Millions of Americans lack affordable water access. Here’s how local utilities can help.

American households are facing higher expenses on a variety of fronts: homes, cars, groceries, and more. But bills for one of the most basic and essential services—water—are hitting many households especially hard. From drinking water to wastewater, these bills vary depending on the exact customer type, geography, and other factors, but all told, millions of households lack access to “affordable” water—paying at least 3% of their income on these services, according to the Environmental Protection Agency (EPA). This burden can be even higher for lower-income households; in some cases, they can pay up to 40% or more of their income on water bills. 

America’s water affordability challenge is growing. But it’s not just households that are struggling: The local utilities that manage and provide water are at the heart of this challenge. As the primary owners and operators of the country’s pipes, plants, and other water systems, they often lack the fiscal or programmatic capacity to lower bills or offer other customer assistance, as they grapple with competing pressures such as infrastructure investment, regulatory compliance, and other operational costs. These rising demands leave utilities increasingly strained, forcing them to raise rates to maintain critical services. 

The current inflationary environment and uncertain political climate—particularly at the federal level—are only amplifying these challenges for local utilities. This report describes the country’s water affordability challenge in more depth by focusing on utilities, including where they stand in the current federal moment and new national data on the geographic extent of this challenge. The report also discusses potential water affordability strategies that local utilities—alongside supportive state and federal leaders—can pursue (or are already pursuing) to help alleviate these fiscal pressures.  

Understanding the country’s water affordability challenge  

A big driver for the U.S. water affordability challenge is a struggle among local utilities to stay ahead of their infrastructure investment needs. 

More than 50,000 water systems are scattered across the country, from small rural utilities to large urban ones responsible for providing safe, reliable, and (ideally) affordable water. And they often operate, own, and invest in water infrastructure singlehandedly; state and local leaders are responsible for nearly 90% of all public spending each year, while federal leaders are responsible for the remainder through a combination of relatively small loan and grant programs. The recent influx of federal funding from the Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA) helped, but did not fundamentally change this underlying calculus. 

Many utilities are struggling to keep up with the financial demands of maintaining and upgrading their infrastructure. Constrained budgets and other economic pressures—including a shrinking customer base in some communities—have resulted in underinvestment. The result is an estimated $744 billion in needed drinking water and wastewater infrastructure improvements over the next two decades, from fixing leaking pipes to upgrading outdated treatment plants. Alongside these capital upgrades, local utilities are contending with rising operational costs driven by stricter water quality regulations, escalating energy and treatment costs, dwindling water supplies due to drought, and more.  

In other words, utilities are contending with higher costs and adjusting rates to keep up with ongoing service, needed repairs, and other improvements. And the customer base in many markets is feeling the pressure. Water and sewer bills for the typical U.S. household have increased 24% over the past five years according to recent surveys, and affordability issues are becoming more widespread, from Cleveland to New Orleans to Santa Fe, N.M.  

Higher water bills are especially a problem for lower-income households. While no single definition for “affordable” water exists among researchers and practitioners, the EPA defines a higher water burden as those households paying 3% to 4.5% (or more) of their income on services. When households cannot keep up with their bills, they often accumulate debt to their local water utility, exacerbated by late fees and disconnection charges. On average, 20% of U.S. households are in “water debt,” and an estimated 12.1 million to 19.2 million households lack access to affordable water according to the recent EPA assessment, with the total cost of unaffordable bills ranging from $5.1 billion to $8.8 billion.  

While some utilities offer low-income customer assistance programs, or CAPs, many do not. CAPs represent utility-sponsored programs aimed at helping lower-income customers pay their water bills, appearing in cities such as Philadelphia, Washington, D.C., and Detroit. But their proliferation remains ad hoc and uneven across the country due to various legal barriers and a lack of durable financial support. 

The national extent of the water affordability challenge 

The enormous geographic extent and fragmentation of the country’s water infrastructure make it a challenge to precisely measure the affordability issues facing individual utilities and the households they serve. Inconsistent definitions around water affordability do not help researchers either. However, growing public awareness and pressure have helped shift the attention toward affordability at a national level—especially during the pandemic, when federal leaders recognized an urgent need for assistance and launched the first coordinated programmatic response in the form of the Low Income Household Water Assistance Program (LIHWAP). Authorized by Congress and overseen by the Department of Health and Human Services (HHS), the $1.1 billion LIHWAP program helped restore water services, prevent disconnections, and provide rate reductions for low-income households. 

While LIHWAP’s funding has since expired, it was popular among many water utilities, with support from several major water associations. By alleviating customer debts and assisting struggling households, LIHWAP reduced financial pressures on utilities. This support offered utilities greater financial stability, enabling them to channel resources toward maintaining critical services and addressing operational challenges. With fewer unpaid bills and service disruptions, utilities could better manage the costs associated with aging infrastructure, regulatory compliance, and other demands.  

LIHWAP consequently had an extensive economic impact—and highlighted the continued need for affordability assistance. In the program’s four years, it served 1.7 million households, prevented disconnection for 23,000 households, restored services for over 15,000 households, and reduced rates for 50,000 households. Further, because the program was intended to serve especially vulnerable populations, Black, Native American, and other households with extremely low incomes received over 50% of the dispersed funding.  

