So-called water neutrality laws affect the development of 4,000 homes a year, the Local Government Association estimates.
Areas in England controlled by 15 different water companies are officially considered to be “water stressed”, including Southern, Thames and Wessex.
“Other parts of the country, particularly the south east of England, where there are generally water stress issues, this is a known issue,” said a spokesman for the Local Government Association.
“It looks like it’s going to become more of a problem.”
Oppose government schemes
On Monday Anthony Brown, the Conservative MP for South Cambridgeshire, said he would oppose the government’s plans for new development in the area, citing the fact that the Environment Agency had already blocked major new house building because “we have literally run out of water”.
The Home Builders Federation has warned that tens of thousands of new homes are being held back by water supply and nutrient neutrality rules that prevent new developments unless excess pollution from sewage networks is offset.
The industry argues that water companies are responsible for building the infrastructure needed to deliver water to new homes.
No new large reservoirs have been built in the country in 30 years, and the water industry has blamed planning rules for stifling development.
Cambridge Water said it was working to reduce water demand and fix leaks, and hoped to divert water from neighboring Anglian Water, which is facing pressure on supplies.
A Water UK spokesman said: “As climate change reduces the amount available in the environment, population growth, particularly in the South East, increases the amount of water needed to supply households.
“Water companies have invested £14bn to develop plans to transport water from wetlands to where it is needed and to store water in seven new reservoirs – the first of which has already started construction.”