The government’s amendment to ease nutrient neutrality rules for rivers in sensitive areas was rejected in the House of Lords with 192 peers voting against versus 161 in favour.

Baroness Willis of Summertown said the Homebuilders Federation’s claim that urban development counted for less than five per nutrient loading was out of date.

She said an updated Defra, department for food and rural affairs, report showed that sewage effluent was responsible for closer to 30 per cent of river nutrients with agriculture accounting for 70 per cent.

“We are already dealing with extremely polluted rivers. In February this year the environment agency reported that only 14 per cent of our rivers are in a good ecological standard and that without new intervention this would drop to six per cent by 2027,” said Baroness Willis.

Conservative peer the Duke of Wellington said: “More houses create more sewage. The government appears to be relieving housebuilders from the cost of this mitigation.”

He criticised the amendment for requiring planning authorities to assume nutrients from a new development would not affect a site and preventing them, or a third party, from doing a pollution assessment.

Lord Best, a member of the built environment committee, said: “Housebuilding is not the main culprit. The first culprit is intensive farming and secondly the water companies who haven’t done what they should have done for years.”

The defeat of the amendment is a major setback for the government’s plans to overturn a European Court of Justice ruling in 2018 known as the ‘Dutch case’. The judge ruled that the additional release of nutrients in protected areas or important wetland sites in unfavourable conditions should be limited.

SME housebuilders could fold

Brokers Hank Zarihs Associates said development finance lenders were worried that SME builders in areas affected by the directive would go out of business and that the planning moratorium was sprung on them with no warning.

Research commissioned by the Homebuilders Federation, HBF, shows developers have given water companies more than £1bn in the past three years to support infrastructure for new homes.

The trade body said that the EU habitats directive means there is a planning moratorium in 74 local authorities in England and Wales.

HBF chair Stewart Baseley said: “New homes make a negligible contribution to the nutrients issue, around 150,000 homes across the country remain on hold. Whilst doing nothing to reduce the disgraceful pollution of our rivers the ban is deepening our housing crisis, reducing economic activity and costing jobs. After four years we need to see politicians delivering a solution to address this damaging ban so desperately needed homes can be built.”
The trade body released new research this week that 171 local authorities were sitting on £1.4 bn in unspent developer contributions under section 106 agreements. The HBF has calculated that the real figure is closer to £2.8bn as only half of the councils in England and Wales supplied data requested under the freedom of information act.