The historic—and horrific—fires that have decimated Los Angeles-area neighborhoods have been attributed to obvious causes, not the least of which include the two recent “wet years” that increased vegetation growth on hillsides and in backyards, followed by the last twelve months of drought that turned the added foliage into highly combustible fire fuel. Many experts have pointed to climate change as the reason behind the rainfall variation and weather extremes, such as the hurricane-force Santa Ana winds that rapidly spread the fires. 

Fire abatement readiness has also come under attack, with cuts in fire department budgets contributing to fire hydrants losing water pressure and running dry as firefighters fought desperately to save homes and lives. Consider another unheralded but aggravating cause of the fire damage, the area’s low water rates.

In a 2022 study, John McKenzie (at the time with a major water-pipe manufacturer) and I reported that LA-area residents, who live in a near-desert climate, pay lower water rates than people in states with four or more times SoCal’s annual rainfall. At the time, in Irvine, I paid less for a hundred cubic feet of water than the price of a large Snickers bar, which is one reason I and many Irvine residents maintain overgrown backyard plantings.

Of course, low water rates have had several effects, including increasing the recent fire damage. The lower rates have induced people to use more water in a variety of ways, which has been a factor in draining the area’s reservoirs and making aerial water drops more difficult. They have encouraged individual homeowners to develop tropical backyards. In doing so, they will be imposing greater fire risks (or costs) because this added foliage eases the spread of flames across neighborhoods (an outcome that has all the markings of a tragedy of the commons, similar to pollution, or an outcome few could have wanted). Those added fire risks can become real costs with the recent confluence of months of drought and the advent of fierce Santa Ana winds.

This means that the conflagrations in Pacific Palisades, Altadena, and Malibu can be partially attributed to politically set low water rates, not just to “acts of God” and governmental incompetence, as critics have emphasized. 

But there is more: The city of LA loses more than a billion gallons of water annually from known water pipe leaks. Of course, it doesn’t know how many more billions of gallons are lost to unknown pipe leaks. Water authorities sometimes delay repairs until the pipes erupt into thirty-foot geysers, imposing serious property damage and injuries. 

Why aren’t leaking pipes repaired when discovered? The economic answer is well worn: Costs exceed benefits, which in LA’s case means that the cost of repairing pipes is greater than the saleable value of the recovered water—at low water rates!

Unknown leaks could be detected with available surface detection technology but SoCal cities, not just LA, sometimes avoid searching for repairable leaks for economic reasons. First, detecting leaks can cost hundreds of dollars per mile. Second, if more leaks were detected, water authorities would be pressed to cover the costs, which, because of low rates, can’t be recovered. The additional repair costs can force curbs in other water-infrastructure projects needed.

Higher water rates can be “rainmakers,” of a sort. Higher water rates can cause water conservation through less water “waste” and replacement of tropical foliage with more drought-tolerant landscaping. The greater water revenues can governments with the means to repair out-of-commission fire trucks. Homeowners will also have an added incentive to find and repair leaks. The resulting higher water levels in reservoirs can make aerial firefighting more effective. 

Higher water rates can fire damage, deaths, and injuries—as well lowering coming fire insurance hikes (and maybe even the overall costs of living in paradise).

 

Richard McKenzie is an economics professor, emeritus, in the Merage School of Business at the University of California, Irvine and author, most recently of Reality Is Tricky: Contrarian Takes on Contested Economic Issues. He is co-authored with John McKenzie of “California Leaking: People, Pipes, and Prices.”