HousingNZ Water Demand NZWWA07 Paper

1 Asset Engineer – Planning, Manukau Water Limited, Private Bag 94010, Manukau

2240, New Zealand. Ph: +649 262 5499 extn 7459, Fax: +649 2625752,

[email protected]

HOUSING NEW ZEALAND CORPORATION AND MANUKAU WATER

LIMITED CASE STUDY: WATER DEMAND MANAGEMENT – DO

CONSUMERS CARE?

Priscilla Chung, BE(Hon)1

Abstract

Housing New Zealand Corporation (HNZC), in collaboration with Manukau Water

Limited (MWL) launched a water usage study in early 2007, to test the hypothesis,

“that HNZC tenants, in not having to pay water usage charges, use more water than

average domestic customers”. The first stage of the study involved analysing water

usage of HNZC and non-HNZC residential properties in the pilot study area Mangere

East. This paper will discuss the methodology adopted, the initial findings, and the

recommendations for future stages of the study.

Introduction

Public housing in New Zealand is managed by Housing New Zealand Corporation

(HNZC). Recent international studies suggest public housing tenants use more water

than private residential households because there is little incentive in conserving water

when tenants are not charged for the amount of water consumed. At present, HNZC

does not charge tenants for water use. Based on overseas experience, it is reasonable

to assume that a tenant’s water usage is higher than average. As with other public

housing providers worldwide, utility company costs constitute one of the largest

components of public housing operating cost. If the 8,900 HNZC households in

Manukau each use on average 50m3 more water per annum than non-HNZC

households, as is the case in New South Wales (NSW Government 2005), then HNZC

have the potential to save 445,000m3 of water per year, some $500,000 in water

charges.

HNZC, in collaboration with Manukau Water Limited (MWL) launched a water usage

study in early 2007, to test the hypothesis, “that HNZC tenants, in not having to pay

water usage charges, use more water than average domestic customers”. The first

stage of the study involved analysing water usage of HNZC and non-HNZC residential

properties in the pilot study area Mangere East. This paper will discuss the

methodology adopted, the initial findings, and the recommendations for future stages of

the study.

International Settings – Water Usage and Pricing in Public Housing

Public housing providers worldwide face the challenge of providing and maintaining

quality housing to low-income families, in a cost effective manner. Utility company

costs, including electricity, natural gas and water, constitute one of the largest

components of public housing operating costs (Fischer 2006). In the past, it was

common practice in Australia, Europe and the USA for public housing providers to

charge tenants a fixed rent, normally below 30% of the tenant’s household income, and

then supply unlimited access to utilities free of charge (Fischer 2006; The Australia

Institute of Health and Welfare 2006). There were discussions in these countries

regarding the tenants’ lack of incentives to conserve water when they were not charged

for the amount of water they consumed. A study by Victorio in 1995 even suggested

individuals tend to maximize their benefit by consuming more water (Victorio 1995).

This is supported by the findings of the New South Wales Department of Housing in

2005 that on average, public housing tenants used 50m3 more water per annum than

those renting private housing even though they had smaller household sizes. That study

also found that public housing tenants represented 8% of high water users, but only 5%

of the general population (NSW Government 2005).

In recent years, public housing providers have tended towards charging tenants for

water on a volumetric demand basis on top of the normal rent (NSW Department of

Housing 2007; State Government of Victoria Australia 2007; Fischer 2006; Chicago

Housing Authority 2005), as it is a well established water demand management practice

to use increased water rates as a mechanism for reducing water usage

(Martinez-Espineira and Nauges 2004; Rotherham 2004; Huges 2007; Victorio 1995).

For example, public housing tenants in New South Wales and Victoria, Australia, are

now paying water rates to housing departments (NSW Department of Housing 2007;

State Government of Victoria Australia 2007). In Chicago, most tenants pay utility bills

directly to the utility companies, but get partially subsidised by the housing agency in

the form of an allowance based on their property size (Chicago Housing Authority 2005;

Fischer 2006).

