That would have to be an ancient toilet to use 7 gallons of water. US law has required a maximum of 1.6 gallons per flush for new toilets since the late 90s, and I've never seen one more that used more than 3 in my life.
Don't forget the folks who rent. It looks like the national average is 35% and California can be up to 50% in areas (hard to tell if the statistics are by person or by household).
Landlords have no incentives to install toilets and appliances that use less water (or electricity), and every incentive to go cheap (which will also be less frugal). They don't incur any of the running costs. And since it is private property they can't be forced into doing anything. Tenants rarely have rights to install more efficient ones either.
If you get out of rent controlled areas like San Francisco, you'll find it's actually quite common for landlords to foot utility bills (except electricity), or at the least charge a flat fee per month that doesn't vary with usage.
Having individualized water meters isn't nearly as efficient or convenient for large apartment complexes as just doing it centrally, especially when the landlord is also using a large chunk of the water (eg for communal lawns). Rent control regimes prohibit separate fees (or higher rents) including the price of the water, so landlords in rent control situations will pass such costs directly to residents any way they can, even if it is inefficient. They'll also pass the costs of upgrading fixtures like toilets and showers, since they're not allowed to charge for them either.
I lived in Santa Cruz, CA for 14 years where there is no rent control, and in regular houses. While apartments may have utilities included for the reasons you gave, individual houses don't because there is no need.
In one house it would have cost $20 more to replace a toilet with an efficient one, versus repairing the existing leaking old one. I wanted to pay that $20 extra - they refused leaving me paying higher water for several years.
