Water Affordability Needs Assessment

EPA’s 2024 Water Affordability Needs Assessment Report provides an estimate of the water affordability burden felt among households and utilities across the nation. The Report summarizes decades of work by utilities, academics, and associations that have been at the forefront of this research. It presents EPA’s analysis of the prevalence of water affordability challenges to both communities and utilities across the country and provides approaches to address water affordability concerns.

The preliminary analysis presented in the Report indicates between 12.1 million and 19.2 million households throughout the U.S. lack affordable access to water services. The estimated national cost of unaffordable water service bills ranges from $5.1 billion to $8.8 billion per year.

This Report provides options to reduce unaffordable access to water services which fall into three broad categories:

• Establishing a Federal Water Assistance Program
• Increasing Education, Outreach and Knowledge Around Solutions to Address Affordability
• Increasing Ways to Reduce Water Infrastructure Capital and Operating Costs.

In producing this Report, EPA gathered input from a wide range of stakeholders, including utilities, associations, academia, nonprofits, community-based organizations, advocacy groups, and the public.

Water Affordability Needs Assessment Frequent Questions

• Water Affordability Challenges
• Data Analyses
• Recommendations

Water Affordability Challenges

• Does the report address utility administrative capacity challenges, especially for small utilities that want to implement financial assistance programs for their customers?
  • Interested parties emphasized administrative capacity as one of several challenges that utilities face. Small utilities may also lack a customer base to support a Customer Assistance Program (CAP). While a detailed analysis of these challenges was beyond the scope of the Needs Assessment Report, the report does recommend that EPA develop additional resources and tools to support the development of utility-led CAPs. These resources and tools could help to highlight innovative approaches to addressing administrative capacity challenges and highlight successful programs. The report also recommends that EPA evaluate best practices and creative program structures to decrease administrative burden and increase affordability to all households through a federal water program.
• Does the report address the unique challenges that different utilities face around rate structures and financing Customer Assistance Programs (CAPs)?
  • An in-depth analysis of specific issues utilities might face around establishing CAPs was beyond the scope of the Needs Assessment Report. EPA recently charged the Environmental Financial Advisory Board (EFAB) with evaluating approaches to support communities facing water affordability challenges. EFAB’s Water Affordability Workgroup Report includes recommendations relevant to capital projects, CAP barriers, rate structure/design, and SRF subsidies.
• Does the Needs Assessment Report discuss the relationship between water affordability and the impact of necessary capital costs?
  • The Needs Assessment Report discusses many factors that impact utilities’ capital expenditures and operations and maintenance (O&M) costs. While it is critical that drinking water and wastewater service providers take action to ensure households have safe and clean water, the costs associated with these actions can pose an increased burden on U.S. households through their water bills. Throughout the report, EPA discusses the costs associated with protecting public health and the environment. EPA has stressed the importance of additional analysis in this area throughout the report.

