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Does Rent Include Utilities?

Your rent could include some or all utilities, so here's what you should know.

[Updated: Feb 04, 2021 ] May 13, 2020 by Matt Frankel, CFP
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Every housing unit in the United States uses utilities. While some apartments and homes may not use every type of utility (for example, many don't have natural gas), we all use electricity, water, and sewer services, and most of us have some form of garbage collection.

In some cases, cable TV and internet can be included in rent as well. While these aren't technically considered "utilities" by most people, it's not uncommon for them to be included in rental units where all of the other utilities on the list are paid by the landlord.

Most apartments and rental homes require tenants to pay for at least some utilities, but there are exceptions. It's not terribly uncommon for a property to be rented with all utilities included. Here's what renters need to know about the utilities that may or may not be included with their home, as well as the pros and cons of renting an apartment that includes utilities.

Does rent include utilities?

The short answer is that it depends on the situation. Most apartments and some single-family rental homes include some utilities. However, rental units that include all utilities are far less common.

When it comes to utilities, there are four basic categories a specific home can fall into:

No utilities included

It's rare for a renter to have to pay all utility costs, but it isn't unheard of. In the case of many apartments, certain costs, like garbage collection, are charged to the landlord on a single utility bill, making them difficult to divide among tenants.

Some utilities included

This is the most common arrangement when it comes to rental properties, as some utilities (sewer and garbage, typically) aren't always practical to split among many tenants. However, apartment buildings often have separate electric and water meters for each individual unit. Many choose to include water as well, as water is typically one of the cheaper utilities and is often easier to include in a tenant's rent, as opposed to having individual water meters installed.

Utilities included with limits

Some apartments come with utilities included, but up to a certain limit. For example, in a triplex I own, tenants get water included with their rent, but only up to a $50 monthly cap. Capping any included utilities gives the tenants the benefit of paid utilities but also gives the landlord peace of mind that they're protected in the event the tenants are careless or wasteful with the utilities. In other words, the tenant will be likely to think twice before setting their air conditioner to 68 degrees on a 100-degree day or letting the water run for a while before they get in the shower.

All utilities included

This arrangement is also known as "all bills paid." There are some apartments with all utility costs included, meaning that the tenant writes one check to the landlord and doesn't have to worry about paying any utilities. This is most common when the rental unit shares utilities with others -- for example, when there's one electric meter for a four-unit apartment building -- but it isn't unheard of in larger apartment complexes. Utility costs are also commonly included in student-oriented apartment complexes, where roommates in each dwelling unit are on individual leases.

One important distinction is that the difference between utilities included and no utilities included is a separate situation from a gross lease versus a net lease. A gross lease means that the landlord is responsible for property taxes, maintenance, and building insurance, which is typically the case with all residential rental properties. A net lease means that these expenses are paid by the tenant, which is only common in some types of commercial real estate.

The pros of renting when utilities are included

The most obvious advantage of leasing an apartment or home with all utilities included is simplicity. You won't have to worry about paying utility bills. Each month, you'll only have to write one check, and the amount is the same. Writing separate checks for rent, the electric bill, water bill, and other utility bills is not only laborious, it also leaves you with varying housing costs from month to month, thus complicating your financial situation. With utilities included, variable costs aren't a problem. If it's hot out, you don't have to worry about the effect of running your air conditioner on your power bill, for example.

You can also avoid connection fees upon moving into a rental property, because many electric companies charge a one-time fee to establish service. You also won’t have to stand in line to connect your utilities. When I had to establish water service for one of my investment properties, I ended up spending the better part of an afternoon in the city's water office. If you land an apartment with utilities included, you can simply move in and not worry about getting everything set up with each utility company before you can use your living space.

The cons of renting when utilities are included

One downside is that utilities-included apartments are often more expensive when compared to similar-quality units where tenants pay their own utilities. One common myth is that if you live in an apartment with utilities included, water, electricity, and other utilities are "free." This is 100% false -- as a landlord myself I can tell you firsthand that rental property owners and property managers factor the expected cost of utilities into the rent. If you use a below-average amount of electricity or water, or you don't need other "freebies" (like cable TV) that come with a unit, you could effectively be paying for utilities that you aren't using.

Another drawback is that a rental property with utilities included can be tougher to find. They are most common in college rentals, older homes that have been divided into several apartments, and accessory units located adjacent to a main home.

The Millionacres bottom line

Renting an apartment or home with utilities included can be appealing to many renters, but just like with every other housing decision, there are benefits and drawbacks that should be taken into consideration. Just because utilities are included doesn't necessarily mean a rental property is cheaper, so it's important to compare it to other options with tenant-paid utilities. If you find a utilities-included housing unit, be sure to weigh the pros and cons to decide if it's a good fit before proceeding.

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