Summary

Concerns about water affordability have centered on access to networked services in low-income countries, but have grown in high-income countries as water, sewer, and stormwater tariffs, which fund replacement of aging infrastructure and management of demand, have risen. The political context includes a UN-recognized human right to water and a set of Sustainable Development Goals that explicitly reference affordable services in water, sanitation, and other sectors. Affordability has traditionally been measured as the ratio of combined water and sewer bills divided by total income or expenditures. Subjective decisions are then made about what constitutes an “affordable” ratio, and the fraction paying more than this is calculated. This measurement approach typically omits the coping costs associated with poor supply, notably the time costs of carrying water home. Three less commonly used approaches include calculating (a) the expenditure related to procuring a “lifeline” quantity of water as a percent of income or expenditures, (b) the amount of income left for other needs after water and sewer expenditures are subtracted, and (c) the number of hours of minimum wage work needed to purchase an essential quantity of water.

Lowering water rates for all customers does not necessarily help those in need in low- and middle-income countries. This includes tariff structures that subsidize the price of water in the lowest block or tier (i.e., lifeline blocks) for all customers, not just the poor. Affordability programs that do not operate through tariffs can be characterized by (a) how they are administered and funded, (b) how they target the poor, and (c) how they deliver subsidies to the poor. Common types of delivery mechanisms include subsidizing public taps for unconnected households, subsidizing or financing the fees associated with obtaining a connection to the piped network, and subsidizing monthly bills for poor households. Means-tested consumption subsidies are most common in industrialized countries, whereas subsidizing public taps and connection fees are more common in low- and middle-income countries.

A final challenge is directing subsidies to renters who are more likely to be poor and who do not have a direct relationship with a water utility because they pay for water through their landlord, either included as part of their rent or as a separate water payment. Based on data from the 2013 American Housing Survey, approximately 21% of all housing units in the United States are occupied by this type of “hard to reach” customer, although not all of them would be considered poor or eligible for an assistance program. This ratio is as high as 74% of all housing units in metropolitan areas like New York City. Because of data limitations, there are no similar estimates in low-income countries.

Instead of sector-by-sector affordability policies, governments might do better to think about the entire package of services a poor person has a perceived right to consume. Direct income support, calculated to cover a package of basic services, could then be delivered to the poor, preserving their autonomy to make spending decisions and preserving the appropriate signals about resource scarcity.