Data Analysis

• How did EPA develop an assumed basic water usage of 50 gallons per person per day?
  • Water affordability studies generally seek to evaluate the cost of water used for basic health and cleanliness needs, including drinking water consumption, food preparation, personal hygiene (bathing, handwashing, oral care), sanitation (flushing toilets), and basic cleaning (washing clothes, dishes, etc.). Researchers must calculate water bills at a particular quantity of water that represents the basic water needs of the household.
  • For the purposes of the Needs Assessment Report, EPA conducted a thorough literature review of national water affordability studies in selecting its assumed basic water usage quantity of 50 gallons per person per day. These studies are listed in Appendix D of the report. Additionally, the 2020 ANSI/RESNET/ICC 850 Standard calculation indicates 49.9 gallons per person per day if a 2.65 occupancy is assumed.
  • Monthly water use was calculated using a basic water usage quantity of 50 gallons per person per day, multiplied by 30 days per month, and multiplied by the household size.
• What type of income data did EPA use in calculating water affordability values (e.g. gross household income, net household income, etc.)?
  • EPA used the American Community Survey household income data. Survey questions that are combined to calculate household income are available at the Census Reporter.
• Were Consumer Price Index (CPI) adjustments used to bring all rates to 2024 level based on national average index or at metro/state/region index?
  • EPA used the following indexes:
    • Consumer Price Index for all urban consumers: All items in U.S. city average (U.S. Bureau of Labor Statistics)
    • Consumer Price Index for all urban consumers: Water and sewer and trash collection services in U.S. city average (U.S. Bureau of Labor Statistics)
• How were the affordability threshold values (3 percent and 4.5 percent of household income) determined?
  • EPA conducted a thorough literature review of multiple affordability threshold values. EPA selected two thresholds, 3 percent and 4.5 percent of household income spent on drinking water and wastewater bills, to estimate a range of the number of households throughout the U.S. experiencing high water burden. 
  • The 4.5 percent threshold is widely used in literature (Cardoso & Wichman, 2022a; Berahzer et al., 2023; Heminger et al., 2023; Mack & Wrase, 2017). Use of the 4.5 percent threshold is largely consistent with the Hours of Labor at Minimum wage metric, which suggests a threshold of one day (8 hours), or 4.6 percent of work hours in a month, assuming a 40-hour work week. In order to generate a range of households throughout the U.S. experiencing high water burden, EPA also selected a 3 percent threshold, which is the lowest fixed threshold used in the Low-Income Water Customer Assistance Program Assessment report (Berahzer et al., 2023).
• What is the household-level water affordability threshold for drinking water-only rates?
  • EPA’s Water Affordability Needs Assessment Report did not recommend use of separate affordability thresholds for drinking water or wastewater bills.
• How did EPA define "utilities that provide service to a disproportionate number of households in need?” What is that threshold (as a percent)?
  • EPA evaluated the number of “qualifying households” using the IIJA definition that compared household income to federal poverty guidelines. EPA then calculated the percentage of qualifying households as compared to total households within the drinking water service area boundaries of each utility. EPA considered utilities to have a disproportionate percentage of qualifying households when the percentage of qualifying households exceeded 40 percent of households in the service area.
• Is the data used in the report calculations available?
  • Yes, all the rate data that was used is publicly available. Please see section 5.1.1 of the Report for a list of data sources used. All links to the sources can be found in Appendix H: References.
• How were rural, small and Tribal systems included/represented in the report?
  • The water rates affordability data analysis conducted in the report combined existing residential drinking water and wastewater rate data from the Duke Nicholas Institute for Energy, Environment & Sustainability Water Affordability Data Dashboard (Duke), the Cardoso and Wichman (2022b) publication dataset (C&W), and the Wisconsin Public Service Commission (WIPSC). All rates for rural, small and Tribal systems that were available in these data sources were included in EPA’s analysis. 
  • It is important to note that current sources of rate data likely underrepresent small and very small utilities because of the difficulty in obtaining rate data for these utilities. Furthermore, small and very small utilities may be more common in rural and Tribal areas that have disproportionally more qualifying households in need. The rate data in the report are not geographically representative of the U.S., which may result in variability due to the aforementioned underrepresentation of small and very small utilities, the inclusion of specific areas where affordability issues may be more severe, or other variations between data used and the U.S. as a whole.
  • Interested parties recommended that EPA conduct additional research into water affordability for rural, small and Tribal systems, and EPA highlighted this as an area for additional research in the report.
• Did the report evaluate how residential rate structures impact water burden? 
  • The Needs Assessment Report acknowledges that the way in which utilities implement rate increases can significantly impact household-level water affordability. While further data analysis in this area was beyond the scope of this report, EPA recommended this as an important area for further research.
  • EPA recently charged the Environmental Financial Advisory Board (EFAB) with evaluating approaches to support communities facing water affordability challenges, including providing recommendations on rate structure and design. EFAB’s Water Affordability Workgroup Report describes options for enhancing affordability through rate design while following the traditional cost of service framework and abiding by relevant statutes in most states. EFAB’s report includes recommendation for rate structure options for enhancing affordability. EPA will continue to evaluate and, where appropriate, pursue EFAB’s recommendations.
    • Advancing Water Affordability Nationwide: A Framework for Action (January 2025) (pdf) (2 MB)
• Is there a standard definition to terms such as “affordable” and “unaffordable” in relation to water affordability?
  • There is no single approach to defining or measuring water affordability. Each approach applies a unique lens that explores the different elements of a community, such as financial capacity constraints. The report describes some of the most common water affordability definitions and metrics. It is important to note that the report focuses on household level metrics, and it may not be appropriate to apply these methods and thresholds to broader community-level discussions, such as certain enforcement schedules or utility planning operations.

