Local Moratoriums on Data Centers Reflect Growing Zoning Challenges

Executive Summary

Local governments across the United States are moving to assert control over data center development through zoning ordinances and outright moratoriums — and the numbers are no longer trivial. The National League of Cities (NLC) has identified at least 28 city and county governments that have passed ordinances directly targeting data centers, ranging from zoning amendments to broader development law revisions. Developers and capital allocators who treat local regulatory risk as a back-office issue are increasingly mispricing project timelines and site acquisition costs. Communities win more say over industrial-scale infrastructure; developers lose schedule certainty and, in some cases, viable sites entirely. The InfraSale takeaway: data center zoning restrictions have crossed from isolated friction into a systemic pattern that demands front-of-pipeline attention.

What Happened

The National League of Cities has documented a meaningful and growing wave of local regulatory action targeting data center development. At least 28 city and county governments have passed ordinances that modify zoning rules, development standards, or both — specifically in response to the rapid proliferation of data center projects across the country.

The ordinances vary in scope. Some jurisdictions have introduced temporary moratoriums that pause new applications while officials study the impacts. Others have enacted permanent amendments to zoning codes, restricting where data centers can be sited, what size they can be, or what conditions they must meet before receiving approval.

The NLC report does not detail every specific restriction type across all 28 jurisdictions, but the pattern is clear: local governments are no longer treating data centers as passive industrial tenants. They are legislating proactively, often in response to community concerns about power consumption, water use, noise, traffic, and the pace of development outpacing local planning capacity.

Source: Google Alert - Solar Energy

Why This Matters

Twenty-eight jurisdictions is not a rounding error. It represents a structural shift in how local governments perceive data centers — from economic development assets to contested infrastructure requiring active management. The pipeline of AI-driven compute demand has outrun the planning frameworks most municipalities have in place, and ordinances are the blunt instrument filling that gap.

For developers, the risk is not just local delay. Moratoriums in one jurisdiction can seed political and legislative copycat behavior in neighboring counties, compressing viable site options across entire metro regions. Industry context: this dynamic has played out in the renewable energy sector, where a single high-profile local rejection has historically triggered zoning reviews in adjacent markets.

The 28 jurisdictions documented by NLC likely undercount the full picture. Assumption: local ordinances that remain in draft, that were passed and then repealed, or that apply to adjacent land-use categories are not captured in a tracker focused on formally enacted measures. The true universe of regulatory friction is probably larger.

For investors underwriting merchant or contracted data center assets, the cost of missing a local ordinance in due diligence is now measurable in months of delay and millions in sunk predevelopment expense.

Power & Interconnection Impact

Data center zoning restrictions carry direct consequences for grid infrastructure, even when the ordinances don't mention power explicitly. A moratorium that prevents a data center from breaking ground also prevents the interconnection application from maturing, the substation upgrade from being scoped, and the utility from planning distribution capacity additions.

When local ordinances create permitting uncertainty, utilities face a challenge: they cannot confidently invest in grid upgrades to serve a load that may never materialize on the original timeline. This dynamic can create queue position risk — a developer who holds an interconnection study slot but cannot advance a project due to local zoning action may lose that position or face restudies as the queue reshuffles.

Industry context: In markets where data center demand has concentrated rapidly — Northern Virginia, Phoenix, the Midwest Power Pool footprint — utilities and ISOs have already flagged transmission and substation constraints. Zoning delays do not relieve those constraints; they redistribute them in ways that benefit projects with cleaner local approval paths.

Land, Zoning & Permitting Impact

Site acquisition for data centers is now a regulatory underwriting exercise as much as a real estate transaction. A parcel that is zoned industrial today may carry a materially different risk profile than it did 18 months ago, depending on what the local planning commission has heard or is likely to hear.

Developers operating in markets with active moratoriums face a compounding problem: the moratorium itself may pause the ability to file for entitlements, meaning the clock on project delivery does not start until the ordinance expires or is repealed. Some jurisdictions have used the moratorium window to pass permanent restrictions that are substantially more limiting than the baseline zoning.

Permitting costs are also trending upward in contested markets. Environmental impact studies, community engagement processes, and conditional use permit requirements add cost and time to projects that would have cleared standard industrial permitting two to three years ago. Assumption: developers who have not updated their predevelopment cost models since 2022 or 2023 may be carrying understated budget assumptions for contested jurisdictions.

