Apartment operators have five utility billing structures to choose from: utility-inclusive rent, flat-fee addendum, direct billing, RUBS (Ratio Utility Billing System), and submetering. Each structure recovers a different share of utility costs. In 2026, rising utility rates and more than 30 active legislative bills across 18 states are pushing operators off passive billing models toward usage-based cost recovery.

Key Takeaways

• Five utility billing structures exist for multifamily operators: utility-inclusive rent, flat-fee addendum, direct billing, RUBS, and submetering.
• Utility-inclusive rent recovers 0% of utility costs from residents. As utility rates climb, absorbing them reduces net operating income (NOI) with no correction mechanism.
• Nearly half of multifamily operators still use a flat-fee or utility-inclusive billing model, according to a 2025 industry survey of 608 multifamily professionals.
• RUBS recovers 70 to 85% of utility costs without meter hardware, per Billee's portfolio benchmark. Submetering recovers 85 to 95% with individual unit meters.
• A two-year U.S. Environmental Protection Agency study found submetering reduced water consumption by 15.3%, or 21.8 gallons per unit per day. RUBS produced no statistically significant conservation behavior change in the same study.
• More than 30 active bills across 18 states are targeting utility billing in 2026, including enacted laws already in effect in Colorado and Connecticut.
• Billee manages RUBS billing, submetered billing, and hybrid portfolios for multifamily owners and operators. Standard implementation takes 45 days.

At a Glance: Five Utility Billing Structures

*Per Billee's portfolio benchmark.

Why Utility Billing Structure Decisions Matter More in 2026

Water and sewer bills rose 24% over five years in U.S. markets, with a further 4.6% increase in 2024, according to Bluefield Research. Total utility costs for multifamily properties averaged $1,304 per unit in 2024. That figure continues to rise.

Every rate increase lands differently depending on which billing structure an operator uses. For a utility-inclusive property, every dollar of rate increase is a direct NOI reduction. For a property on RUBS or submetering, rising costs pass through to residents rather than sitting on the operator's income statement.

A 450-unit building that transitioned from utility-inclusive billing to submetering saw NOI increase by $180,000, according to a National Apartment Association case study. At a 5.5% cap rate, that NOI gain represents approximately $3.27 million in recovered asset value.

The Five Utility Billing Structures

1. Utility-Inclusive Rent

Utility-inclusive billing bundles utility costs directly into monthly rent. The property pays the utility company and absorbs 100% of the cost. Residents have no visibility into their consumption and no financial incentive to conserve.

Recovery rate: 0%. Every dollar of utility expense reduces NOI with no offset mechanism.

Utility-inclusive billing made sense in markets where all competing properties offered bundled utilities, or in affordable housing structures where U.S. Department of Housing and Urban Development utility allowances constrain how operators can charge residents. Outside those two situations, it is a costly default rather than a deliberate strategy.

Utility rates have not stayed flat. An operator absorbing $800 per unit annually in 2021 faces materially higher costs today under the same lease structure, with no mechanism to recoup the difference as rates continue to climb.

2. Flat-Fee Utility Addendum

A flat-fee utility addendum charges residents a fixed monthly dollar amount for utilities regardless of actual consumption or what the utility company billed the property that month. Nearly half of multifamily operators still use flat-fee or utility-inclusive billing, according to a 2025 industry survey of 608 multifamily professionals.

Recovery rate: partial and unpredictable. The fixed charge may cover utility costs in mild months and fall short during peak consumption periods. Operators absorb the gap, or overshoot in low-usage months and create regulatory exposure.

Flat-fee billing's appeal is administrative simplicity. It requires no formula, no meter reads, and no third-party billing system. That simplicity explains its persistence in the industry and also its hidden cost.

A flat fee calibrated to 2021 utility rates loses accuracy with every rate cycle. Multiple states now restrict flat fees that exceed the property's actual utility cost. Colorado's HB 25-1090, effective January 1, 2026, explicitly prohibits utility pass-throughs from exceeding what the utility company billed the property in the same billing period.

3. Direct Billing

Direct billing places utility accounts in each resident's name. The utility company bills the resident directly. The property owner has no billing role and no third-party billing administration cost.

Recovery rate: full. The resident pays 100% of their utility cost directly to the utility company. The property absorbs nothing.

