This article is part of a series looking at the risks to the UK’s water security, which are being amplified by our current Labour government. You can read the AI data centres Water Crisis series here.

Britain has failed to build enough affordable houses for decades now, and the problem could actually get worse. Despite making a big deal of its ‘build baby build‘ ambitions at the Labour Party Conference, it’s become obvious that their housing plans are in direct competition with other government strategies. Particularly, home builders will find themselves at odds with the resource needs of data centre operators and the available capacity of regional water companies.

Even worse, Labour seem to have purposefully given US tech barons the upper hand in this struggle.

‘Build baby build’

After Steve Reed took over as housing secretary, the Ministry of Housingissued the following statement:

A ‘call to arms’ has been issued to key developers and housebuilders, as new Housing Secretary, Steve Reed, vows to build, baby, build, as part of the next phase of getting Britain building faster.

The new Secretary of State, alongside Housing Minister Matthew Pennycook, committed to working in partnership with industry leaders to ramp up housebuilding, focusing on the remaining barriers, including complex planning processes, that stand in the way of building 1.5 million homes in this Parliament.

It comes after the government took decisive action to get more spades in the ground in every corner of the country through our Plan for Change, ensuring hundreds of thousands of working people and families can have a safe roof over their head and achieve the dream of homeownership.

The government’s strategy under Reed will heavily rely on private housing companies, and as such many suspect it’s yet another bung to the private sector:

But the English Sec for Housing Steve Reed’s inane ‘Build Baby Build’, focused on private developers to the cost of ‘affordable’ housing, will worsen youth homelessness in England, as sure as ‘eggs is eggs’. https://t.co/rPXq8f7xPJ

— Edward Harkins @edwardhar.bsky.social (@EdwardHarkins) October 17, 2025

Private companies are primarily motivated by profit, so what happens when a business tasked with delivering government work finds its bottom line threatened? As we all know, that company does everything it can to wriggle out of delivering what it’s supposed to.

This is a problem, because sometimes government policy means one sector must spend more to facilitate the progress of another. If these sectors were publicly run, it would be a case of moving numbers around on a spreadsheet; when these sectors are private, it’s an existential threat to each company’s existence.

An example of this in action is the battle which is currently raging between private housing developers and regional water monopolies.

Stall, baby stall

In a report published on 15 October, Joey Gardiner published an article in Building titled:

Waste water infrastructure: There’s a major blockage in the housing pipeline – and it looks likely to get much worse

In it, he reported that water companies have successfully ‘blocked’ new housing developments on the grounds that they can’t provide sufficient sewage treatment. While the water companies can’t block developments themselves, they can go crying to local councils before builders receive planning permission.

This is happening despite the fact that:

the Water Industry Act 1991 makes clear both that water companies have a statutory duty to connect homes to the sewage networks they oversee and operate

Additionally:

developers pay water companies hundreds of millions of pounds each year in fees and in-kind infrastructure in order to ensure that happens. The HBF says that £2.3bn was paid – £600m in fees and the rest in the installation of kit – in the four years between 2020/21 and 2024/25 alone. One listed company executive describes water companies’ continued resistance to development in this context as “bonkers”.

Water companies claim that the regulator Ofwat prevented them from investing as they should have done. Responding to this, Building quoted one executive as saying:

This feels like useful cover for years of underinvestment.

The Home Builder’s Federation report that the sewage issue is affecting around 30,000 proposed new homes, and Gardiner says the problem “appears to be be getting worse”. Labour have planned to build 1.5 million homes across this government, which would even out to 300,000 a year. Given that they only achieved 62% of this target in the first year (according to one estimate), they clearly don’t have the headspace for an issue like this.

As such, it’s all the more galling that Keir Starmer has created yet another obstacle to home building.

Drought, baby drought

The Government Digital Sustainability Alliance (GDSA) was established to provide guidance on how we can achieve “digital transformation” without putting sustainability targets at risk. In aid of this, they published a report titled Water use in AI and Data Centres.

The GDSA report highlights this government’s staggering failure to account for the water being used by AI data centres and companies (emphasis added):

A critical oversight in current UK water resource planning is that the measures proposed by water companies to meet the projected 2050 deficit do not account for the water needs of novel infrastructure or data centres.

Key to this, data centre owners do not have to monitor, report, or predict their water usage. As such, we have no idea how much water they’ve used up to now; how much they’re using currently, or how much they will use in future.

As we’ve noted, the reason this is so ‘staggering’ is that data centres use vast amounts of water and electricity. This is even more true of the new AI data centres which will be coming online in the next few years.

As the GDSA report states, new developments are already stalling due to water shortage:

water-poor regions such as Sussex, Cambridgeshire, Suffolk, and Norfolk are already experiencing the impact, with housing and business growth being constrained by water supply availability and inadequate or ageing water infrastructure.

The economic ramifications of this scarcity are substantial; the Chartered Institute of Water and Environmental Management estimates that water
scarcity could cost the UK economy £25 billion over the next five years due to halted housing developments alone.

The GDSA adds:

AI’s water footprint, therefore, adds another layer of complexity to an already multi-faceted policy challenge, demonstrating that water is not merely an environmental concern but a fundamental constraint on economic development and social well-being.

As we detail here, the government has continued greenlight AI data centres in areas experiencing acute water stresses.

All they can drink for AI data centres

The truth is, we don’t know how much this will affect our ability to ‘build baby build’, because we’ve no idea how much water is being used.

As shown, we’re starting from a place of water scarcity. Now, local areas will have to grant planning permission for new housing estates without having any idea how much water will be available in the years to come.

No sensible person could have thought it was a good idea to give US AI data centres an ‘all you can eat’ pass to the utility banquet, and yet that’s exactly what Starmer has done.

Featured image via the Canary

By Willem Moore

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