A city's water supply is critically important for a number of reasons. First, it must be pristine and clean. Otherwise, you'll have to buy drinking water or a filter system. Some cities have grungy-tasting water, and even though it may not be harmful to your health, it still makes you feel grungy.
Second, some cities simply don't have enough water. You can conserve, but if too many hands are reaching into the pie, costs are likely to rise, as is the amount of pressure to reduce usage even more. Consider whether a city is a candidate for severe droughts (most western cities are). Find out what happens when a drought occurs. If the city forbids watering lawns, for instance, you may have an expensive problem on your hands.
Find out whether the community has installed water meters. If so, homeowners are a lot more likely to use less water. In communities where water meters don't exist, the people have absolutely no incentive to use less water.
Unfortunately, politics can enter into the equation. In California's central valley, there is a constant tug of war between farmers and cities over who gets water rights. These water wars affect development, and the cost of homes rises because supply can't meet demand.
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