The Rising Demand: How Cities Use Water

For many Texans, domestic water is primarily used for bathrooms, kitchens, and lawns. Under the state’s system, these residential uses fall into the larger municipal use category.

Municipal water serves many types of end users. Their commonality is being customers of public water utilities (Figure 1). There are many similar users who are not utility customers, such as farms and factories, who self-supply. Municipal water represented a third of statewide water demand in 2020. By 2070, it is projected to account for 44 percent of all demand and exceed that of any other use. With that growth, more efficient municipal water use is essential to offset overall growth in Texas’ urban areas.

Source: Texas Water Development Board 2020 Biennial Report

Improving the efficiency of water use is a critical part of the long-term solution to projected water scarcity in Texas. Over the past few decades (in Texas and across the U.S.), several technological and behavioral improvements have led to efficiency gains in water use. While these gains have been realized across broader categories of water use, we consider here the history and outlook of municipal water use.

Water Efficiency Goes Mainstream

Large efficiency gains across the U.S. started around the 1970s with the introduction of water metering and public education. The Energy Policy Act of 1992 introduced regulations limiting the flow rates in water fixtures, such as faucets, showerheads, toilets, and urinals. This contributed to significant improvements in water efficiency over time as the regulated products entered the market. More gains came in the early 2000s with the introduction of voluntary measures to conserve water and further improve the efficiency of water fixtures.

Source: Texas Water Development Board and author’s calculations

Over that time, Texas also experienced significant gains in water efficiency. Between 2000 and 2022, municipal water consumption in Texas improved by 12 percent on a per capita basis (Figure 2). Rainfall in 2022 was unusually low, likely understating the improvement over this time period. By measuring the gains between 2000 and the average over 2014 to 2021 (typical rainfall years), the gain would have been more than 20 percent. While these estimates highlight the critical role that efficiency measures can deliver in addressing long-term water scarcity, they also highlight the importance of conservation efforts in times of drought.

Residential Water Use

Not surprisingly, the residential sector—including both single-family and multifamily homes—represents the largest user of municipal water, where single-family residences consume the lion’s share. In total, residential water consumption by families and households accounted for 58 percent of the municipal water supply. The remaining 42 percent is distributed among businesses such as hotels, restaurants, and offices (commercial, 24 percent), manufacturing facilities (industrial, 13 percent), schools, hospitals, universities, and government facilities (institutional, 4 percent), and agricultural uses such as wildlife management, nurseries, livestock farming (agricultural, 1 percent).

Between 2012 and 2019, residential water usage as a share of the municipal supply declined slightly from 60 percent to 58 percent, even as the state’s population grew by over 2.9 million, gaining more than 909,000 households. In fact, the decline in residential’s share of municipal water consumption is indicative of a key long-term trend: Residential water use grew far more slowly than the state’s population and household formation (Figure 3).

Source: Calculation using Texas Historical Water Use Estimates, Texas Water Development Board

Over the decade, household water consumption increased slightly—from 2.9 million to 3 million acre-fee — reflecting a 4.2 percent rise overall, with an average annual growth rate of just 0.4 percent. Meanwhile, the state experienced significantly faster growth in population and households, driven in part by significant migration toward the end of the decade. The number of households expanded by more than 1.7 million, a 19.4 percent increase, with an average annual growth rate of 1.8 percent.

Furthermore, the disproportionate rise in residential water usage compared to the state’s remarkable population growth over the decade was driven by efficiency gains in household water usage (Figure 4).

Source: Calculation based on Texas Historical Water Use Estimates, Texas Water Development Board

There was a notably persistent drop in household’s daily water use since 2012, notwithstanding minor fluctuations in some years. Year-to-year water use can fluctuate due to variabilities in weather, temperature, precipitations, or rainfall that affect household indoor and outdoor water uses. At the start of the decade for which historical residential water use estimates were available, daily household water use averaged 293 gallons per household. By 2019, average daily usage decreased to 237 gallons per household, representing a savings of 55 gallons (18.9 percent) in per-household daily use.

Between 2012 and 2022, average usage decreased 37 gallons (12.7 percent or 1.4 percent in annualized rate) to 255 gallons in per-household daily use. This trend closely mirrors the 1.4 percent annual lag in total residential water consumption relative to population growth. A few factors are likely at play.

Urban Density Efficiency Gains

Urban density shapes how much water a household consumes. As the population grows, new development tends to be more densely planned with smaller lots with smaller outdoor irrigation area. The density effect or the built environment effect, as urban economists call it, refers to the observation that dense neighborhoods generally use less water per home, primarily by reducing the demand for outdoor irrigation use. Shared infrastructure, economies of scale and more modern maintenance practices also help reduce water loss from leaks, enhancing overall system efficiency.

Gains from Water-Efficient Appliances and Fixtures

As more homes are upgraded or newly constructed with more water-efficient appliances and fixtures, household water use decreases. For instance, a washing machine that meets ENERGY STAR criteria uses 30 percent less water than a conventional washing machine. The availability of energy-efficient technology aside, this trend also reflects growing consumer awareness of water conservation as well as government policies that incentivized the installation of energy-efficient household appliances and fixtures.

Rising Consumer Awareness

Consumer awareness around water conservation has grown significantly in recent years and has likely contributed to greater household water conservation and savings.

Water Conservation Strategies

Local water conservation strategies not only raise consumer awareness about the benefits of conserving water, but also incentivize behavior changes, which can lead to lasting shifts in how households manage and use water. In 2010, for example, Austin Water Utility expanded the incentives and rebates offered to its customers in its water conservation programs. Similarly, in San Antonio, with rising water demand during dry summer months, the city’s Water Landscape Coupon and other door rebates and incentives gained significant traction from 2015 to 2017, where homeowners replaced over two million square feet of traditional grass with drought tolerant landscape.

More Water-Efficient Urban Design Under SB 15

Newly built homes tend to be more water efficient than older ones, thanks to their more water-efficient appliances and fixtures. New homes have also become smaller with smaller lots than older homes, especially in more densely populated urban areas in the state’s largest cities. Beginning Sept. 1, 2025, zoning deregulation under Senate Bill 15—enacted by the 89th Texas Legislature and signed into law by Governor Greg Abbott—permits denser residential development by eliminating minimum lot size requirements for new homes. This policy shift to build smaller, more affordable homes with higher density single-family residential development is expected to generate significant water savings due to smaller yards and reduced landscaping needs.

Texas Water Policies

Carefully crafted pricing policies have contributed to market-based efficiency improvements by encouraging efficient use and dampening demand. In the 2010s, for example, water prices across Texas rose dramatically, including a nearly 100 percent increase for the average household in Austin. Over that same time period, Texas experienced some of its largest water efficiency improvements. Tiered pricing, which has been implemented in several municipalities throughout Texas, has offered another solution that allows prices to limit high water use while meeting household needs and addressing concerns over equity.

Recent legislation passed in the 89th Texas Legislature could further improve municipal water use efficiency and enhance conservation efforts. SB 7, for example, dedicates resources to improving infrastructure that mitigates water loss through leaks. The bill also distributes funding to municipalities for water conservation and efficiency. Another bill, House Bill 29, requires audits of large municipally owned utilities to ensure water losses fall below state thresholds. Several other bills improve infrastructure and encourage more efficient water use through measures such as water recycling and reuse. These measures are expected to continue improving municipal water use efficiency over the next several years.

Jorge Barro, Ph.D. ([email protected]) and Yanling Mayer, Ph.D. ([email protected]) are research economists with the Texas Real Estate Research Center.