Status of Federal Low Income Household Water Assistance Program

Rate increases have accelerated in recent years, in part, to compensate for the chronic, historic underpricing of water services and pay for rising costs associated with aging and deteriorating infrastructure, deferred maintenance, growing (or shrinking) customer bases, regulatory compliance burdens, and increased system risks, e.g., from climate change to cybersecurity risks. In fact, the costs of water and sewer services rose nationally by 46% in the last decade, outpacing inflation by almost 20 percentage points. The combined water and wastewater bill for a typical American household has now passed $111 per month.

A primary challenge for water and wastewater systems, even pre-pandemic, is how to price water services to fully cover costs and maintain affordability for customers who already struggle to pay their bills. In 12 major U.S. cities, more than 1.5 million households combined owed $1.1 billion in past-due water bills in 2020.

When water bills become unmanageable, missed payments and delinquent accounts can lead to service disconnection or system shutoffs, an outcome with many negative impacts for customers and a utility. Disconnection, which can legally make a home uninhabitable in some jurisdictions, can have the same effect as eviction and even lead to children being placed in protective care. As such, many utilities—when they have the requisite technical, managerial, and financial capacity—have revisited their rate structures with a focus on equity and affordability concerns and have implemented strategies to help low-income customers better manage their bills through customer assistance programs or CAPs.

Concerned about the pandemic’s impact on the ability of low-income households to pay for water services, the potential of increased service shut-offs, and the public health imperative to maintain water services amid a pandemic, members of both parties in Congress proposed providing aid to low-income families to help pay water bills—a concept that had been introduced in legislation previously but never advanced. Congress ultimately appropriated $638 million in the Consolidated Appropriations Act for Fiscal Year 2021 (P.L. 116-260) in December 2020 and an additional $500 million in the American Rescue Plan Act (P.L. 117-2) in March 2021, though the latter was passed without any Republican support. Congress authorized HHS to create the Low Income Household Water Assistance Program as a temporary program with its authorization set to expire December 31, 2023.

A New Federal Water Assistance Program

LIHWAP is the first federal program to exclusively assist low-income families with their water and wastewater bills. Some federal housing programs, like the Housing Choice Voucher program, do account for utility costs, like water service, when calculating and providing rental subsidies but they are not specifically targeted to help with these costs. LIHWAP is modeled after HHS’s Low Income Home Energy Assistance Program (LIHEAP), which has been providing states, tribes, and territories with federal funding for needs-based heating and cooling bill assistance since its creation in 1981. Like LIHEAP, LIHWAP is intended to provide one-time funding to help low-income households afford their utility bills and maintain service.

LIHWAP funding can be used to assist with:

1. Paying arrears
2. Reconnecting services and covering late fees
3. Reducing rate charges to a more affordable level

How the Program Works

To apply for LIHWAP funding, HHS requires potential grantees—states, territories, and tribes—to submit a plan with expected costs, household eligibility, and any outreach and enrollment initiatives. HHS, charged with reviewing and approving the plans, provided a Model Plan for grantees to follow.

HHS allocated funding to every state except North Dakota, which opted out of the program, based on a formula which considers the percentage of households in the state with income equal to or less than 150% of the federal poverty line and the percentage that spends more than 30% of their monthly income on housing.

Grantees are fully responsible for administering their own program, following federal guidelines and their plan submitted to and approved by HHS, with distribution to recipients based on two forms of eligibility. The first, categorical eligibility, refers to households that are eligible for other means-tested federal programs and do not need to repeat income tests to qualify. The second, income eligibility, refers to households that must undergo a review to determine if they meet their state’s income eligibility criteria. In addition, grantees are required to prioritize households with the highest water costs or need, in relation to household size and income, including targeting households with vulnerable members (such as seniors, young children, or members with disabilities).

Households needing assistance apply directly through their local grantee’s LIHWAP program, which is often housed within existing local social service agencies. After applications are reviewed and approved, grantees are required to disburse funding via direct payments to water and wastewater utilities on behalf of the specific, approved households. LIHWAP provides only one-time assistance—so applicants cannot reapply to the program once they have already received assistance.

Program Status

Grant applications were initially due in August 2021, but the deadline was extended to October 2021 when less than 30 states submitted plans on time—potentially delaying access to LIHWAP funds for families. Despite this slow start, as of September 2022, 52 states and territories and 70 tribes had begun accepting applications for their LIHWAP programs.

According to the latest data, over 400,000 households have now received assistance. Over 30,000 of these families have seen their water or wastewater services restored and 217,000 have had the disconnection of their services prevented. Alaska, Nevada, New Hampshire, Virginia, and Wyoming have yet to distribute funding to a single household—18 months since Congress initially appropriated funding.

The Future of Federal Water Bill Assistance

BPC first recommended that Congress provide water bill assistance in 2017 and later evaluated various options for delivering it, including:

• Creating a low-income water assistance program modeled on LIHEAP
• Establishing a water loss prevention program, modeled after the Weatherization Assistance Program at the U.S. Department of Energy
• Turning LIHEAP into a utility assistance program and/or amending and coordinating other existing low-income assistance programs to better promote affordable access to water services

President Biden’s fiscal year 2023 budget proposed something akin to the third option—allowing states to use LIHEAP dollars for low-income water assistance. In the 117th Congress, two bills to provide low-income water assistance were introduced:

• The Assistance, Quality, and Affordability Act (H.R.3291), sponsored by Reps. Paul Tonko (D-NY) and Frank Pallone (D-NJ), would provide $4 billion to forgive household water debt that accrued during the pandemic, improve drinking water standards, and provide emergency assistance for accumulated water debts to effectively stop water shut-offs.
• The bipartisan Low-Income Water Customer Assistance Program (H.R.3293), sponsored by Rep. Lisa Blunt Rochester (D-DE) and Rep. John Katko (R-NY), would establish a permanent program at the EPA (as opposed to HHS) to help low-income households pay their water and sewer bills and provide grants to states for community water assistance needs.

Now that the LIHWAP program has built out a delivery system to support water bill assistance, Congress must decide whether to preserve this capacity once current grant allocations are spent down.

Conclusion

We all know why having safe, reliable drinking water and sewer services is important, and the pandemic reiterated the public health imperative. Congress provided emergency relief that has been slow to reach families most in need of it. With the program set to expire, Congress should examine LIHWAP, what has and hasn’t worked, and assess if it is the most effective way to safeguard water affordability for low-income families moving forward.