A few weeks ago I moderated a panel at TAAHP titled “Turn Water into the Capital that Closes Your Deal.” Before we started, I asked the audience two questions: How many of you know about the new Texas law that credits developers for water conservation? Only a few hands went up. Then I asked: How many of you have heard about Volumetric Water Benefits (VWB)? Only one hand remained.
I’ve thought about that response a lot. Not because of whether or not audience members specifically knew about the Texas law or VWB but because of what it told me about their frame of reference and what water is likely costing them. But really, here was a group of experienced, dedicated, capable developers who had never been given a reason to think about water as anything other than a budget line item. Until now. While I loved the multiple data points that were shared, discussing a new understanding of water as a financial lever is what the panel was really about.
It would be easy to write this blog as a panel recap: here’s what Andrew Parks (Committee Director for the Texas Senate Committee on Water, Agriculture, and Rural Affairs) said about impact fee credits, here’s what Paul Reig (Founder and CEO of Blue Risk), said about corporate-funded conservation partnerships, here’s how Jackie Page (developer at Roers Companies), described a water leak that cost one property $200,000 a year before anyone found it. Those numbers are real and they matter. But the point of the panel was really about how the three panelists view water as a powerful tool that can produce positive financial outcomes in new and innovative ways, not merely a cost they just have to accept in their P&L. That mental shift is new in the affordable housing industry.
Here’s the mental model most developers are still running: water is an operating expense. You budget for it, you hope it doesn’t creep up, but if it does creep up, you just have to absorb it and move on. It’s passive. It’s something that happens to a property, not something a property actively manages.
Here’s the shift in perspective the panelists shared: water is capital. Not metaphorically. Literally, in the sense that it can be underwritten, financed, credited, and monetized, the same way any other asset on your balance sheet can be. But capital only behaves like capital when someone is actively controlling it, not just letting it happen.
That distinction – accepting versus controlling – is the one I keep coming back to. Accepting water means watching the cost go up. Controlling water means having real-time visibility into what’s happening at the unit level, understanding why usage is moving the way it is, and having a team that can act on that information before it becomes a $200,000 problem instead of a quick fix. Every story during the panel, from impact fee credits to the corporate partnership dollars to the deal that closed because a lender trusted new, real-time data instead of historical averages, was really a story about what is possible once our industry moves from accepting the status quo to actively controlling water use and monetizing it.
That’s a harder shift than adopting a new policy or signing a new partnership. It’s a shift in how you see the resource in the first place. But it’s also the shift that determines whether water shows up on your pro forma as a risk to underwrite around, or as a financial lever you can pull at acquisition, through the operating years, at recapitalization, and again at sale.
I left that panel convinced that developers who make this shift now, those who ask not “How do we keep the water bill down?” but “How do we control this resource and make it work to our advantage?” will have a real advantage over the coming years and decades. All because they stopped treating water as something that just happens to a property, and started treating it as a resource the property actively controls.
