BTR Utilities - Tailoring a Solution to Enhance
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From a utility perspective, Build-to-Rent (BTR) projects can sometimes feel in no man’s land between the domestic metering typically applied to residential properties (where residents choose their own supplier and pay their own bills), and an all-inclusive model with utility bills included in the cost (like student accommodation and hotels). BTR owners and operators have the luxury of being able to choose either of the above options, or a bespoke combination of the two. An enviable position, but one that requires a careful and informed decision to enjoy “the best of both worlds”.
OPTION 1: ALL INCLUSIVE – USE AS MUCH AS YOU WANT
This is the simplest solution for residents and, because of the lack of metering hardware required, it is also the solution with the lowest build cost. However, bundling these extra costs into your headline rent can make your property appear expensive relative to others not using this method. The approach does provide scope to enhance income if the additional rent exceeds utility costs, but this can quickly become reversed. Energy prices can move, leaving owners exposed to rising costs that cannot be passed on due to restrictions on rent increases.
For residents, the simplicity of the approach can often be outweighed by the perceived unfairness of everyone being charged the same for utilities irrespective of usage.
A recent BEIS survey highlighted that all-inclusive district heat networks result in 20% savings compared to domestic gas, but residents were still dissatisfied with the arrangement because they were not being billed for their own usage. With a CMA study underway into district heat networks, further obligations for such arrangements may be on the horizon.
Research shows that, without an incentive for residents to be efficient in their energy use, consumption on an all-inclusive plan can often be as much as 30% higher than when residents are billed for actual use. Fair usage policies can provide some protection on this but require sub-metering investment and careful communication with residents.
OPTION 2: DOMESTIC METERING – IN THE HANDS OF THE RESIDENTS
Domestic metering puts the control and administrative burden back in the hands of residents, requiring them to choose suppliers, provide meter readings and pay multiple bills.
A limitation to this approach is that it cannot be applied in properties with a central heating and/or hot water network since residents consume heat rather than gas. Many operators also find that it does not align with the full-service proposition they offer BTR residents, who must find their own supplier (and change suppliers to secure the best tariffs), provide meter readings and deal with payment. With potentially different suppliers for power, heat and water this is not an insignificant administrative task and feels at odds with the aim to streamline the lives of time-poor residents.
Financially, the infrastructure required for domestic metering can add to build costs, although this may be partly or wholly offset by energy suppliers funding elements of the infrastructure to position themselves as the incumbent supplier.
OPTION 3: SUB-METERING – THE BEST OF BOTH WORLDS
True to the innovative spirit of the BTR community, operators and owners are increasingly looking to combine the best elements of the two options outlined above to create a new hybrid approach.
Energy is purchased for the property as a whole (at commercial rates) and then billed to tenants using consumption data collected remotely from sub-meters. Users are incentivised to be economical, and build costs are typically between the two traditional options. The difference between domestic and commercial utility costs means administrative costs can be covered whilst still providing residents with an exclusive tariff that beats anything they could obtain on comparison websites. Owners also have the opportunity to derive additional income through effective energy procurement.
Variants of this hybrid can be tailored to fit individual projects and resident demographics. Some operators use it to bill for heat usage from a district heat network as part of residents’ monthly bills. Others opt for a full service for all three utilities – providing them, billing for them and collecting cash from residents in one monthly payment.
One attraction here is the increased potential for bespoke solutions, using BTR utilities as a tool with benefits far beyond boiling the kettle.
Engaging usage data and account information, as well as energy-saving tips, can be integrated into resident apps and portals, reinforcing the digital leadership of BTR brands. 100% renewable electricity can be used if desired by investors and/or residents. Funds collected can even be put towards designated charities to help build a sense of community purpose amongst residents.
LIV Group chose the sub-metering approach for Lochrin Quay, the first live BTR property in Edinburgh. Working with amber energy, residents have their energy supplied by Comm:UNITY, amber energy’s sub-metering brand. Residents get a streamlined service, enjoy a market-beating tariff, and contribute 2.5% of their bills to Power 2 Africa – a project installing robust renewable community energy in parts of Africa where limited availability of reliable power hampers development. “We continually seek new and innovative approaches to improve customer experience in the properties that we manage, enhancing property owners’ yield. Comm:UNITY is a solution designed with the resident in mind, combining great service and value. We have found that meaningful charitable contributions included within an exclusive market-beating tariff are a real selling point.”
KATE LISTER, SENIOR PRS ASSET MANAGER AT LIV GROUP
CHOOSE WISELY, CHOOSE EARLY
It’s always great to have choices; but finding the ideal solution for your project can appear difficult, with lots of conflicting advice in the market. It’s also a decision that needs to be made as early as possible in a project in order to allow the metering set-up to be optimised.
At amber energy we have built our reputation on making the complex world of energy simple. We are helping many BTR owners and operators on this decision, developing individually tailored solutions to fit their objectives and provide a great resident experience. Whichever route is taken, our complete range of energy services drive effective delivery.