Lords debated on the change suggested as part of the Levelling-up and Regeneration Bill. The government said it would result in the delivery of 100,000 homes between now and 2030.
However, environmental groups have said it would have a negative impact on the water quality in the country.
During the debate, the Duke of Wellington said: “We all recognise the need to build more houses, and where possible to remove obstacles to achieving this, but surely none of us wishes this to be achieved at the expense of further damage to the environment. Ministers say this is fully mitigated, but that is not clear in the amendments.
“More houses create more sewage, and therefore there must be mitigation. But the government appears to be relieving housebuilders from the cost of this mitigation and passing it to the taxpayer.”
When the plans were announced the Department for Levelling Up, Housing and Communities (DLUHC) said it would give £280m in funding to Natural England to offset the additional nutrient discharge and work with housebuilders to ensure they contribute to the scheme.
Wellington said this was not enough and added: “There must be a legal requirement for housebuilders to contribute in each case to protecting the environment from further pollution created by new houses.”
Lords blocked the amendment on a vote of 203 noes to 156 ayes.
The House of Lords Built Environment Committee will also publish a report next Thursday covering the impact of environmental regulations on development.
