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Fundamental Student Utilities

Fundamental Student Utilities

One of the great rites of passage in this country is the opportunity to amass a fair amount of debt in exchange for an education.  It’s that scar that will stay with you for years to come.  Luckily, while pursuing that education, people need a place to live.  Every college town in America is filled with apartment communities that cater specifically to the student lifestyle, but filling those beds isn’t always an easy task.  One of the more challenging juggling acts that occur at most properties is figuring out how to handle the rising utility costs, while staying competitive.  It’s not uncommon to see utilities incorporated into marketing strategies in one way or another, but there is often a lack of understanding of the financial risks and potential impacts on resident satisfaction that stem from the different approaches.  Below we’ll dive into a few common mistakes, and learn the best practices that can help protect your bottom line.

Free Utilities

Probably the most common marketing approach when it comes to utilities in the student housing industry is to promote them as being included with rent.  While it’s tempting to fall prey to this tactic, let’s talk about what this means for your property.  One of the basic premises of a utility bill back service is that if an individual is responsible for the cost of the utility, they’re more likely to conserve.  Where there is conservation, there is also cost savings.  Pretty simple, right?  The logical conclusion to this thought process is that if you remove the cost burden from the individual, the incentive to conserve is also removed.  So while the promotion is a great way to get students to sign leases, it means the property has no control over the cost of utilities month over month.  This creates a budgeting nightmare, and overall ends up increasing operating costs in the long run.

So what’s the alternative?  If all of your competitors are offering free utilities, how do you compete without doing the same?  The solution is to offer a utility allowance.  This goes by many different names out there, but the concept is simple; each month, every student is allotted free utilities up to a certain dollar amount.  The utility bill for each unit is analyzed on a monthly basis, and any amount over the allowance is billed back to each student.  This does a number of things, including allowing the property to budget more effectively.  In addition, the student gets free utilities, and the community has residents that are more likely to conserve.  Because the community is being reimbursed for the cost of the utilities, providing an incentive to conserve means that there is less utility expense that you’re trying to recover.

Residents assume financial responsibility

Another common practice is to have the students put the utility bill into their own name.  This presents a number of potential challenges, but let’s talk about the two most common.  First off, there is a good chance that these students have never had to set up utilities, and they likely have no credit.  As a result, establishing service in their name will likely require a deposit with the utility.  You may also have foreign students who won’t be able to set up an account at all.  These challenges can slow down the move-in process, and often times the site staff has to get involved to help residents get their keys.

The other side of this approach is the impact on resident relations.  Chances are that if you have a similar policy in place, you’ve dealt with resident disputes regarding payment of utilities.  It’s inevitable.  It takes a group of people who are learning to live with new roommates (potentially for the first time), and forces them to not only talk about money, but trust that the other will do their part every single month.  It’s a challenging situation not only for people who may have just met, but even for those who live with their friends.  This is often the very scenario where you find out that your lifelong friends are unreliable and cheap.

Now let’s say you removed utility set up from the move-in checklist, and the residents don’t have to worry about being reimbursed by the roommates.  By keeping the utilities in the name of the property, you can utilize a third party to split the cost and bill each roommate for their portion.  In the ideal situation, this is combined with their rent on a monthly convergent bill sent via email.  The residents receive their bill, log in to your resident portal, and make a payment in full for rent and utilities.  And if we’re being realistic, this is actually being done by the parents, so make sure your portal allows the guarantors to have their own log in to make payments.  In one easy step, you’ve saved both yourself and your residents the headache of dealing with this on a monthly basis.  As an added bonus, if you choose the right partner, you’ll gain insight into your utility cost and consumption, and you can look for ways to reduce the overall cost.  There are several small upgrades you can do at the unit level to reduce utility spend, and a lot of them pay for themselves in the first year.

And there you have it.  The information provided in the preceding paragraphs essentially make you an expert in utility billing.  Armed with this knowledge, you’ll likely never struggle to lease another bed.  And if that doesn’t hold true, at least you should see a positive impact to your bottom line without having to sacrifice your competitive edge.


By: Jon Ford

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