Measuring water affordability in developed economies. The added value of a needs-based approach

In developed countries, water affordability problems remain up on the agenda as the increasing financial costs of water services can impede the realisation of an equal access to water. More than ever, public authorities that define water tariffs face the challenge of reconciling environmental and cost recovery objectives with equity and financial accessibility for all. Indicators of water affordability can be helpful in this regard. Conventional affordability indicators often rely on the actual amount that households spend on water use. In contrast, we propose a needs-based indicator that measures the risk of being unable to afford the amount of water necessary to fulfill essential needs, i.e. needs that should be fulfilled for adequate participation in society. In this paper we set forth the methodological choices inherent to constructing a needs-based affordability indicator. Using a micro-dataset on households in Flanders (Belgium), we compare its results with the outcomes of a more common actual expenses-indicator. The paper illustrates how the constructed needs-based indicator can complement existing affordability indicators, and its capacity to reveal important risk groups.