The UK government’s latest proposals to prioritise artificial intelligence (AI) data centres for electricity connections could severely hinder new housing developments, according to industry experts. With a staggering 140 data centres currently awaiting electricity supply, builders are voicing urgent concerns that burgeoning demands from these facilities may effectively place a moratorium on new homes.
Surge in Electricity Demand
Recent figures reveal that the queue for new electricity connections surged by an astonishing 460% in the first half of 2025, largely due to the escalating energy needs of data centres. Under current regulations, all new projects—ranging from hospitals to industrial installations—must join a virtual waiting list for grid access, leading to delays that could stretch into years for many housing initiatives.
The government’s new strategy, proposed on Wednesday, aims to address the issue by allowing projects deemed to promise the greatest economic growth and job opportunities to bypass the queue. This would include AI infrastructure, electric vehicle (EV) charging stations, and industrial sites shifting from fossil fuels to electricity.
Risks to Housing Development
However, the Home Builders Federation (HBF) is sounding the alarm, arguing that neglecting to prioritise housing developments could stall new homes at a time when the UK is grappling with a housing crisis. Steve Turner, the executive director of HBF, expressed frustration, stating, “As we continue to face into a housing crisis it is frustrating that regulatory, planning and policy arrangements effectively prioritise energy-intensive data centres over energy-efficient homes for families.”
The HBF warns that if housing projects are not afforded priority status, the result will be an effective halt on new developments in regions where electricity capacity is limited. This concern is echoed by London Assembly members, who noted in December that parts of west London have already experienced delays in new housing projects due to grid capacity issues.
Current Landscape of Data Centres
With nearly 500 data centres operating across the UK, these facilities are essential for managing a variety of digital services, from banking transactions to online gaming, and currently account for about 2% of the nation’s electricity demand. The surge in AI capabilities is expected to drive further growth, with projections suggesting that electricity demand from data centres could increase by as much as six times by 2050, according to the national grid operator.
The Office of Gas and Electricity Markets (Ofgem) has raised alarms over this unprecedented demand, suggesting that the queue for electricity connections has surpassed even the most ambitious forecasts. Many projects in the backlog may not have adequate financing, planning permissions, or land rights, raising questions about their viability and the potential obstruction of genuinely beneficial projects waiting for access.
Government Response and Future Implications
In response to the mounting concerns, the government plans to consult on allowing “strategically important” projects to expedite their access to the grid. AI Minister Kanishka Narayan emphasised the importance of timely reforms, stating, “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.”
Simultaneously, Ofgem is expected to tighten the rules for joining the electricity queue, aiming to streamline the process and mitigate the backlog caused by non-viable projects.
Why it Matters
The implications of prioritising AI data centres over housing are profound. As the UK continues to grapple with a critical housing shortage, the potential for new homes to be sidelined in favour of energy-hungry infrastructures poses a serious risk to community development and economic growth. With the demand for housing already at a breaking point, the government must strike a balance that ensures both innovation in technology and the fundamental need for shelter and community well-being are met.
