Lawn is definitely wasteful. But residential water use in California is only around 10% of water used. This is a population that has already cut their per-person water use in about half over the past 30 years.
You could probably get another ~30% reduction in residential use by eliminating lawns. Depending upon how you go about it, trees are probably more important in that environment though as a cooling element. Our backyard patio increases heat by a good 5-10 degrees on sunny days.
But it's still not much water saved. The only reason to do it would be to sell it politically - "everyone has to sacrifice". Which I'm fine with. But if your goal is to make residents do this but tell farmers they can do whatever they want, it's kinda pointless.
Edit: I also think there's somewhat responsible ways to have lawn in California. Subsurface irrigation can reduce lawn water usage by 30-40%. And certain drought tolerant grasses require 60-80% less water. These setups seem very rare though.