Rapid urbanization in developing countries leads to a dramatic increase in solid waste production, with serious socio-economic and ecological impacts. In order to avoid the associated hazards, particularly those related to human health and the environment, solid waste management is indispensable. Disposal of municipal waste that predominantly comprises household and commercial refuse has become a daunting task for local governments and municipalities of Pakistan. Issues related to both inadequacy of service delivery and inappropriate disposal signify that waste management should be high on the local environment policy agenda. In particular, the external cost of waste management is high, and cost recovery of refuse collection may cause the exclusion of many households and additional costs on the households that avail themselves of the service. In this study, we carried out an evaluation of the health damage caused by improper waste disposal in a sample of heterogeneous households. The study shows a framework for evaluating the damages caused by inadequate waste management practices. The results indicate that irregular disposal in the vicinity of residents causes illness: respondents living within 100 m are more vulnerable to malaria, dengue, and asthma than those living more than 500 m away. Moreover, the findings highlight that households lack knowledge of waste hazards and 75.9% of waste is not segregated. We suggest a subsidized waste collection and disposal service provided either by the local government or by outsourcing.