A London Assembly committee has warned that the rapid growth of high-energy-use data centres is delaying new housing developments and exacerbating the capital’s worsening housing crisis.

The Planning and Regeneration Committee’s new report highlights that London’s electricity grid is increasingly strained, with data centres—huge facilities hosting vast quantities of computer hardware—placing extraordinary pressure on local infrastructure. A single AI-focused data centre can require the same power as 100,000 homes, the report notes.

Data centre boom concentrated in west London

The committee found that 29 data centres have either been built or are in the pipeline across the boroughs of Brent, Ealing, Hillingdon, and Hounslow, and within the Old Oak and Park Royal Development Corporation area.

In 2022, parts of the distribution network reached full capacity, halting new housing connections in some locations. An investigation later revealed that rapid, clustered data centre development—particularly along the M4 corridor—was consuming significant network capacity.

Short-term interventions by the Greater London Authority, National Grid and Ofgem enabled connection of over 12,000 new homes by early 2025, but long-term challenges remain.

Housing supply at risk without strategic intervention

The committee warns that London’s electricity needs are forecast to grow by at least 200%, meaning the capital risks further delays to housing delivery unless long-term planning and investment accelerate.

The report states: “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.”

Recommendations: new planning class and strategic approach

To address these concerns, the committee proposes:

1. A new planning use class for data centres, replacing the current B8 (storage and distribution) classification.

2. A specific data centre policy within the London Plan to ensure consistent decision-making.

3. Completion of Local Area Energy Plans by all boroughs, informing future Local Plans and helping manage network capacity constraints.

‘A critical moment for London’

James Small-Edwards, chair of the Planning and Regeneration Committee, 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 about the delays, uncertainty and long-term risks posed by ongoing grid constraints.”

He added that a clearer strategic framework is essential to ensure London has the infrastructure required to support both new homes and the digital economy.