The main source of this problem is the degree to which people are using drinking water for watering their gardens and cleaning their cars. Those who are particularly aggravating the problems are relatively well educated home owners who do not include water conservation on the list of their civic duties.
“Water is precious. Let’s Conserve itâ€.


Easy Solution
Seems to me that the easiest fix for the "water shortage" is to apply market-based pricing. If the supply is low then raise the price! If the price is high enough then people WILL find ways to conserve. Even if the price increased tenfold nobody would be unable to afford drinking water, but they sure would think twice before watering their lawn.
There. Problem solved. Bring on the next issue.