Direct billing eliminates all administrative overhead from the operator's side. It also eliminates visibility. The operator cannot monitor consumption for ESG reporting, cannot detect water leaks at the unit level early, and learns of resident utility delinquency at move-out rather than in time to act.

Direct billing works cleanest at new construction designed for individual utility accounts from the start, and in markets where the utility company meters units separately. Retrofitting direct billing to older properties with shared infrastructure often requires capital investment that makes it impractical.

4. RUBS — Ratio Utility Billing System

RUBS allocates the master meter utility bill across occupied units using a formula. The formula is typically based on square footage, occupancy count, bedroom count, or a hybrid of those factors. RUBS is the most common third-party billing model at existing multifamily properties.

Recovery rate: 70 to 85%, per Billee's portfolio benchmark. Common area consumption is excluded through the Common Area Deduction (CAD) before any allocation is made. Vacant units are not billed to residents under RUBS.

No meter hardware is required. RUBS billing can be implemented at any property, any age, within 45 days.

Conservation finding: a two-year U.S. Environmental Protection Agency study of multifamily properties found that RUBS produced no statistically significant reduction in water consumption compared to utility-inclusive billing. Because residents pay a formula share rather than their own measured usage, there is no direct feedback loop between behavior and bill amount.

State disclosure requirements apply in most markets. Operators must document the allocation formula and disclose it in the lease addendum before billing begins. Colorado's HB 26-1013 (signed March 26, 2026) specifies four conditions for legal RUBS use in that state: charges cannot exceed the utility company's invoice to the property, no markups above cost are permitted, common area usage must be excluded via the CAD deduction, and the allocation method must be disclosed in the lease. For new construction with building permits filed after July 1, 2027, Colorado prohibits RUBS entirely. Only direct metering or submetering is allowed.

For a direct comparison of RUBS and submetering — including recovery rate benchmarks and the specific failure modes that push each model below benchmark — see Master-Metered vs. Submetered Multifamily: Which Billing Model Recovers More?

5. Submetering

Submetering installs an individual utility meter at each unit. Residents are billed for their actual measured consumption rather than a formula-based share of the building total.

Recovery rate: 85 to 95% for water, 90% or more for gas, and 95% or more for electricity, per Billee's portfolio benchmark.

Conservation impact: the two-year EPA study documented a 15.3% reduction in water consumption, equal to 21.8 gallons per unit per day, at submetered properties compared to utility-inclusive billing. When residents see their own measured usage in their monthly bill, consumption behavior changes in ways formula billing cannot produce.

Hardware is required. Submeters installed at the unit level need periodic calibration and eventual replacement over the property's lifecycle. Installation is least expensive during new construction or gut renovation when building interiors are already open. Retrofitting submeters into occupied buildings involves higher per-unit costs and resident coordination.

Submetered billing provides the most defensible NOI documentation of any billing structure. Recovery ties directly to meter reads rather than a formula, which makes utility income cleaner to verify during institutional acquisition due diligence. Institutional buyers increasingly expect submetered water billing on mid-size to large multifamily assets.

Hybrid Billing: The Real-World Portfolio Configuration

Most large portfolios do not run a single billing structure across every property. The most common real-world configuration is hybrid: water submetered at properties where hardware is already in place or included in a renovation scope, and gas or electricity allocated via RUBS at properties where meter installation would require significant capital.

Operators transitioning from flat-fee or utility-inclusive billing often move through a hybrid state: adding RUBS at existing properties while submetering new acquisitions or major renovations. Billee manages hybrid portfolios under a single dedicated account team, with consistent billing cycle, prelim workflow, and reporting across all properties regardless of which model each building uses.

The 2026 Regulatory Landscape

More than 30 bills across 18 states are actively targeting utility billing structures, fee transparency, and resident protections in 2026, according to Vitality.io's 2026 Utility Billing Compliance Guide. Every bill in the 2026 pipeline pushes in the same direction: more itemization, stricter limits on pass-through fees, and a clear preference for metered billing over formula allocation.

Laws Already in Effect

Colorado has enacted two laws with direct impact on multifamily utility billing practices.

