I've done a couple of tests and when a settlement has a water shortage, my farms have been deactivated while some of my houses still get water. Priority should be given to farms so they take up all the extra water first, as if they fail the food drops and the the houses are likely to fail anyway as a result even if they have water.
Also, I suggest making it so that farms still get their water even if there isn't enough "extra" available (ie, more than the number of settlers) and if that happens, they add unhappiness to the settlement (because they are taking up the fresh water, so the settlers don't get it).
Of course, this could be moot if KingGath is planning on implementing water and food in the virtual storage anytime soon (looking at the code, it was clearly the original plan).
Also, I suggest making it so that farms still get their water even if there isn't enough "extra" available (ie, more than the number of settlers) and if that happens, they add unhappiness to the settlement (because they are taking up the fresh water, so the settlers don't get it).
Of course, this could be moot if KingGath is planning on implementing water and food in the virtual storage anytime soon (looking at the code, it was clearly the original plan).