There are clear sustainability and environmental advantages of water conservation by

reducing water usage with the global shift to charging for water usage. The housing

departments in favour of volumetic pricing also believe they will be able to better use

the money saved on water usage to improve or acquire public housing properties, in

addition to providing better services to those in need (NSW Department of Housing

2007).

The Effect of Price Control on Water Demand

Most studies worldwide agree on a significant but moderate effect of price on water

consumption (Martinez-Espineira and Nauges 2004). In New Zealand, there are

consistent trends around reductions in water use with water metering and the

introduction of volume based water rates. Water consumption in Auckland City showed

a 15 per cent decrease from 220 litres per capita per day to 188 litres per capita per day

from 1997 to 2002 following Metrowater’s introduction of volumetric wastewater

charging based on water consumption (Rotherham 2004; Huges 2007). In Tauranga, the

average household water consumption in 2004 is lower than it was in 1996 despite the

rapid population rise. This is believed to be a result of water metering introduced by

Tauranga City Council in 2002 (Rotherham 2004).

The amount and rate at which water consumption is reduced by price control measures

is not straight forward to predict, as it depends on a number of factors ranging from

behavioural and housing factors to the type of water use and the overall tariff structure

(Martinez-Espineira and Nauges 2004 , Gaudin 2006). For example, water for essential

household services and those used by household appliances are generally insensitive to

changes in price. A study in Spain estimated this price insensitive water consumption

component to be a fixed quantity of 100 litres per capita per day (Martinez-Espineira

and Nauges 2004).

The effect of tariff structure on water demand is a complicated topic and will not be

discussed in detail in this paper. But generally, an increasing rate structure is more

effective in reducing water consumption than a uniform or decreasing rate structure

(Dandy, Nguyen et al. 1997).

Human behaviour such as water usage habits, moral obligations to save water, and the

perception of water price are found to have significant effects on how consumers

respond to price variations (Agthe and Billings 1996, Gaudin 2006). A study in the

USA found that water consumption dropped 30% simply by explaining price

information in the water bills to better educate consumers on prices (Gaudin 2006). At

the other end of the spectrum, a study in Europe found consumers paying a fixed water

charge tried to maximize their benefits by consuming more water (Victorio 1995).

HNZC and MWL Water Usage Pilot Study in Mangere East

HNZC currently manages approximately 8,900 households in Manukau City, mostly in

the suburbs of Mangere, Otara, Manurewa and Papatoetoe. The water bills in these

households are fully subsidised by HNZC; they are not reflected in rent or passed on to

public housing tenants. This provides no incentive for the tenants to conserve water,

making it difficult for HNZC to manage water demand. Therefore, HNZC and

Manukau Water Limited launched a water usage study in early 2007 to determine the

water demand profile of the HNZC managed public housing, to test the hypothesis,

“that HNZC tenants, in not having to pay water usage charges, use more water than

average domestic customers”. The first stage of the study involved analysing water

usage of HNZC and non-HNZC residential properties in the pilot study area Mangere

East.

Selection of Pilot Study Area – Mangere East

At the project scoping stage, Manukau Water Limited assessed the water bills of all the

HNZC managed households in Manukau City in the period September 2006 to

November 2006 to select a pilot study area. Mangere East has been selected to represent

the worse case scenario because the initial assessment revealed a relatively high

average water consumption rate in Mangere East compared to other suburbs. Mangere

East also has higher proportion of high water usage households, where 1.7% of

households consumed more than 8,700 litres per household per day. A household would

normally be expected to consume only 430 to 1,310 litres per household per day.

There are 1,163 HNZC households in Mangere East, representing 13% of the total

HNZC managed households in Manukau City. This is considered a representative

sample size for a pilot study.

Figure 1: Manukau City in Auckland

Figure 2: Water Usage Pilot Study Area – Mangere East

Methodology

The pilot study was programmed in 5 phases. Phase 1 was completed in early April

2007, and the initial results are presented in detail in subsequent sections. The project

has been progressed to Phase 3 completion to date.

Phase 1 - Per household water demand analysis;

Phase 2 - GIS data processing;

Phase 3 – Preparing per capita water demand data;

Phase 4 – Per capita water demand analysis; and

Phase 5 – Detailed investigation targeting extreme water users.

