I heard on the radio that a major home builder (sorry, didn’t catch which one) was planning to market new homes by including a energy expense guideline on all its new homes. The rating would be similar to the energy efficiency rating that comes with your new major appliance; the intent would be to educate the homebuyer on the lower monthly cost of utilities in one of their new homes as opposed to a lower priced but more inefficient older home.

When it comes to utilities costs we’ve noticed this lack of sophistication in our appraisal practice. Many small new rental developments in Brooklyn have recently been constructed with individual heating units so that the tenants pay for all of their own utilities. One building we recently looked at even submetered the water bill for their residential tenants. However, the rents in these buildings typically aren’t any lower than rents in buildings where utilities are included. The explanation that has been offered by landlords: Tenants don’t pay attention to that when signing a lease. With the cost of fuel typically in the $1.50 per square foot range, this results in an extra cost of nearly $100 per month to the tenant. With some of these new buildings also receiving tax exemptions, this results in a nearly net apartment building operation, but that’s a topic for a future post.