From The Editor | February 27, 2017

What Happens When Water Becomes Unaffordable?

Peter Chawaga - editor

By Peter Chawaga, Associate Editor, Water Online

Bank

A recent study made headlines with the conclusion that more than one third (35.6 percent) of U.S. households will find their water bills have grown unaffordable over the next five years if rates rise at projected levels. This will nearly triple the number of households that currently cannot afford water services, per the study.

It will take significant change to keep rates from rising as they are expected to, researchers for the study, “A Burgeoning Crisis? A Nationwide Assessment of the Geography of Water Affordability in the United States,” concluded. They cited climate change, sanitation, water quality, and infrastructure upgrades, issues that would require monumental efforts to curb, as the main pressures that will drive up prices.

“Estimates of the cost to replace aging infrastructure in the United States alone project over $1 trillion … needed in the next 25 years to replace systems built circa World War II, which could triple the cost of household water bills,” the researchers wrote. “Other studies estimate that adaptations to water systems to deal with climate change will cost the United States more than $36 billion by 2050.”

But it wasn’t necessarily the immediacy of these growing trends that prompted the study. It was a simple question with a surprisingly drastic answer.

“The study was not motivated by a particular timeframe, rather it was motivated by a question: Can people afford water?” said Elizabeth Mack, an assistant professor in the department of geography at Michigan State University and a researcher for the study. “Households are facing a variety of challenges at this point in time, which include the ability to pay for goods, services, and mortgages. This bucket of goods that are expensive for households is likely to include water in the future.”

To determine the cost of water service compared to household incomes, the researchers relied on data from the American Water Works Association’s biennial survey of water and wastewater rates. The researchers based their definition of “affordability” on the U.S. EPA’s affordability criteria, which dictates that a combined annual water and wastewater bill is affordable if it constitutes less than 4.5 percent of the median household income, 2.5 percent for water and 2 percent for wastewater services.

But it isn’t just the low-income households priced out of water service that will be adversely affected. Their inability to afford rising rates will directly impact providers and wealthier consumers as well. Exacerbating the problem in urban centers, the researchers wrote, is slow or declining population growth, which reduces the water utility customer base and means fewer people will have to be charged more.

“These issues mean that utility providers could have fewer customers over which to spread the large fixed-costs of water service,” the researchers wrote. “Unaffordable water bills also impact customers for whom water services are affordable via higher water rates to recover the costs of services that go unpaid by lower income households.”

Of course, there is reason to be skeptical that authorities would actually let basic water and wastewater services, seen widely as fundamental rights, become unaffordable for a third of Americans. It raises the question: What does it really mean for water to become “unaffordable” in a first world country? With that in mind, the results of this study may not be predicting a future without water service, but one in which the rising cost of water rates begins to have significant impact on the rest of the economy.

“This could lead to reductions in expenditures on other household items,” said Mack. “This could have economic consequences in terms of jobs, output, and regional income.”

While Mack declined to speculate on the likelihood that rates will actually reach this level of unaffordability, she did confirm that immediate action must be taken if that reality is to be avoided.

“We need to find a way to pay for infrastructure upgrades without passing on the entirety of the needed costs to households,” she said. “[Concerned parties should] lobby for subsidies to help pay for the cost of water infrastructure and/or lobby for local water affordability programs for low income households.”

Image credit: "Breaking The Bank," Konta Oszczednosciowe © 2015, used under an Attribution 2.0 Generic license: https://creativecommons.org/licenses/by/2.0/