In this blog, I’ll explore the introduction of fair usage energy billing in Purpose Built Student Accommodation as an answer to over-spend and anti-environmental practice.
The Energy Problem
In large-scale PBSA developments, the inclusion of utilities in rent is fairly standard. The students forego their freedom of choice as far as electric and gas suppliers are concerned, but in doing so gain the freedom to use unlimited energy, without financial repercussions. The Management Company uses their purchasing power to nab competitive energy and broker rates, but in turn, has very little control on over-usage, and is forced to add on the worst case fixed sum to the rent of their residents. This is not only throwing money down the drain, it is also an environmental travesty.
The younger generation is our ticket to a greener country, and – with the rich tapestry of international students occupying PBSA – a greener planet. Most of those in higher education have grown up in greenhouse gases, against the backdrop of environmental concern. The good news is that they need little incentive to reduce energy consumption: these days it forms part of our moral compass.
In a survey conducted by Bristol University, 90% of respondents stated that sustainability is important to them, with 69% of participants stating that sustainability ought to be embedded in their higher education course.
Undoubtedly the most efficient way to reduce utilities spending in PBSA is to pass through the energy bill to the student, meaning they pay for their own consumption as opposed to including an arbitrary sum in their rent. As highlighted by Obrinsky and Walter’s publication, Energy Efficiency in Multifamily Rental Homes: An Analysis of Residential Energy Consumption Data, “the fact that billing residents separately for energy utilities reduces energy usage confirms that retrofitting apartments to submeter residents separately could contribute meaningfully to reducing energy consumption.” Using this method, modelled on the US Multifamily Industry, PBSA providers can expect a saving of around 25% on utility bills. The main caveat here is that meters are required on every unit, which is very rarely the case in student accommodation. Having said that, we can expect to see this becoming the norm, as government legislation tightens its grip on energy use across the country.
To protect an “All-Inclusive Rent”, the second-best option is that of a fair usage policy. The introduction of a fair usage utility billing policy can reduce consumption and save significant sums of money that can be spent on projects to enhance resident experience.
A fair usage policy is a consumption limit imposed on tenants by landlords using guidance from Ofgem’s TDCVs (Typical Domestic Consumption Values), or using average usage calculated over two years. Where bills are included in the rent of regular student accommodation, a fair usage policy will often apply, with the cost of the extra energy usage passed through on top of their rent.
However, this is rarely seen in large-scale PBSA developments, despite all-inclusive rent as a norm. The main reason for this is the difficulty encountered when quantifying energy usage on an individual scale. Unless a site has sub-meters correlating to every unit, it is only ever possible to calculate a consumption average per floor, or in some cases, per building.
So how can you charge a resident for over-usage, when unable to determine the responsible party? Conversely, how can you reward an individual resident for energy efficiency? The answer is simple: you don’t have to!
If your site has sub-meters on each floor, you reward the greenest floor. The power of free pizza delivered directly to communal kitchens remains uncontested; and a little healthy competition will see a significant reduction across the whole building after a few months. Similarly, if you have several small sites, you can create a competition across your portfolio, promising a social event for the greenest site. Another way to ensure student engagement is by assigning student Eco Managers to organise campaigns and meetings with environmental groups to share best practices and raise awareness.
An action-based research project carried out by the National Union of Students (NUS), funded by the Department of Environment, Food and Rural Affairs (DEFRA) explored the most effective methods to engage students in energy-saving initiatives. Among the key recommendations emerging from the study were the use of multiple interventions in multiple contexts, and the appropriate design and location of information. The study found that a combination of engagement initiatives is likely to be more effective, given the varied drives and barriers to motivational change. Property managers should draw on the power of peer influence, altruism and perceived control, as well as financial incentives in their effort to boost engagement. The NUS also suggest that eye-catching information should be positioned where the behaviour is carried out – by light switches and on the backs of doors – and that the display of this information should vary in design to cater for different mindsets. For example, some posters showing statistics and hard data, others showing images and catchy slogans.
By introducing a prominently-marketed fair usage energy policy (with or without a billing system), and effectively motivating their residents, PBSA developers and property managers can drastically reduce energy consumption. Successfully carried out, this two-pronged attack can save on operating expense, as well as grant the right to proudly declare your properties green and eco-friendly.
Would you like help introducing a Fair Usage Utilities Policy? Contact Fjeld Consulting to Go Green and keep your rent clean!