New Housing Bill Offers Developers 5% Tax Credit Bonus for Installing Water Meters in Rental Units

The “Promoting Submetering for Affordable Housing Act” is a targeted piece of legislation designed to nudge housing developers toward more sustainable building practices using a familiar tool: the tax credit. Simply put, this bill increases the size of a key tax credit for developers who build multi-unit rental properties (four units or more) and install water submetering systems.

The 5% Bonus for Smart Water Use

This act changes how developers calculate their “eligible basis” for certain housing tax credits. If a developer installs individual water meters for each unit—allowing tenants to be billed based on their actual water usage rather than a flat rate or complex formula—they get a 5% bump. Instead of calculating the tax credit based on 100% of the building’s eligible cost, they can use 105%. This is a direct financial incentive to integrate water-saving infrastructure into new projects. This change only applies to projects that receive their housing credit allocations or are financed using tax-exempt bonds after the law is enacted, meaning it targets future construction.

What This Means for Renters

For the average renter, this is a big deal for two reasons. First, submetering means you only pay for the water you actually use. If you’re mindful about water use, you could see lower utility bills compared to living in a building where the total water cost is split equally among all tenants, regardless of usage. Second, the bill includes a crucial tenant protection: even if the water meter is located in a basement or utility closet controlled by the landlord, tenants must be able to access a reading of their usage within 72 hours of requesting it. This provision adds transparency, ensuring renters can track their consumption and verify their bills, which is a significant step toward fair utility practices in rental housing.

The Trade-Off for Taxpayers

While this bill promises more efficient buildings and fairer utility bills for tenants, it’s important to look at who pays for the incentive. Increasing the eligible basis by 5% means the federal government is foregoing more tax revenue. Essentially, the general taxpayer is subsidizing this infrastructure upgrade and the resulting water conservation efforts. For a developer, the increased credit makes the initial cost of installing the submetering system more palatable, but for the government, it represents a slightly larger expenditure through the tax code. Overall, this bill is a straightforward exchange: a tax break for developers in return for better water infrastructure and increased utility transparency for renters.