Recommendations

• Is EPA planning to pursue stakeholder recommendations in Section 7, "Additional Recommended Analyses" (page 50) in 2025?
  • EPA has committed to continuing work in the water affordability space. EPA is currently working to prioritize the recommendations in Section 7 of the Water Affordability Needs Assessment Report, along with other recommendations provided by EPA’s Environmental Financial Advisory Board’s Water Affordability Report, Advancing Water Affordability Nationwide: A Framework for Action, and other stakeholder engagements. However, some of these analyses may be beyond the scope of the work products that EPA plans to produce in the next year. EPA welcomes feedback and collaboration on recommended analyses, including prioritization of work products.
    • Advancing Water Affordability Nationwide: A Framework for Action (January 2025) (pdf) (2 MB)
• Does EPA recommend that utilities use individual household income to determine affordability? If so, does EPA have recommendations for utilities that don't have access to this information?
  • Individual household income data are the most granular level of information that can be considered in household-level water affordability analyses; however utilities should use the best level of information available or accessible to analyze, which in many cases may be a community level metric, such as Lowest Quintile Income (LQI).
  • EPA offers free Water Technical Assistance (WaterTA) to utilities needing support with building financial, technical, and managerial capacity, including water rates analyses. If your utility needs assistance in this area, please request WaterTA for your community using the WaterTA Request Form.
• Is the assistance program authorized in IIJA 50109 more limited in scope than a national assistance program would be?
  • Section 50109 of the IIJA authorizes EPA to make no more than 40 grants under the program, if funded. While a national assistance program could be structured in many ways, EPA’s estimates of unaffordable water bills is broader in scope, includes all households connected to a utility in the United States, and is not limited to 40 potential grants.
  • It is important to note that any potential future federal water assistance or affordability program, including the program described in IIJA 50109, would require congressional appropriations.
• Does EPA envision support for non-revenue water reduction programs that promote improved affordability for customers by reducing utility capital and O&M costs?
  • The report stresses the need for a multi-facetted approach to address water affordability, which includes continued investment in infrastructure. An important component of this approach is addressing capital and O&M challenges to reduce “non-revenue water,” or water that is lost before reaching the consumer and therefore does not produce revenue to the utility nor value for the consumer. 
  • The report recommends that EPA works to reduce water infrastructure capital and operating costs by promoting the use of low-cost federal funding and financing for water infrastructure and Water Technical Assistance (WaterTA) to address affordability issues. The Clean Water and Drinking Water State Revolving Funds are important programs for investing in the nation’s water infrastructure. Since 2021, EPA has invested more than $500 million in WaterTA, which connects communities to experts who help assess and implement solutions for their drinking water, sewage, and stormwater needs.
  • EPA recently charged the Environmental Financial Advisory Board (EFAB) with evaluating approaches to support communities facing water affordability challenges. This includes recommendations relevant to capital projects, CAP barriers, rate structure/design, and SRF subsidies. In its Water Affordability Report, Advancing Water Affordability Nationwide: A Framework for Action, EFAB developed a high-level roadmap, or framework of considerations, for addressing water sector affordability issues, including capital investments and O&M decisions. EPA will continue to evaluate and, where appropriate, pursue these recommendations.
    • Advancing Water Affordability Nationwide: A Framework for Action (January 2025) (pdf) (2 MB)
• Does EPA have recommendations for addressing nonpayment in ways other than through water service disconnections? 
  • The Needs Assessment Report recommends additional analysis on the effectiveness and impact of disconnection moratoriums in states that discontinued water shut-offs during COVID-19, including evaluating the impacts, such as revenue impacts on utilities. Service disconnections can impact public health concerns. Due to this, some utilities choose to place a tax lien on the customer’s property when there is a nonpayment issue. More research is needed to assess the best option for households and for utilities. 
• Does EPA have authority to mandate reporting of disconnection data from utilities?
  • EPA does not have statutory authority to mandate utilities to report data on water disconnections due to nonpayment.
• Was EPA tasked with developing systems or policies beyond recommendations?
  • No, Congress did not task EPA to develop systems or policies to address water affordability. IIJA 50108 directed EPA to provide recommendations to address water affordability. The report presents recommendations that were identified during the affordability analysis, discussed during interested parties engagement sessions, and/or are found in literature.