Kaikohe residents say the Far North District Council was woefully underprepared for the current drought and slow to respond as things got worse.
The town has been on essential use only restrictions since early this month, and there is a total fire ban.
Local man Steve Tau said families were finding it hard to cope and felt let down by council.
"Pretty poor… this thing should have been started in June, July, August to save water. Not just starting in January and February… it should have been planned."
That was echoed by another local, Phillip Whare, who said he had never seen such water restrictions before and was angry the council had let things get so bad.
"What's happening? What is the council doing about it? I've been to two meetings and there has been no positive reaction come out of it."
Kaikohe East School principal Chicky Rudkin said some students had come to school in mufti, because parents were waiting to wash their uniform in a full load.
To play its part, Rudkin said the school had introduced student-led conservation initiatives, like bottling water and multiple milk breaks.
The students were enjoying learning how to conserve water and were coming up with creative solutions to the problem, Rudkin said.
It was clear whānau were doing it tough, but said some of the criticism being levelled at the council was unfair, she added.
Regional Development Minister Shane Jones, a NZ First list MP based in Northland, told Morning Report the government was working with the council to find a permanent solution.
He said however that from communicating with businesses, families and schools it was clear they were facing a "genuine crisis situation".
"Look, there's a genuine deep sense of hopelessness in some parts of Kaitaia and Kaikohe ... because people are reduced to using buckets," he said.
A local hapū which owned Lake Omapere had been working with the council and government to come up with a plan to use it to supply more water to the town, he said.
"Everyone realises they've got to work together because quite frankly the owners of these nearby water bodies and land on top of the aquifer, their members are huge percentages of the local population."
He said what was being organised was a short-term solution to a long-term problem, however.
"We've tried our best to catalyse and stimulate economic growth. A number of the projects in the north are long-term infrastructure things but businesses are saying 'hey mate, if basic sanitation is a constant worry what's the point of running my business'."
Jones said that with the Auditor-General's report out yesterday - which highlighted a need for stronger leadership over water management - perhaps the time was right for reform.
"It's not only in the Far North that we're having these challenges. Throughout local government in New Zealand there's a deep question as to whether or not we've reached the time we need to reconfigure how water is disposed of, how water is provided."
He said he did not have time to deal with that right now, however.
"I was asked to step up to the plate, to offer some short term relief with a small amount of money and hopefully the council will have both the institutional capacity and pūtea of its own to come up with us a permanent solution."
Far North Mayor John Carter had stood up at meetings in the past and taken responsibility for the mistakes initially made by council, she said.
Carter admitted mistakes were made initially, but said the council was working hard to pump the pipes full of water again.
He said people had been fantastic at keeping to the restrictions and offering up solutions of their own.
"People have come and said 'by the way are you aware of this offer of water flow?' It might be a stream, it might be a spring whatever. These have been very helpful."
Carter said he was confident water would be found for the homes and businesses of Kaikohe and Kaitaia.
The council was looking at long and short-term solutions and was hoping to move on both shortly.
Carter said those long term solutions could include use of an aquifer in Kaitaia, and water retention dams which would be used as a backup town supply.