As part of the Enabling Water Smart Communities project, CIWEM has released groundbreaking research underscoring the pressing need for water-efficient housing to counteract the economic impact of water scarcity in the UK. The study, conducted by policy and research consultancy Public First, highlights the critical link between water security and sustainable development.
According to the analysis, water scarcity could cost the UK economy £25 billion over the next five years due to halted housing developments—posing a major challenge to government housing targets.
The projected losses include £18.3 billion in missed construction-related economic activity, £6.3 billion in diminished land value uplift, and £344 million in reduced productivity gains in high-value regions. Implementing water-smart solutions in housing is essential to mitigating these losses and ensuring long-term economic growth.
The research warns that water scarcity could prevent the construction of approximately 61,600 homes in the East and Southeast of England over the next parliamentary term. Under the Government’s revised housing need formula, 150,000 additional homes are required in these areas, yet nearly 40% may not be built due to inadequate water capacity. Without immediate intervention, water shortages will continue to hinder housing development and economic progress.
Catherine Moncrieff, Policy Engagement Manager CIWEM, said: “Water systems and housing are deeply interconnected, and addressing water scarcity is critical for unlocking new homes and driving economic growth.
“By adopting water-smart housing standards and integrated water management, we can build resilient communities and create billions in economic value. Regulatory reforms would represent a quick win for a government wishing to address water challenges and meet vital housing targets.”
Implementing water-smart standards in new developments could recoup up to £20bn of this economic loss, enabling the construction of nearly 50,000 additional homes in productivity-critical areas, such as Cambridge and the Southeast, over the same period. The report estimates that water efficiency improvements of 30% would allow for 43% more homes to be built without increasing water demand in constrained areas.
The bigger picture
The economic impacts of water scarcity extend beyond housing. Limited water availability also affects commercial development and strategic economic areas. For example, in Cambridge, constraints on housing and commercial growth risk undermining its role as a global innovation hub. Other high-value areas in the Southeast face similar challenges, where productivity is highest and housing demand is critical for economic growth.
Moncrieff continued: “With the government’s housing and growth ambitions, the urgency of building ‘water smart’ homes has never been clearer. The reference to a new ‘fleet’ of reservoirs in yesterday’s speech by Chancellor Rachel Reeves is a welcome step toward addressing the UK’s long-term water challenges. The approval of £7.9 billion for water resources management plans, including advancing the Fens Reservoir near Cambridge and the Southeast Reservoir near Oxford, represents crucial investment in our water infrastructure. However, while these reservoirs are vital for alleviating water scarcity and ensuring future resilience, they won’t deliver significant relief for another 10 to 15 years. Water-efficient housing solutions are essential to bridge the gap and ensure sustainable living as communities expand.”
George Warren, integrated water-management lead, Anglian Water said: “We need to future-proof new developments with dual supply pipes for using lesser-quality water, reducing treatment energy and using resources like floodwaters. Retrofitting is costly and impractical, making it far cheaper to integrate this infrastructure during construction. The EWSC project aims to demonstrate a clear path for delivery, ensuring long-term water security for the homes we build today – homes that will serve us for the next century.”
Other highlights of the research include:
Public support for water-smart solutions: Nearly 70% of respondents said they already take steps to conserve water, and most were open to water recycling. Notably, 85% support the use of recycled greywater (water from household activities such as bathing, showering, handwashing, laundry and dishwashing) for some uses around the home. This was higher for recycled rainwater (92%).
The type of reuse matters: people are very willing to reuse rainwater but are averse to the concept of recycled toilet water – known as blackwater. People are most willing to use recycled water for toilet flushing and outdoor uses such as watering and cleaning.
Affordability matters: Messages highlighting cost savings resonated most with the public, outperforming those focused on sustainability, quality, or practicality. Emphasising how water reuse reduced bills was the most persuasive approach, as people valued financial benefits alongside environmental advantages.
Barriers to adoption: public support for reuse could be undermined by arguments about negative health implications. Messaging strategies that emphasise the right water sources (particularly rainwater) and water uses (toilets and outdoor use), – while avoiding negative associations like toilet-to-tap – can improve public trust.
Regional variability: The Southeast and East of England, areas of high housing demand, face the most acute water scarcity challenges. These regions collectively need to plan for 31,300 more homes annually but could lose 12,300 homes each year to water scarcity without interventions.