Its clear in the animation that the point of the story isn't the fact that the city is flooding. In my view, the water represents the past, what is flooded is buried in memory. As the old man ages he continues to build upwards to escape the water, which in that sense, represents life. When he drops the pipe, he goes into the water after it. By doing so, he has delved into the past. His pipe represents a sentimental emotion, and by going after it, relives his life from childhood into his present elderly state. The ending will represent, or at least it did to me, the fact that experiencing those emotions again has made him miss his (apparently) deceased wife, and is lonely. His child has reached adulthood and started a life of her own, so what now does he have left? To continue building (living) until he reaches the limit, and ultimately death, which is when there is no higher he can build up.
Review of The House of Small Cubes
