The amount of water that people need for basic personal use is so small that they could just take your word on how many people are in a household. The payoff for fraud is just so low that it wouldn't be worth it.
An acre-foot of water, the amount that some farmers are paying $20 for, is 325,000 gallons. At that price, a typical persons usage would be about $0.20/month. Raising that number by 10x, which is roughly the price San Diego pays for water, each person would be using about $2 of water per month. Even assuming the worst case, that 100% of the water had to be produced by desalination costing $2000 per acre-foot, that would only be $20 per person per month.