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According to the report by the comptroller and auditor general of the Northern Ireland Audit Office, Dorinnia Carville, construction of new homes is among the developments affected.
The NIO estimates that development applications in 100 areas, including 25 cities and towns, cannot be approved or are subject to restrictions due to pressure of wastewater and sewerage infrastructure.
The report warned that these limitations “could profoundly affect” the Executive’s ability to deliver against its objectives, including on the delivery of housing commitments.
Under the Home Supply Strategy, the Department for Communities is targeting the development of 100,000 new homes in NI over 15 years.
The report said that underinvestment in water infrastructure “has been a long-term problem” and pre-dates the establishment of NI Water in 2007.
The report highlighted that a 2007 independent review, commissioned by the then Department for Regional Development, highlighted that NI Water inherited a network of assets that had suffered from lower levels of investment than other regions of the UK.
And it added that projected funding is set to continue to fail to meet the needs of NI Water.
It said that funding for NI Water is £93m lower than needed for 2023/24 and that a shortfall is expected to continue into 2024/25.
The report said:” The Department recently confirmed that NI Water’s 2023/24 capital allocations will be £321 million compared to the £370 million requested, with resource funding of £171 million granted against a request of £215 million.
“It has also been confirmed that the funding allocation for 2024-25 will be lower than requested. A reduction in the anticipated level of funding will impact the number of capital outputs that can be delivered.”
It added that analysis by NI Water suggests that addressing the consequences of historic underinvestment will require “substantially higher levels of funding” than previously delivered.
An annual investment of £350m a year will be need to be sustained for the next 15 years, it said.
Ms Carville said: “This report highlights the challenges that decision-makers have faced in securing the finance and investment needed to meet water infrastructure requirements in the coming decades.
“A very real consequence of this underinvestment is that there are many areas in Northern Ireland where new development, including the construction of homes and other buildings, is restricted due to insufficient capacity to connect to sewage and wastewater services.
“The current funding model that applies to the Department and NI Water creates uncertainty and constraints around securing and using resources, and this has been further compounded by wider economic volatility.
“It is important, therefore, that the Department and NI Water complete a comprehensive review of alternative arrangements, led by suitably qualified experts. The ability of departments to secure appropriate finance to invest in critical infrastructure is a wider issue than just the water system.
“This report notes increasing recognition of the importance of a coordinated and sustainable approach to infrastructure planning more generally.
“It is critical that relevant stakeholders work purposefully towards establishing appropriate arrangements to support such an approach.”
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