Households in many cities worldwide consume substantial amounts of water, but increasing aridity will result in serious water supply challenges in the future. In South Africa, droughts are now a common phenomenon, with severe implications on water supply for urban households. Developing interventions to minimise the impacts of drought requires understanding of users’ perceptions of water scarcity, water use practices, and participation in water conservation practices. Using household surveys across different income groups (low, medium, and high) in Makhanda, South Africa, this study investigates households’ perceptions of water scarcity, water use, and conservation practices as a basis for designing pathways for sustainable water use practices. Results indicate that a substantial proportion of households were aware of water scarcity and attributed it to poor municipal planning rather than drought and wasteful use practices. Households reported good water use behaviour, but wasteful practices (e.g., regular flushing of toilets) were evident. Gender, age, education, and environmental awareness influenced water use practices, but the relationships were generally weak. Households participated in water conservation measures but felt the local municipal authority lagged in addressing water supply challenges. The implications of the study are discussed.