Water shortages in England risk obstructing the construction of more than one million new homes, officials have warned, posing a significant challenge to the government’s housing targets. Water companies have informed ministers that current supply levels can only support an additional 420,000 homes, falling well short of the 1.5 million new homes Labour has pledged to build by 2030.

This shortfall arises from increased demand on the country’s water network alongside concerns that official projections for reducing water consumption and leakages are overly optimistic. Water companies highlight that these assumptions do not adequately factor in rising demand from emerging sectors such as data centres and hydrogen production facilities. The industry also points to bureaucratic hurdles that are delaying the development of key infrastructure projects, including new reservoirs, which could alleviate supply pressures.

David Henderson, chief executive of Water UK, the sector’s representative body, stressed that regulatory obstacles are impeding efforts to scale up water infrastructure at a time when demand is accelerating. “We desperately want to provide enough water for new housing, but are being held back by a regulatory system that makes building new reservoirs much slower than it should be,” Henderson said. He also indicated that most of the necessary reforms fall within the government's current powers, without the need for new legislation.

Water scarcity is increasingly affecting certain regions, notably Sussex, East Anglia, the Midlands, the North West, and Yorkshire. In Cambridge, for instance, the Environment Agency has recently advised against the construction of thousands of new homes at the city’s periphery, citing “extreme stress” on local water supplies. The agency has also opposed plans for a new cancer hospital nearby on similar grounds.

Water UK’s briefing to the government described the planning system for water infrastructure as “broken,” forcing companies to rely on potentially inaccurate forecasts that restrict investment decisions. Official assumptions anticipate a 10% drop in household water use by 2038 due to initiatives such as smart meters and behavioural changes. However, Water UK expressed skepticism that these reductions will materialize, citing the absence of new building standards for water efficiency and the impact of longer, hotter summers on consumption patterns.

The pressure on water resources also threatens business growth, as expanding industries find difficulties securing reliable water supplies. Independent analysis commissioned by Water UK concluded that England will only have sufficient water capacity for about 420,000 of the 1.5 million new homes planned by 2030.

The lobby group has called on ministers to streamline regulatory processes and expedite projects like reservoirs and desalination plants to address the supply constraints more rapidly. Labour’s 2024 manifesto set a target of building 1.5 million homes within the current parliamentary term, supported by enforceable targets for local authorities. However, the government has faced criticism over delays caused by planning hurdles, construction skill shortages, and inadequate infrastructure.

Recent data showed a sharp 52% decline in housebuilding activity for the three months ending June, further complicating efforts to meet Labour’s housing ambitions. A government spokesperson reaffirmed a commitment to balancing environmental protection with development. The statement highlighted ongoing investments in water infrastructure, including plans for nine new reservoirs, aiming to sustain supplies amid growing demand.