Utility Allowance Modeling
Multifamily affordable housing developments generally rely on utility allowance schedules set by the local housing authority. These allowances are used to determine the “Total Tenant Payment” or gross rent, which is the sum of the monthly rent and the monthly utility allowances. Because the total tenant payment is regulated at the state level, the higher the utility allowance, the lower the rent that can be charged per unit type.
Developers and managers of these properties have the option of providing actual consumption data or conducting energy consumption modeling in lieu of adopting the local utility allowances. In the cases where the actual consumption or the modeled consumption is lower than the published utility allowance, the developer or management company has the ability to increase the amount it charges for rent without exceeding the designated total tenant payment. This increases profit and also allows the owner to recover money invested in water and energy efficiency upgrades.
The cost of conducting a water or energy consumption model can generally be recovered in less than three months.