Data Centres delay housing delivery

Growing electricity demand across London—including the expansion of data centres—is becoming a key factor contributing to delays in new housing delivery.

A new report from the London Assembly Planning and Regeneration Committee - Gridlocked: how planning can ease London’s electricity constraints - highlights the increasing pressure on London’s electricity grid, and the need to plan for both digital infrastructure and new homes, particularly in areas like West London where capacity has been stretched to its limits.

Since 2022, parts of the London electricity grid, particularly in Hillingdon, Hounslow, and Ealing, reached full capacity, temporarily halting new housing developments. As a result, the Greater London Authority (GLA) has worked with stakeholders including National Grid and Ofgem to secure short-term fixes, ensuring over 12,000 homes were connected by early 2025.

Despite this progress, the report warns that London’s long-term electricity needs—including from energy-intensive sectors such as data centres, which are forecast to grow by more than 200 % to 600 %—will require long-term strategic planning to avoid further grid constraints and delays.

A typical data centre now requires significant, concentrated power—sometimes equivalent to the needs of tens of thousands of homes. As the sector expands, these large, site-specific demands can add pressure to local parts of the grid and create challenges for connecting new developments. These pressures make it harder and more costly to bring forward new homes, with implications for London’s wider economic growth and its ability to meet housing targets.

The report calls for a series of policy reforms to better balance London’s long-term energy and development needs. To support more strategic planning of digital infrastructure, the report recommends that the Government introduce a separate use class for data centres, enabling their energy demands to be planned for in a clearer and more coordinated way.

The Committee also calls for the GLA to include a dedicated data centre policy in the next London Plan to address their significant energy impacts and ensure more coordinated energy planning across the city.

Other recommendations in the report include:

• The GLA’s Infrastructure Coordination Service (ICS) should publish the results of its data centres forecasting project promptly, without waiting for the London Plan’s evidence pack.
• The Mayor should prioritise retrofit funds for social housing and key infrastructure to reduce energy cost burdens on low-income households

Chair of the London Assembly Planning and Regeneration Committee, James Small-Edwards AM, said:

“London is at a critical moment, with energy capacity becoming a real constraint on both housing delivery and wider economic growth.

“Through this investigation we heard from councils, developers and residents about the delays, uncertainty and long-term risks posed by ongoing grid constraints. As demand for power rises, particularly from large energy users like data centres, we need a clear, strategic and long-term approach.

“The recommendations we’ve set out are an essential step towards managing these pressures fairly and ensuring London has the infrastructure it needs to support new homes and a growing economy.”