Affordability of WASH services: rules of thumb and why it’s difficult to measure

Editors Note: This post is authored by Catarina Fonseca, Head of International and Innovation Programme at IRC. In her post, Catarina discusses different measures that aim to assess the affordability of WASH services, and ultimately, increase access. She highlights research that has been done on this topic and identifies several practical issues that make measuring and comparing affordability in WASH a difficult endeavor. The post originally appeared here on the IRC blog.

Catarina Fonseca, Head of International and Innovation Programme at IRC

What happens when people cannot pay for water and sanitation services? Mostly, we hear about women and girls in low income countries and how they access polluted water from ponds, rivers or hand dug wells. This week, the Detroit Water and Sewerage Department (USA) made it to international news for disconnecting water services at a rate of 3.000 customers per week, in an area with high rates of poverty and unemployment.

The right to water is defined as “the right of everyone to sufficient, safe, acceptable and physically accessible and affordable water for personal and domestic uses.” Affordability to households means the ability of households to spend on water and sanitation without reducing their well-being. It assumes that households have an income in the first place, of which they have to pay a part for accessing water or sanitation. Ultimately, the responsibility towards affordability rests with service authorities or with regulators, but measuring affordability is crucial for service providers to avoid budgeting based on tariffs or payment modalities that households cannot afford. Or, if tariffs are to be above the means of consumers, the poorer consumers need to be protected by other social mechanisms.

The existing literature on the topic is limited and related mostly to the percentage of overall household budget spent on water and sanitation services that is considered affordable. The most quoted amount is the 3 to 5 percent of household expenditure as an affordability rule.1 2 3 It has been recognised by, amongst others, the World Bank, UNDP, the Asian Development Bank and DFID that setting these percentages has been an arbitrary process but that, as an initial tool, they can provide a rule of thumb.4 5 It has also been proposed that the poor should not pay more than three times in relative terms what the average user pays.6

In many countries in the World, water and sanitation come at a higher financial cost to poor households than the 3 to 5 percent of their income. Smets has conducted a study on affordability in high, middle and lower income countries.7  Countries with low-income populations spending a high proportion of their income on water and sanitation services include Burkina Faso (29% of income of poorest of the population), Poland (10.8% for the poorest), United Kingdom (2% of households spend more than 8% of income). Several countries have measures in place to limit the financial impact of increased water pricing on the most vulnerable groups of the population.8  These measures include among others large subsidies, reduced VAT, social tariffs, targeted assistance, no disconnection, unmetered water and income support. For an overview per country see Water Academy.9

While policies exist and have been tested to mitigate affordability issues, measuring and comparing affordability has several practical problems. Firstly, there is a need to collect household expenditure specifically for water and sanitation. This includes, depending on the context, the expenditure on construction and on maintenance, purchase of bottled water, the tariff, etc. Only capturing the tariffs, as is common, fails to acknowledge all the costs incurred by the poorest with non-networked services, and these families are the ones that are supposed to be targeted by affordability mitigation policies.

Secondly, it is required to collect household total expenditure in order to calculate the expenditure on water and sanitation relatively to households available income. This is a known lengthy, costly and cumbersome process. An alternative cheaper proxy commonly used is to collect reported income.

Once income or expenditure data are collected from households, an appropriate maximum percentage of expenditure which is considered affordable (for example based on the 3-5%), needs to be defined and matched with what is a minimum level of service that is considered acceptable. But who is to judge? Who is to decide what the word “appropriate” means in each case?

Affordability measurements are difficult to collect and to measure. However, used in combination with other service level indicators (understanding for instance, if it is the money or the quality of the service that are preventing people to pay) it has the potential to be useful to measure progressive realisation towards reducing the proportion of those that do not have access because water and sanitation services are really not affordable to them. It is unclear from the case of the Detroit Water and Sewerage Department who is actually responsible for ensuring that consumers are not excluded and where has the system failed to ensure mitigation measures.

1 Damme, H., Hans M.G.and White, A., 1984. Technology Choices for the Decade. In Water and Sanitation. Academic Press, pp. 151–172.

2 Mcphail, A. & Bank, T.W., 1993. The “Five Percent Rule” For Improved Water Service : Can Households Afford More? World Development, 21(6), pp.963–973.

3 Saunders, R.J. & Warford, J.J., 1976. Village water supply. Economics and policy in the developing world. Washington, D.C.: International Bank for Reconstruction and Development.

4 Briscoe, J., 1999. The Changing Face of Water Infrastructure Financing in Developing Countries. International Journal of Water Resources Development, 15(3), pp.301–308.

5 Waughray, D. & Moran, D., 2003. Cost Recovery in Water and Sanitation Projects Volume 2 : Annexes to Main Report. Available at: http://r4d.dfid.gov.uk/PDF/Outputs/R7834annexes.pdf. [Accessed August 13, 2013].

6 Roaf, V., Khalfan, A. & Langford, M., 2005. Monitoring Implementation of the Right to Water: A Framework for Developing Indicators. Berlin: Heinrich Böll Foundation.

7 Hutton, G., 2012. Monitoring “Affordability” of Water and Sanitation Services after 2015: Review of Global Indicator Options, Geneva: World Health Organisation. Available at: http://www.wssinfo.org/fileadmin/user_upload/resources/END-WASH-Affordability-Review.pdf. [Accessed December 11, 2013].

8 OECD, 2009. Managing Water for All: an OECD perspective on pricing and financing, Paris, France: OECD.

9 Water Academy, 2003. Solidarity for Drinking Water, Paris: L’Harmattan.