Water shortages could stall Labour plan to build 1.5 million new homes

By the Editorial Team · Wednesday, July 22, 2026

A Water UK report warns that England’s water supply constraints could limit new housing construction to around 420,000 homes, far short of the government’s 1.5 million target. Without reforms to water infrastructure regulations and planning rules—especially to account for rising demand from data centres—new developments may face delays or restrictions, exacerbating housing shortages and water scarcity issues.

England faces significant challenges in meeting the government’s target to build 1.5 million new homes over the next five years due to water supply constraints, according to a new report commissioned by Water UK. The analysis suggests that current water resources could support only around 420,000 homes, leaving a shortfall of more than one million properties from Labour’s housing ambitions announced ahead of the 2024 general election.

Water UK, the trade body representing the water industry, identified two main factors contributing to this limitation: existing regulatory frameworks that hinder the construction of new water infrastructure, and planning legislation that restricts water companies from developing resources based on anticipated future demand. David Henderson, chief executive of Water UK, emphasized that while the industry aims to provide sufficient water for new housing, regulatory delays and optimistic assumptions about future water usage impede progress.

Current government rules project a 9 percent reduction in business water use by 2037–2038, a forecast Water UK regards as unrealistic. The report underscores the growing demand from non-domestic sectors, particularly data centres, which are rapidly increasing across the UK. With 563 data centres currently operating and over 100 more in development, these facilities are estimated to consume 6.6 million litres of water daily—approximately the equivalent of 20,000 homes. By 2030, this demand is expected to nearly triple to 19.8 million litres per day, equating to the water needs of 60,000 households.

Notably, data centres are excluded from the Environment Agency’s national framework for water resources, a strategic document guiding water infrastructure planning. This exclusion means their water usage is not factored into official supply forecasts, raising concerns about the impact on residential water availability. Water UK warns that without a revision of these calculations, residents may face more frequent water use restrictions, such as hosepipe bans.

Under current legislation, local planning authorities and water companies must confirm sufficient regional water capacity before granting connections to new developments. If capacity is unavailable, planning permission for housing projects can be delayed or denied. To address these challenges, Water UK has called for updates to the national water resources framework to incorporate actual water use patterns and account for future business demand, including that from data centres. Such revisions would allow water companies to expedite the construction of necessary infrastructure, reducing bureaucratic delays.

The report also highlights the long-term threat posed by climate change, with the Environment Agency estimating a potential daily water shortfall of five billion litres in England by 2055. A spokesperson for the Department for Environment, Food and Rural Affairs (Defra) said the government is actively addressing water scarcity through coordinated efforts involving water companies, regulatory bodies such as Ofwat and Natural England, as well as the Environment Agency. These groups are collaborating on water resource management plans covering the period from 2025 to 2030 to better manage supply and demand pressures.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.