HB 25-1090 (effective January 1, 2026) prohibits utility pass-throughs from exceeding the property's actual utility invoice and caps third-party billing service fees at 2% of the utility bill or $10, whichever is lower.

HB 26-1013 (signed March 26, 2026) keeps RUBS legal for existing properties under four conditions: charges cannot exceed the utility bill, no markup is permitted, common area usage must be excluded via the CAD deduction, and the allocation method must be disclosed in the lease. Buildings with permits filed after July 1, 2027 may not use RUBS for new construction. Direct metering or submetering is required for those properties.

Connecticut now requires all recurring fees, including utility charges, to be disclosed in rental advertising, with civil penalties for non-compliance.

Legislation Advancing in 2026

Virginia has passed legislation requiring operators using submetering, RUBS, or energy allocation to maintain detailed billing records that residents can access at no cost.

Ohio's HB 173 passed the state House 74 to 23 and would place submetering companies under Public Utilities Commission of Ohio oversight, with rate caps and mandatory itemized billing requirements.

Maryland's SB 130 would create the first statewide water submetering regulatory framework in that state, prohibiting charges above the property's actual utility cost and barring billing residents for common-area consumption.

Washington DC's B26-0126 would prohibit charging residents for common-area utilities entirely.

Texas's Public Utility Commission Chapter 24 is under active review, with public comment periods beginning September 1, 2026.

The Direction of Travel

Every legislative trend in 2026 favors metered billing, itemized charges, and hard limits on what operators can charge above actual utility cost. Operators on flat-fee or utility-inclusive models who have not revisited their billing structure are not only leaving recovery on the table. They are increasingly out of step with where regulation is heading across the country.

Choosing the Right Billing Structure for Your Portfolio

The decision is not about which billing model is theoretically optimal. It is about which model your current portfolio situation can support.

If you are on utility-inclusive billing: calculate the annual utility cost per unit and compare it to the cost of implementing a RUBS program. For most properties, a properly configured RUBS program recovers enough in the first billing year to cover implementation costs. The longer a portfolio stays on utility-inclusive billing, the more NOI it absorbs permanently.

If you are on flat-fee billing: audit whether your current flat fee is above or below your actual per-unit utility cost. If it is below, you are subsidizing residents on the NOI line. If it is above, you may be out of compliance with 2026 state regulations in Colorado and other markets heading in that direction.

If you are on RUBS and recovery is below 80%: run a billing methodology audit before switching models. Below-benchmark RUBS programs typically have a fixable configuration issue: a stale CAD deduction, an outdated allocation formula, or a lease addendum that no longer reflects the billing method. Fixing the configuration is faster and less expensive than a full model transition.

If you are planning new construction or a major renovation: submeter. Hardware installation is least expensive when the building is already open. Submetering after stabilization requires resident coordination and higher per-unit installation expense. Colorado's new construction requirement, effective July 1, 2027, signals the direction the broader regulatory environment is moving.

If you are preparing for institutional sale: submetered recovery documentation is more defensible than formula-based allocation. Institutional buyers review utility billing practices during due diligence, and meter reads provide cleaner proof of recovery than RUBS allocation worksheets tied to a formula.

How Billee Manages Utility Billing Across All Structures

Billee manages RUBS billing, submetered billing, and hybrid portfolios for multifamily owners and operators. Every customer gets both the Billee platform and a dedicated account team that handles the monthly billing cycle, vendor management, and exception resolution — without operators having to run the billing system themselves.

Standard implementation takes 45 days and includes vendor transitions, PMS integration, historical data migration, and operator training. For operators transitioning from flat-fee or utility-inclusive billing, the onboarding process begins with a billing methodology audit covering utility cost data, formula or submeter configuration, and lease addendum language — all before the first billing cycle goes out.

Each month, Billee generates a preliminary billing report reviewed by the dedicated account team before charges go anywhere. The report is accompanied by Biller Highlights — proactive notes flagging exceptions or items needing attention. Once the operator approves, charges are pushed directly to Yardi, RealPage, or Entrata.

Billee also manages Vacant Cost Recovery (VCR) for units between tenancies, ESG and Sustainability Reporting for institutional and sustainability-focused owners, and Hardware and Maintenance Support for portfolios with active submetering infrastructure. For operators navigating 2026 state-level regulatory changes, Billee's Regulatory and Compliance team provides billing methodology audits and documentation support.

