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What New Water Heater Regulations Mean for Landlords

January 22, 2021

The next time you have to replace a water heater in your rental property, it may not be the relatively simple, inexpensive task it used to be.

New requirements went into effect in April 2015 that require manufacturers to produce models that are more efficient, resulting in larger and more expensive water heaters.

Especially for owners of properties that have large capacity water heaters, such as multifamily buildings, the reforms might make buying and installing a new water heater particularly challenging.

Typical Residential Water Heaters

Most homes have water heaters that hold fewer than 55 gallons. According to The American Council for an Energy-Efficient Economy, water heaters in that category meet new efficiency standards with additional insulation. The extra padding means most of these new heaters are one to two inches larger in diameter and in height.

If your rental’s water heater is located in a basement or another relatively roomy location, the small size increase is unlikely to pose a problem. But, for water heaters located in a closet or crawl space, it may be a tight squeeze. Owners may have to opt for a water heater with less capacity, retrofit the space to accommodate a new unit’s larger size, or move it to a new location.

Tank dimensions vary by manufacturer, so owners with limited space should check out manufacturers’ specifications and consult with installers, the ACEEE said.

Large Capacity Water Heaters

For properties with water heaters that hold more than 55 gallons, Consumer Reports said manufacturers have to use different technology to achieve the higher efficiency standards. Gas models will use gas-condensing technology, while electric models will use heat pump technology.

To accommodate the new technology, the electric water heaters are significantly larger.

It is also far more costly. Manufacturers and installers have estimated that the new equipment is 15 to 40 percent more expensive than comparable prior models, depending on the size and type. In addition, installation may be more complex and costly.

Replacement Cost vs. Energy Savings

In the long term, the more efficient water heaters are expected to reduce energy costs. The U.S. Department of Energy estimates heaters shipped over the next 30 years will save consumers $63 billion.

The savings will likely be moderate for tanks 55 gallons or smaller, but could be as much as 25 to 50 percent for larger capacity models, Consumer Reports wrote.

Of course, unless you’re paying the gas or electric bills for your rental property, those savings will go directly to your tenants, not to you.

Owner Options

So what can you do if a water heater at one of your properties breaks?

Consumer Reports recommends first looking into whether the old water heater may be worth fixing. It suggests considering the labor costs for the repair against the time remaining on the warranty.

In addition, if a replacement is necessary, owners who require a large capacity water heater could opt to install two smaller tanks, rather than a single, more costly one. However, they since they won’t be using the new technology, two smaller units likely won’t be as efficient in the long-run.

Depending on the situation, space available, and potential cost of replacement, owners may also want to check into whether a tankless water heater would be a cost-effective solution.

No matter what your situation is, replacing a water heater now requires doing at least a little more homework to find the right product and fit for your property.

Expert property managers can simplify the process of replacing your water heater as well as other large systems and property improvements. Gordon James Realty helps owners plan for needed upgrades, evaluates the best, most cost-effective options, and oversees installation and work to ensure it meets regulations and building codes.

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