InfraSale Marketplace

Turn this intelligence into a deal

InfraSale connects landowners, developers, and tenants directly — skip the broker chain.

Investment Takeaway

Regulatory due diligence is now core underwriting. Investors must map local ordinance status — active moratoriums, pending code amendments, planning commission activity — for every target market before committing predevelopment capital.
Tier-2 and Tier-3 markets look more attractive on relative terms. Jurisdictions with less organized opposition, simpler planning processes, or proactive economic development postures offer schedule certainty that primary markets cannot match. That schedule certainty has real IRR value.
Site control timing matters more than it did. Getting under contract on entitled or pre-entitled land before an ordinance passes is increasingly a competitive advantage, not just a convenience.
Moratorium risk should be priced into option agreements. Developers and landowners negotiating site options should factor in the possibility of a regulatory pause extending the option period and price accordingly.
Portfolio diversification across jurisdictions is a hedge. Concentrating a development pipeline in a single metro increases exposure to a single regulatory event cascading across multiple projects.

InfraSale Market Angle

Developers sourcing sites for data center projects need to treat local ordinance tracking as a live intelligence function — not a one-time diligence check at the start of a deal. The 28-jurisdiction count documented by NLC will grow. The question is whether a developer's next target market is ahead of or behind that curve.

For investors and landowners, the flip side of regulatory risk is value concentration. Sites in markets with favorable regulatory environments — where local governments have affirmatively signaled openness to data center development or have streamlined permitting pathways — are becoming scarcer relative to demand. That scarcity supports land pricing and, for powered land with available capacity, PPA optionality.

Local governments themselves face a calibration challenge: ordinances that are too restrictive push development to neighboring jurisdictions, forfeiting tax revenue and job creation without actually limiting regional power demand or grid strain. The communities that get this balance right will attract capital; those that don't will watch it move.

Market Signal

Location: Unspecified
Primary Issue: Zoning restrictions on data centers
Infrastructure Theme: Zoning
Who Benefits: Local government authorities and communities concerned about development impacts
Who's at Risk: Data center developers and investors facing regulatory hurdles
InfraSale Takeaway: Stay informed about local ordinance trends to mitigate risks in data center investments

Take Action

Local zoning risk is moving faster than most development pipelines can track — and the jurisdictions imposing restrictions are not broadcasting their intentions far in advance. Developers who identify and secure sites in regulatory-friendly markets now are buying schedule certainty that will be difficult to replicate in 12 to 18 months. Don't wait for a moratorium to surface in your target county before building a site strategy around it.

Browse available powered land and DC sites

FAQ

What are data center zoning restrictions and how do they work?

Local governments use zoning ordinances to control where and how data centers can be built within their jurisdictions. Restrictions can include limiting data centers to specific zones, imposing size caps, requiring conditional use permits, or enacting temporary moratoriums that pause all new applications while officials conduct planning reviews. At least 28 city and county governments have passed such ordinances according to NLC data.

How do data center moratoriums impact investment timelines?

A moratorium halts the entitlement process, meaning a developer cannot receive the permits needed to begin construction until the moratorium expires or is lifted. Depending on how a moratorium is structured, it can add months to a project schedule and, in some cases, lead to permanent zoning changes that make a site unviable entirely. Investors underwriting project timelines in affected jurisdictions should model moratorium risk as a discrete scenario, not a tail event.

What strategies can developers use to work around local zoning regulations?

Early engagement with local planning staff and elected officials — before a project is publicly announced — gives developers the best opportunity to shape the conversation rather than react to organized opposition. Securing sites in jurisdictions that have already signaled openness to data center development, or that have industrial zoning frameworks designed for high-power users, reduces entitlement risk at the outset. Where moratoriums are already in place, developers should monitor the legislative calendar closely and be ready to move quickly when restrictions lift.

Which types of markets are seeing the most data center zoning activity?

The NLC data does not specify which jurisdictions are among the 28 that have enacted ordinances. Industry context: zoning activity has been most visible in markets experiencing rapid data center clustering — regions where the pace of development has outpaced existing infrastructure and community expectations. Both primary hyperscale corridors and emerging secondary markets have seen local regulatory responses.

Does a favorable land purchase guarantee a smooth permitting process?

Not necessarily. Zoning classifications can change after a site is acquired, and a parcel that is appropriately zoned at contract signing may be subject to an overlay restriction or moratorium before entitlements are complete. Developers should conduct ongoing regulatory monitoring of target markets through site control periods, not just at the point of initial diligence.