Phase 1 involved extraction of water consumption data from Manukau Water Limited’s

customer billing database and categorising the property data into five water user groups

according to their daily water consumption as follows:

Low water user - consumes less than 430 litres per household per day.

Normal water user - consumes 430 to 1,310 litres per household per day.

High water user - consumes 1,310 to 2,620 litres per household per day.

Very high water user - consumes 2,620 to 8,750 litres per household per day.

Extreme high water user - consumes over 8,750 litres per household per day.

The percentage distribution of water user groupings, average daily consumption and

maximum daily consumption for HNZC managed households were compared against

that of non-HZNC households.

Phase 2 to Phase 4 involves combining the initial results from Phase 1 with GIS

information and 2006 Census data to perform further analysis on water demand on a per

capita basis. The outcome of Phases 2 to 4 will be utilised in Phase 5 to investigate

reasons for high water usage and differences in water consumption profile, if any,

between HNZC managed households and non-HNZC households.

Figure 3 to Figure 5 summarise the procedures carried out in Phase 1 to Phase 3.

Figure 3: Pilot Study Phase 1 – Per Household Water Demand Analysis

Figure 4: Pilot Study Phase 2 – GIS Data Processing

Figure 5: Phase 3 – Preparing Per Capita Data for Further Analysis

Initial findings from per household water consumption analysis

Table 1 summarises the results from Phase 1, the per household water consumption

analysis, using data extracted in the period 1 September 2006 to 22 March 2007 from

Manukau Water Limited’s customer billing database.

Table 1: Phase 1 per household water consumption analysis results

HNZC managed households Non-HNZC households

No. of

Properties Percentage

No. of

Properties Percentage

Extreme High User 4 0.35% 1 0.03%

Very High User 39 3.36% 31 0.89%

High User 242 20.88% 294 8.44%

Normal User 770 66.44% 2208 63.39%

Low User 104 8.97% 949 27.25%

Average Daily Water

Consumption 1,200 litres per day 750 litres per day

Maximum Daily Water

Consumption 8,410 litres per day 1,440 litres per day

In viewing the percentage results for water user groupings, about two thirds of the

houses fall into the Normal User Group in both HNZC managed households and

non-HNZC households. However, for the remaining one third of houses, the majority of

HNZC managed households fall into higher user groups (21% High User) while those

in the non-HNZC households falls into lower user groups (27% Low User). Figure 6

and Figure 7 shows the percentage distribution of water user groupings.

Figure 6: Water User Group Distribution for HNZC Managed Households

Figure 7: Water User Group Distribution for Non-HNZC Households

The average per household daily water consumption for HNZC managed households is

60 % higher than that of non-HNZC households and the maximum HNZC consumption

is five times that of the non-HNZC household.

The initial findings from the per household data analysis suggest that the hypothesis of

the study is true. Since Mangere East has a relatively low socio-economic status

compared to other suburbs in Auckland, the average occupancy of the households may

be different from other suburbs. It is considered crucial to also analyse water

consumption on a per capita basis, before the testing of the study hypothesis could be

fully justified. Therefore, no conclusion has been drawn at this phase of the project. A

detailed per capita per day water consumption analysis will be conducted in Phase 4

and the potential reasons for the high or low water consumption rates will be explored

in Phase 5 in the study.

What’s next?

To refine the accuracy of data for analysis, HNZC and Manukau Water Limited may

consider modifying the methodology to use actual occupancy numbers for the HNZC

houses, extracted from HNZC databases, in place of the currently used 2006 Census

population data. Water demand profile in the pilot area may also be compared with

citywide, region-wide, and nation-wide water demand profiles to verify the findings.

If the hypothesis that HNZC tenants, in not having to pay water usage charges, use

more water than average domestic customers is proven to be true, then the next step will

be to extend the study to investigate possible benefits of using price and non-price

measures for residential water demand management in HNZC households.

Acknowledgements

The author acknowledges the support of HNZC in publishing this paper.

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