Stuck in development: how to approach US data centers in a new political environment

The conventional wisdom for data center developers has been the same for the last few years: find cheap land with abundant water and power, secure favorable zoning, break ground, and get ready for a big payday. That playbook is rapidly becoming obsolete. A wave of moratoriums, utility connection freezes, and community opposition is reshaping the landscape for data center land acquisitions—and investors who fail to adapt their diligence and deal structuring may get burned.

What you need to know

• Political winds have shifted against data center development, with recent headlines from New York and Texas showing that opposition is on the march.
• Dealmakers need to sharpen their pencils on diligence, lest they get stuck with energy, zoning, or other regulatory hurdles during development.

The political ground has shifted

In July 2026, New York became the first state to impose a statewide moratorium on large data center construction, halting permits for facilities with peak demand of 20 megawatts or more while state agencies study environmental, energy, and rate impacts. Days later, Texas Governor Greg Abbott—whose state had been the nation's fastest-growing and arguably most developer-friendly data center market—directed the Electric Reliability Council of Texas (ERCOT) and the Public Utility Commission to freeze all new data center grid connections pending a comprehensive audit of power and water usage. ERCOT had reported that large energy consumers (approximately 90% of them data centers) were requesting an unprecedented 474 gigawatts of power: more than five times the energy used to power the entire state.

Where Texas and New York lead, others will follow. As of mid-2026, moratorium bills have been introduced in at least 11 states, and dozens of municipalities—from Madison, Wisconsin to Lexington, Kentucky to multiple townships across Pennsylvania—have enacted local construction pauses. Polling shows that 69% of US adults now say data center costs outweigh their benefits, up from 62% just months earlier. Opposition crosses party lines, and high-profile opponents are gaining confidence. For example, Erin Brockovich (yes, Julia Roberts played her in that movie), has been using her platform to publicize the environmental impacts of data centers and galvanize opposition across the country.

Rethinking due diligence for data center land

This political environment requires investors to fundamentally recalibrate how they approach development parcels. Traditional real estate diligence—title, survey, environmental—remains necessary, but it is no longer sufficient.

Zoning and entitlements require a political strategy 

Many zoning codes still do not specifically address data centers. Historically, developers treated this as a back door: data centers could slip into industrial or commercial classifications without triggering further review. That back door is getting slammed shut. Municipalities are using interim zoning ordinances to freeze applications while they draft data-center-specific regulations. Dealmakers must now assess not only whether current zoning permits their use, but whether a moratorium is pending or politically likely. Evidence of engagement with local government stakeholders is no longer a “nice to have”: it is something investors should be looking for as part of their diligence. A compliant zoning report from a third party simply cannot incorporate how fast these classifications are changing and whether a moratorium or other dead end is coming.

Infrastructure diligence must account for regulatory bottlenecks

Securing will-serve letters from utilities was once a routine diligence step. In Texas, those letters are now effectively worthless until the ERCOT audit concludes. Developers must evaluate not just whether power and water capacity exist, but whether regulators will permit connection on a timeline that supports project economics. This includes understanding the interconnection backlog, transmission planning study schedules, and whether state-level review processes could delay energization by months or years.

PSA must reflect extended timelines

Investors should look for purchase agreements that include extended or rolling diligence periods, zoning contingencies with mutual termination rights, and clear allocation of responsibility for entitlement work between buyer and seller. Aggressive site buyers may also push for a “material adverse effect”-type termination trigger related to something like the data center moratorium in New York. A site that cannot be entitled, powered up, or operational within a defined period must have a clear exit path for the buyer.

Environmental and community impact diligence is now front and center 

Phase 1 and (if necessary) Phase 2 environmental site assessments (ESAs) remain essential, but developers must also assess air quality permitting, water consumption impacts, noise mitigation requirements, and, increasingly, the political appetite of the community for data center use. Governor Abbott's directive specifically requires data centers to demonstrate "efforts to mitigate impacts on nearby communities, such as noise mitigation, light controls, setbacks, traffic improvements, emergency response coordination, and other community protection measures". Once again, what was once a “nice to have” has become a prerequisite for institutional investment. Specialized third party data center construction development consultants can bridge the gap for investors, and allow them to determine whether the developer’s mitigation plan is workable/durable.

What this means for dealmaking

The new political reality does not mean data center development is dead—but it has taken a left hook to the jaw. Ground-up development carries more risk, and requires earlier and deeper investment in government relations, community engagement, and regulatory strategy. Developers who treat land acquisition as a straightforward real estate transaction rather than a multi-dimensional political, regulatory, and infrastructure challenge will find their projects indefinitely stalled, and investors should be wary of any developer that is not adequately addressing these matters with the same urgency as the other elements of the project.

Institutional investors that can wrestle down the uncertainty of the current environment by sharpening their pencil on diligence and developer process will be the winners in this new age, and those that follow the existing paradigm may find themselves stuck in limbo.