Lady in the Water is an interesting film in the Shyamalan canon. Of all the films to that point, it is arguably the one that indicates Shyamalan's background as an immigrant and a child of immigrants. The multicultural melting pot of the apartment complex is something that rings immediately false to those who are very insular to the American experience, but it represents what America can look like to an outsider. Although Shyamalan grew up in the United States, his films have always suggested a sort of remove, especially his open religious overtones and his lack of reserve compared to other filmmakers. Shyamalan has become an allegorical filmmaker more strongly as time goes on, but mainstream audiences have never been quick to embrace nuance; The Sixth Sense is still a fundamentally straightforward story. Shyamalan uses the American mythos to tell tales that are extreme in their remove, from the isolated community of The Village, to the weirdly friendly apartment building in Lady in the Water, to the idyllic farm of Signs, but he is using these cultural touchstones to tell fantastical stories. This bothers a lot of people; we seem to accept anything bizarre and outlandish in stated fantasy films, but demand pure realism in more human films. It is a limitation that has never made sense and a limitation that is regularly broken in independent and foreign film, but people will gleefully mock a Shyamalan film with nymphs and aliens while lining up months in advance to buy merchandise from a movie about laser swords and even more outlandish aliens.
The film does suffer from Shyamalan's decision to adapt his own fairy tale, and it hurts in multiple ways. The decision to have a caricatured Asian family interpret the story comes off as vaguely racist when one realizes the story is not of Asian origin, and the film has to use an exhausting amount of exposition to explain the tale. The film critic is a ridiculous character, and naming him after the legendary film critic Manny Farber is a tad too low. Shyamalan may have felt right to be upset with critics after the way they misinterpreted The Village, but a shallow response like that just continues animosity. Critics will live to trash another film, and they do not forget.
Lady in the Water is often beautiful, if not fully satisfying. It is another Shyamalan film with an unfair reputation, sometimes obviously the result of conformity. It became a self-fulfilling prophecy, leading to Shyamalan abandoning his personal work and taking paychecks for Avatar and Jaden Smith. Hopefully The Visit is a sign of a reawakening.