Plans to build thousands of new homes in the South East will make the water crisis in the region worse, opposition MPs have told the government.
Hosepipe bans are in force across swathes of southern England
Environment minister Elliot Morley told the House of Commons the two-year drought was the worst since 1975.
In some areas it was the worst water shortage for 100 years, he said.
But his Conservative shadow, Peter Ainsworth, said: "Pressing ahead with building masses of new homes... is only going to make this situation worse."
Critics have warned that the government's property "hotspots" at Milton Keynes, the Cambridge-Stansted corridor, Ashford in Kent and the Thames Gateway will create spiralling demand for water.
But Mr Morley said the issue of water supply was taken into account when house building was planned.
Finance was available to water companies to upgrade and connect up to one million additional homes.
He said there were plans to upgrade existing reservoirs and build new ones.
Mr Morley defended the introduction of hosepipe bans across large swathes of southern England.
"I do not think it is a lot to ask that people should face some restrictions," he said.
The minister said people could still use watering cans and recycled water.
Richard Ottaway, Conservative MP for Croydon South, said further "drastic action" was likely to curtail water demand with essential-use only orders about to be imposed in some areas.
"They will result not only in a ban on car washes but a ban on the watering of bowling greens, golf courses, tennis courts and sports grounds such as Lord's, The Oval and Wimbledon and the royal parks, including Kew Gardens.
"This has arisen because this is the second dry winter in a row.
"What are your contingency plans in the event of a third dry winter?"
Mr Morley said it was important to "prudently manage" water supplies, including the use of drought orders if necessary.