In a worrying trend for the housing sector, new government proposals prioritising artificial intelligence (AI) data centres for electricity grid access may severely hinder the construction of new homes across the UK. As demand for electricity from these data centres surges, builders are raising alarms that the focus on energy-intensive infrastructure could effectively freeze housing development amid an ongoing crisis in affordable housing.
A Shift in Priorities
Currently, all new projects—ranging from hospitals to industrial sites—must join a lengthy virtual queue for electricity connections. In the first half of 2025, this queue expanded by a staggering 460%, largely due to the increasing energy demands of AI data centres. This has led to significant delays, with some essential projects facing waits of many years before they can commence operations.
Under the latest proposals put forward by the government, initiatives promising substantial economic growth and job creation could be allowed to bypass this queue. This includes AI infrastructure, electric vehicle charging hubs, and industrial sites transitioning from fossil fuels to electric power. However, the Home Builders Federation (HBF) has expressed grave concerns that housing developments are not included in this list of priorities, labelling it a potential “moratorium” on new homes.
The Impact of AI on Energy Demand
The energy regulator, Ofgem, has previously warned that the demand from AI data centres has exceeded even the most optimistic forecasts for future energy needs. This surge has raised critical questions about the viability of projects waiting for electricity connections, many of which lack proper financing, planning permissions, or land rights. As a result, genuine housing projects that could stimulate local economies and create jobs are at risk of being sidelined.
AI Minister Kanishka Narayan has emphasised the urgency of reforming the system to ensure that the UK can harness the transformative potential of AI. “Delivering data centres relies on access to the grid. These timely reforms will help us move at pace, to seize AI’s potential to help build a wealthier and fairer Britain,” he stated.
Yet, Steve Turner, executive director of the HBF, has countered that prioritising energy-intensive data centres over housing is both frustrating and short-sighted. “As we continue to face a housing crisis, it is disheartening that regulatory, planning, and policy arrangements effectively prioritise data centres over energy-efficient homes for families,” he asserted.
The Reality on the Ground
Existing data centres in the UK already account for around 2% of the nation’s electricity consumption, with nearly 500 facilities operating across the country. As AI technology continues to advance, the demand for processing power is set to increase dramatically. Predictions indicate that energy requirements for these centres could potentially rise by as much as six-fold by 2050, according to the National Grid.
In London, the situation is becoming increasingly dire. Members of the London Assembly warned back in December that some housing developments in west London had been temporarily stalled due to the electricity grid reaching capacity. The Planning and Regeneration committee expressed concern that this reality could become commonplace if housing is continually deprioritised.
Why it Matters
The implications of prioritising AI data centres over housing development are profound. With the UK already grappling with a housing crisis, the potential for many more families to be denied access to affordable homes is alarming. As energy-intensive projects receive preferential treatment, the struggle for adequate housing may deepen, exacerbating social inequalities and threatening to undermine the government’s broader economic goals. Balancing the needs of technological advancement with the urgent requirement for housing is not just a policy issue—it is a matter of social responsibility and community well-being.
