The UK government’s latest proposals to prioritise artificial intelligence (AI) data centres for electricity connections could significantly hinder the construction of new homes, builders have warned. As the demand for energy continues to escalate, especially from power-hungry data facilities, the construction industry is raising alarms over the potential impact on housing availability and affordability.
Surge in Electricity Demand
Currently, there are around 140 data centres awaiting new electricity connections across the UK, with a staggering 460% increase in the queue reported in the first half of 2025. This surge is primarily attributed to the rapid expansion of AI technologies, leading to project delays that could stretch for years. Under the new government proposals, projects deemed to promote economic growth and job creation might be allowed to bypass this queue, a move that has ignited fierce debate.
AI Minister Kanishka Narayan expressed optimism, 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.” However, this assertion has not quelled the concerns voiced by housing advocates.
Housing Crisis at Risk
The Home Builders Federation (HBF) has issued a stark warning that neglecting to prioritise housing developments could lead to an effective moratorium on new homes. Steve Turner, executive director at HBF, lamented, “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.” This prioritisation could exacerbate the existing housing crisis, particularly in areas where electricity capacity is already constrained.
In London, for instance, the Planning and Regeneration committee has reported that some housing projects in west London have already faced delays due to capacity issues on the electricity grid. As the prioritisation of data centres becomes more pronounced, the risk of stalling essential housing projects only increases.
Speculative Projects and Economic Growth
The energy regulator Ofgem has previously cautioned that the queue for electricity connections has surpassed even the most ambitious demand forecasts. Many of the projects currently in line may not have the necessary financial backing, planning permissions, or land rights to become operational. This raises concerns that genuine housing and infrastructure projects, which could drive local economic growth and provide jobs, are being sidelined.
The government’s proposals aim to rectify this by allowing “strategically important” projects—including AI infrastructure and electric vehicle (EV) charging hubs—to skip the queue. However, the exclusion of housing developments from this list has drawn criticism from various stakeholders who argue that residential needs should be placed on an equal footing with energy-intensive industrial projects.
The Future of Data Centres
With nearly 500 data centres across the UK currently supporting a wide range of digital services, the anticipated growth in AI is set to drive the demand for even more facilities. The National Grid has projected that the energy consumption of these data centres could rise by as much as six-fold by 2050. As a result, the government’s focus on AI data centres may be seen as a necessary step to support technological advancements, but it brings with it significant challenges for the housing sector.
Why it Matters
The implications of prioritising AI data centres over housing developments could have long-lasting effects on the UK’s housing landscape. As the country grapples with a severe housing crisis, the decision to favour energy-intensive projects could jeopardise the availability of affordable homes. Striking a balance between fostering technological innovation and ensuring that housing needs are met will be crucial for the government as it navigates these competing demands. The outcome of this policy could shape not only the future of the housing market but also the socio-economic fabric of communities across the nation.