The program’s impact extended across 49 states (North Dakota opted out), Puerto Rico, and the U.S. territories. While the largest states with the most systems—such as California, Florida, and New York—received the most funding overall (more than $65 million each), assistance was still widespread. LIHWAP helped stabilize utilities of all sizes, from small rural systems to large metropolitan ones, with funding distributed based on multiple factors beyond system count, including the number of low-income households, the balance between rural and urban areas, and the prevalence of minority and economically disadvantaged communities.  

Advancing water affordability strategies at a state and local level amid federal uncertainty 

Water affordability is a national challenge, not simply a local one, as demonstrated by the geographic reach and impact of LIHWAP funding. Thousands of water utilities—and millions of households—benefited from the program. Yet LIHWAP’s funding was relatively limited and short-term in nature, leading to continued uncertainty for many utilities as they balance water investment and affordability concerns.  

The urgency for action on water affordability remains, but the recent political transition in Washington is not only calling into question federal water infrastructure funding (as the IIJA expires in another couple years, for instance), but also support for programs such as LIHWAP. In the coming months and years, state and local leaders will face even more financial pressure to come up with infrastructure solutions. But they can still advance several water affordability strategies, including: 

• Identifying funding sources beyond federal programs. Utilities need to experiment with alternative funding and financing strategies to stay ahead of their infrastructure and affordability needs. In addition to federal grants and loans, utilities can generate more durable and equitable revenue by adopting innovative pricing strategies, including rate adjustments based on property-level characteristics, customer incomes, and more. For example, the Northeast Ohio Regional Sewer District has adopted a Summer Sprinkling Program that adjusts bills based on seasonal outdoor water use, resulting in potentially lower and more customized pricing for customers without jeopardizing the system’s financial health. Numerous cities, including Atlanta, Houston, and Seattle, have also designed their own innovative funding approaches and customer assistance efforts, such as assisting with plumbing repairs for low-income households and offering annual credits on their water bills. Beyond individual utilities, states can provide greater funding certainty and flexibility. Texas, Iowa, and Utah, for example, have established dedicated water infrastructure funds to accelerate projects, while a number of other states, including New Mexico and New Jersey, are pursuing public education and awareness efforts. Combining utility innovation with state-led initiatives can allow utilities to secure needed financial backing without imposing across-the-board rate increases, with the potential for greater household affordability. 
• Testing (or continuing to test) customer assistance programs. Utilities develop CAPs to provide targeted relief and address affordability challenges unique to each community. Successful models—such as Louisville, Ky.’s Drops of Kindness; Montgomery County and Prince George’s County, Md.’s Water Financial Assistance Program; and Atlanta’s Care and Conserve—highlight the potential for local solutions. These programs offer a range of support, such as direct financial assistance, installation of water efficiency devices, plumbing upgrades in homes, and lower fixed fees on bills for struggling customers. No single source of support made these CAPs possible, but funding set aside by the city, customer contributions, and public-private partnerships helped, showing the need to test a variety of financing approaches and elevate water as a shared local priority. 
• Driving more collaborative regional planning. Many utilities are struggling to simply keep up with their existing infrastructure needs, let alone experiment with innovative funding and financing strategies or affordability programs. Yet formal and informal collaboration with other neighboring utilities—and other community partners, including nonprofit organizations—can boost their capacity to address these infrastructure and affordability concerns together. For instance, the Water Finance Exchange (WFX) hosts workshops that explore water infrastructure opportunities and foster regional collaboration. Workshops like these connect utility managers, allowing them to learn from their peers, share strategies for addressing water affordability, and implement successful practices in their own communities. Regional collaboration can help utilities pool funding applications, streamline infrastructure improvements, and advocate for policy changes that reduce affordability challenges. California’s Integrated Regional Water Management program illustrates how uniting regions can drive sustainable water use, enhance economic stability, and improve access to state funding—ultimately fostering long-term, equitable solutions.  

State and local leaders are likely to take the lead on any water affordability efforts in the near term, but that does not mean federal action is impossible. Despite the current political uncertainty, agencies such as the EPA and HHS still have opportunities to explore affordability programs and strategies. Steps that can help advance action include improving national water affordability data collection, establishing clear affordability standards, and utilizing tools from organizations such as the Environmental Policy Innovation Center and the University of North Carolina Environmental Finance Center. By reassessing subsidy requirements and expanding technical assistance, federal leaders can also help utilities use state revolving funds more flexibly. 

Further, as IIJA funding winds down, congressional leaders have the chance to consider reauthorization of the Water Resources Development Acts (WRDAs) that have previously provided targeted funding for disadvantaged communities. Building on the success of LIHWAP and the findings of the EPA’s Water Affordability Needs Assessment, Congress could further pilot a permanent federal water assistance initiative to consistently support low-income households while strengthening utilities’ capacity to manage infrastructure and operational demands. 

Ultimately, the country’s water affordability challenge transcends any single political moment—and its scale and severity are only growing over time. The escalating costs to operate and maintain existing infrastructure and make needed upgrades are putting enormous financial strain on local utilities. Pilot programs such as LIHWAP hold promise in offering some assistance to both utilities and customers, alongside other efforts (including CAPs) led by individual utilities across the country. But no single program will solve a utility’s affordability challenge; it will take coordinated state and local leadership to assess and respond to these needs over the next few years.