Frequently Asked Questions

What are the different utility billing structures for apartment operators?

There are five utility billing structures for apartment operators: utility-inclusive rent, which bundles utilities into rent with 0% cost recovery; flat-fee addendum, a fixed monthly charge that does not adjust with actual utility rate changes; direct billing, where residents hold their own utility accounts and pay the utility company directly; RUBS (Ratio Utility Billing System), which allocates the property's master meter bill across units using a formula and recovers 70 to 85% of costs; and submetering, which installs individual unit meters and recovers 85 to 95% of utility costs, per Billee's portfolio benchmark.

What is the difference between RUBS and a flat-fee utility addendum?

RUBS allocates the property's actual monthly utility bill to residents using a formula, so resident charges rise and fall with actual utility costs each billing cycle. A flat-fee addendum charges residents a fixed dollar amount every month regardless of actual usage or what the property was billed. When utility rates increase, a flat fee becomes an operator subsidy because the fixed charge no longer covers the property's actual cost.

Is including utilities in rent a bad idea for apartment operators?

For most operators, utility-inclusive billing is a costly default rather than a deliberate strategy. Utility-inclusive rent recovers 0% of utility costs from residents, and utility rates in most U.S. markets have risen significantly since 2021. Utility-inclusive billing makes financial sense only in markets where all competing properties offer bundled utilities, or in affordable housing structures with HUD utility allowance constraints that limit operator billing options.

Does submetering reduce water consumption in apartment communities?

Yes. A two-year U.S. Environmental Protection Agency study found that submetered multifamily properties reduced water consumption by 15.3%, equal to 21.8 gallons per unit per day, compared to utility-inclusive properties. The same study found RUBS billing produced no statistically significant reduction in water consumption behavior. When residents see their own measured usage reflected in their monthly bill, behavior changes in ways formula billing cannot achieve.

What states changed utility billing laws in 2026?

Colorado and Connecticut enacted new utility billing laws already in effect as of 2026. Colorado's HB 25-1090 prohibits utility pass-throughs from exceeding the actual utility bill and caps third-party service fees. Colorado's HB 26-1013 sets four conditions for legal RUBS use and bans RUBS for new construction with building permits filed after July 1, 2027. Virginia, Ohio, Maryland, Washington DC, and Texas are all advancing additional legislation in 2026. Vitality.io's 2026 Utility Billing Compliance Guide tracks more than 30 active bills across 18 states.

Can an apartment portfolio run different utility billing structures across different properties?

Yes. Hybrid portfolios — some properties on RUBS, others on submetering, and some on direct billing — are common and fully manageable. Billee handles hybrid portfolios under a single account team, with the same monthly billing workflow, Biller Highlights, and PMS integration regardless of which billing model each individual property uses.

How long does it take to set up RUBS or submetered billing?

Billee's standard implementation timeline is 45 days for RUBS billing programs and for submetered billing programs where hardware is already installed. Implementation includes a billing methodology audit, lease addendum review, PMS integration setup with Yardi, RealPage, or Entrata, and the first complete billing cycle. New submetering hardware installation is a separate construction timeline that varies by property size and building configuration.

Billee manages RUBS billing, submetered billing, and hybrid portfolios for multifamily operators who want accurate utility cost recovery without operating the billing system themselves. See how it works for portfolios like yours.

Sources

1. Bluefield Research, "U.S. Water and Sewer Bill Has Increased 24% in Five Years, Raising Affordability Concerns," 2024.
2. 2025 Multifamily Revenue Operations Report, industry survey of 608 multifamily professionals, 2025.
3. U.S. Environmental Protection Agency, "WaterSense: Water Score for Multifamily Housing," accessed 2026.
4. National Apartment Association, "Improving Returns and ESG Metrics Through Multifamily Submetering," accessed 2026.
5. Vitality.io, "The Regulatory Shift: The 2026 Utility Billing Compliance Guide," 2026.
6. Colorado General Assembly, "House Bill 25-1090: Protections Against Deceptive Pricing Practices," enacted 2025, effective January 1, 2026.
7. Colorado General Assembly, "House Bill 26-1013: Ratio Utility Billing Systems," signed March 26, 2026.