Lancaster, California was one of the first municipalities to push the envelope on sustainability by requiring homes to be solar-ready, as part of Mayor Rex Parris’ goal of becoming a net-zero city.

Parris has now taken his sustainability goals one step further by addressing water consumption in new homes. Beginning in 2015, all new residential construction in Lancaster, a city of approximately 158,000, will be required to have “recycle-ready” plumbing.

Nexus eWater is a Lancaster, Calif.-based startup that hopes to benefit from this novel legislation. The company has a system that recycles the gray water in the home, as well as the heat in that water, and recycles it for non-potable uses, such as for irrigation or toilet water. More than 80 percent of the water used in the typical home is not used for drinking.

The need for built-in water conservation is growing, especially in the parched Western U.S. California is now in its third year of sustained drought. The drought has pushed cities to strengthen efficiency mandates, and has also jeopardized hydropower resources and water available for thermal cooling. Ongoing water issues are forcing municipalities to examine every point in the water system, in some cases compelling them to invest in smart water meters and upgraded water-efficiency programs.

In homes, recycling gray water could be one of the best ways to slash water use. Nexus can recover 2 of every 3 gallons of a home’s gray water, which comes from sinks, laundry and baths. Not only does the system reuse gray water, but it can also recover the heat from the water to be reused by the water heater, according to Ralph Petroff, co-founder and chairman of Nexus eWater. He said the system can cut the total amount of water used by a home by about one-third.

The cost of the system on new construction is less than $10,000, although it can also be installed as a retrofit. Currently, Nexus is working with KB Homes on a series of net-zero homes.

Engineers in Australia developed the system, although the focus is on the U.S. market, which has a far larger new homes market than does Australia.

The system involves plumbing that diverts water from gray water sources to an underground 75-gallon drum. Within the drum, bubbles are injected into the water to make a frothy mix from which dirt and oil are lifted to the top and removed. The water is then run through a carbon filter and blasted with UV light, and then run through another filter for good measure.

For systems that also recover heat from the water, which is usually warm from being used in showers or laundry, a heat exchanger is added. The heat exchanger transfers the energy back to Nexus’ hot water heater. Nexus says it can cut hot water energy use by 75 percent. Water heating is a significant energy load in the house, accounting for about 14 percent to 25 percent of total energy use in typical homes, according to the U.S. Environmental Protection Agency.

The system might not make sense for most existing homes because of the upfront cost, but for new homes, the payback on new construction can be immediate for builders. Petroff said that the cost of water and sewer tie-ins could be up to $30,000.

He added that houses with his company’s technology only generate one-third as much sewage as an average home, and about one-sixth the peak sewage of new, water-efficient homes. The result for builders is that they can build more homes for the same sewer connection fee.

It’s still early days for Nexus, which will likely need far more municipalities to pass laws similar to Lancaster’s in order to get market traction. Higher water prices would also make a difference, not only for Nexus, but for all water-efficiency technologies that are ready for prime time but have not yet achieved the price signals in the market that they need in order to be widely implemented.

Recycling water could also become the norm on a much larger scale for drought-ridden regions. San Diego, for instance, just approved a measure to turn its wastewater into drinking water.