Water affordability in the United States

Diego S. Cardoso and Casey J. Wichman. (R&R) Working Paper

Water Affordability in the US

Abstract In the US, recent trends suggest that the cost of water and wastewater is rising three-times faster than inflation and water infrastructure requires more than 1-trillion USD investments over the next 20-25 years. In this paper, we assemble the most comprehensive data set of utility water and sewer prices in the US, capturing approximately 45% of the US population, matched with community-level socioeconomic characteristics and typical levels of consumption. Using these data, we provide a large-scale snapshot of the distributional burden of water and sewer bills across income groups, geography, and race. Descriptive statistics suggest that 13.8% households have water and sewer expenditures greater than what the EPA deems affordable, and that households in the lowest income decile pay on average 7.8% of their annual income on water and sewer service. We show that using median household income at the county level drastically understates the extent of the water affordability problem relative to using the full income distribution within Census block groups. Additionally, we find that the number of households facing affordability concerns is positively associated with water and sewer price levels, impoverished residents, and the proportion of black residents, after conditioning on poverty levels. Lastly, we simulate self-sufficient water affordability programs, implemented at the county level, that redistribute the burden borne by low-income customers. We show that affordability policies that provide a lump-sum rebate to low-income households and are paid for by income taxes dominate policies that change marginal incentives for water and sewer consumption.