The government’s housebuilding agenda is hitting the stark reality of a lack of water and crumbling infrastructure across the east and south-east of England.

Half the country was declared to be in serious drought this week, for the second consecutive year, with the Environment Agency warning of dire consequences for the economy, environment and wildlife.

The parts of England in extreme water stress with residents under hosepipe bans are also where the government’s “build, baby, build” agenda is being targeted. Labour has promised to build 1.5m homes by the end of this parliament – a strategy retained by Andy Burnham.

Environmental pressures are already extreme in the south and east of England. In one area where increased housing numbers are being demanded, fenlands are close to collapse from over-extraction of water; in another, chalkstreams are having to be artificially maintained.

Some water companies are clear there is “insufficient” water for new homes, a situation exacerbated by crumbling infrastructure.

“We cannot magic up more water,” said Paul Harvey, the Independent leader of Basingstoke and Deane council, which is being told to build more than 1,000 houses a year in Hampshire. “They say ‘build, baby, build’ but it is something we cannot just wave a wand and do.

“The evidence of our water cycle study, which looked at whether we have enough water supply and sewage treatment capacity to meet the needs of future residents, showed demands for water from new housing may outstrip the limits of sustainable supply.”

Across Hampshire, Kent, Hertfordshire, Essex and Cambridgeshire, drought linked to the climate crisis and the failure of the water industry to build critical infrastructure means growth plans are hitting environmental barriers.

Ali Morse, the water policy manager at the Wildlife Trusts, said: “This week we’ve seen drought declared across half of England, but even under normal conditions, water scarcity is emerging as an urgent issue.

“If we don’t secure new water supplies and become more efficient with our use, it’s clear that, under a changing climate, we won’t have enough water to meet the needs of both society and the environment in future … but what most don’t realise is that across large parts of the country, we’re already reaching this limit.

“Mapping by the Environment Agency shows that even under normal flow conditions, there isn’t any additional river water available to serve new homes or industry across roughly a third of the country.”

Around Basingstoke, the struggle to find water for the existing population is causing huge environmental damage to one of the largest remaining alkaline fens in southern England, pushing it toward irreversible ecological collapse, according to Natural England, which advises the government.

The situation is so critical that the Environment Agency has banned South East Water from taking more water from the Greywell chalk aquifer. The water company is appealing against the decision.

South East Water has also failed to build a pipeline to channel water from the Surrey Hills to Basingstoke that it promised would be completed by 2030. Water regulators initially disallowed funding and there is no sign of the vital piece of infrastructure being built in the near future.

The housing target for Basingstoke has been increased from 830 to 1,150 new homes a year. In neighbouring East Hampshire, the number of homes required a year has risen by 98% to 1,142.

Basingstoke and Deane council, Natural England and the Environment Agency have been unable to approve a local plan because there is not enough water to meet the government’s growth demands.

Harvey said: “The Labour government’s unrealistic imposed housing targets don’t take account of the fact that the Environment Agency, Natural England and the water companies are all waving red flags about whether the water exists to supply them.”

Damian Hinds, the Conservative MP for East Hampshire, said there were serious questions about the long-term resilience of water supplies for existing customers, especially in times of drought, and about whether the planned housebuilding was sustainable.

“The existing water infrastructure is not capable of supporting development on that scale without infrastructure investment, which has yet to materialise,” he said.

In Cambridgeshire, chalk streams are already being artificially filled by the Environment Agency because of over-extraction of water. Yet ministers are suggesting Greater Cambridgeshire can host another 150,000 homes as part of the creation of a development corporation to spur growth and take decision-making away from elected councils.

Lack of water is already a critical issue around Cambridge. The 5,726 residents of the fenland village of Waterbeach – where another 4,500 homes are planned – are under a hosepipe ban.

The Environment Agency initially refused plans for the new homes because of water scarcity, the significant risk to the environment and the inadequacy of the strategy from Cambridge Water to meet future demand. But it lifted the objections in November 2024 as long as measures to increase water efficiency were adopted in Cambridgeshire.

These include a credit scheme where developers pay to offset the water increases their housing developments will cause; conservation measures including a limit of 89 litres per person per day; promised investment in infrastructure from Cambridge Water, including a new reservoir; and a scheme where farmers can use land to store water.

But two years on, the credit scheme is not up and running and no developer has paid in any money.

Critics say the water efficiency measures and promised new supplies will not be enough to meet the needs of the 150,000 homes and commercial developments the government is demanding.

Sam Davies, a former independent councillor on Cambridge city council, said: “Residents are being told: ‘Don’t fill up your paddling pool, the splash pool is closed because there is no water.’ But commercially that growth is just ripping away at speed and no one wants to talk about the lack of water.”

None of the water efficiency and supply promises take into account datacentre growth in Cambridgeshire, including one of the largest being planned in England at the innovation campus in Sutton.

Pippa Heylings, the Liberal Democrat MP for South Cambridgeshire, said: “If you want growth then water is a deal breaker, that is the crux of the issue. Locally it was agreed that growth needed to be staggered, and that the water transfer scheme and the new Fens reservoir had to be built in order to support it.

“But the government are now attempting to ‘unlock’ growth on the promise of water credit sales that have no evidence-base nor monitoring, and which are not up and running yet two years in.”

In the Tonbridge and Malling area of Kent, as in Hampshire, South East Water says there is insufficient supply to build the 19,000 homes demanded by the government by 2042.

Matt Boughton, the Conservative leader of the council, said: “There is not one specific water infrastructure improvement that would solve this. It is the culmination of a water sector that has simply not kept up with modern demand, and which is already facing significant increases in demand in terms of housebuilding over the last 20 years.

“But ultimately it boils down to this: you can drill as many boreholes into acquifers as you want, but if the water isn’t there, you are still trying to extract the same natural resource from the ground which isn’t available.”

Back in Basingstoke, council leaders are due to meet the new chief executive of South East Water this week to demand answers about when the Surrey Hills pipeline will be built, and what level of housing the likely supply of water can support. They are also seeking a meeting with the housing minister Matthew Pennycook.

Harvey said the council wanted to support a sustainable level of housing, but argued it was impossible to build homes while the infrastructure that made those properties livable was starved of funding.

He said: “Roads, schools, GP surgeries and now, most fundamentally of all, water. The investment that should have built the Surrey Hills pipeline, upgraded the treatment works, and ended reliance on the crumbling Greywell source was instead siphoned off to shareholders and executives. Now the bill has come due.

“This is what decades of water privatisation and successive governments’ failure delivers: a water company caught between a regulator that won’t fund the infrastructure and an environment that can no longer sustain the abstraction.”

Nick Price, the head of water resources for South East Water, said: “We understand and appreciate the level of urgency surrounding the issues of water security and infrastructure delivery in the district.

“We are reviewing and progressing options to reduce the risk to customers and the environment as quickly as possible.”

A government spokesperson said: “We will build the homes this country needs and our water delivery taskforce will make sure that this is not constrained by water capacity, alongside our action to improve water efficiency and invest in new infrastructure like reservoirs.

“Water companies have a duty to plan and deliver the infrastructure needed for new homes, and we’re working with areas like Cambridge and Basingstoke and Deane to address water supply challenges.”

The government defended the creation of the Greater Cambridge Development Corporation and said it remained committed to the water credit scheme. It said officials were in regular contact with Basingstoke and Deane council and were listening to their concerns.