When the City Zones Out the Data Center: The 2026 Restriction Wave

San Marcos, Texas doesn't have a single data center inside its city limits. That didn't stop its council from voting 4–3 to write "data center" into its land development code for the first time and make the use ineligible in every zoning district, before a single application had been filed (Texas Tribune).

Two projects were already proposed just across the line in unincorporated Hays County. The ban aimed at what might come, not at anything already there.

"You're seeing a lot of cities in the age of preemption being creative," said Council Member Amanda Rodriguez, who sponsored it (CBS Austin). Mayor Jane Hughson dissented, favoring case-by-case review over a blanket exclusion. Weeks later, a state law took effect that may have made the ban unenforceable in the city's industrial zones anyway.

Two hundred miles north, Fort Worth is still fighting over its version. On July 8, 2026, its Zoning Commission voted 7–4 to reject a proposed data center ordinance and send it back to City Council as "insufficient" (Fort Worth Report). As drafted, it would confine data centers to industrial zones, ban crypto mining outright, and require a 250-foot setback from homes, ten times the 20-foot standard the city applies to other industrial uses.

That wasn't enough for the residents in the room. Ambika Sharma of the group 817 Gather asked for a full mile between a data center and the nearest home or hospital.

It wasn't enough for the commissioners either, who found even the 250-foot draft under-baked. "I can appreciate the work, it's insufficient at this time," said Commissioner Matt McCoy. Council takes it up again August 4, with a final vote set for August 11 (KERA).

Hill County tried the fastest tool and got the fastest reversal. Its Commissioners Court passed a one-year construction moratorium on a 3–2 vote in May 2026, reportedly the first by a Texas county, triggered by a proposed 300-acre campus in north Hillsboro (Texas Tribune). Three weeks later, facing a $100 million federal lawsuit from a developer with contracts on more than 800 acres, the commissioners voted unanimously to rescind it (Texas Tribune). County Judge Shane Brassell didn't dress up the retreat: the pause, he said, had already done its job by scaring off the projects the county didn't want.

Three jurisdictions, one state, three months, three answers. And the question has moved. For years the data center was the frictionless industrial use, the one business-friendly places competed to land, and the only question was how to build it. Now the first question is whether the use is allowed at all.

In Texas, that answer is unstable in both directions. A city can zone the use away one month; the state can put it back the next. Put option money down without checking, and you may be pricing a use the jurisdiction already took off the table.

This is the same reclassification that hit self-storage over the past three years, now on a much bigger asset class. We covered the storage version. The stakes and the wrinkles are not the same.

Three ways a data center deal can die

The restriction comes in three forms, and each kills a deal differently. Knowing which you're facing is the difference between a delay and a dead lot.

The first is outright removal: the jurisdiction takes data centers off its list of allowed uses entirely. San Marcos did it at the city level. Marshall County, Indiana did it at the county level, adopting a permanent countywide ban on April 20, 2026 after a one-year moratorium proved too small for the scale of projects being proposed (WNDU).

Removal is the cleanest kill. If your parcel's district no longer allows the use, there's no site plan to draw.

The second is the moratorium: a temporary freeze on new applications while the jurisdiction writes permanent rules. A freeze doesn't end the use forever, but it can end your deal by running out the clock on a purchase option.

Spartanburg County, South Carolina passed a unanimous 12-month pause on June 22, 2026, one of at least five South Carolina counties to use the same mechanism inside about six weeks (Post and Courier). Councilmember Grant DeShields put it plainly: "the state legislature kind of hung us out to dry" by passing nothing to guide counties.

Prince George's County, Maryland went longer, extending a hyperscale pause to two full years on July 7, 2026, with an escape hatch: it lifts itself if the council passes comprehensive rules first (WTOP). "I believe the county sets the rules, not the data center companies," said Councilmember Sydney Harrison.

The third is the heavy conditional-use category: the use stays legal, but the jurisdiction wraps it in a discretionary permit, large setbacks, noise limits, and buffers that add a public hearing and years to the timeline. Fort Worth's draft is this type, still being argued over. Loudoun County, Virginia is what it looks like once it's law.

The by-right assumption is dead where it was strongest

Loudoun County has more data center capacity than any jurisdiction on earth. Its "Data Center Alley" is the densest concentration of the industry anywhere.

On March 18, 2025, its Board of Supervisors decided that wasn't a reason to keep approving data centers administratively, and ended by-right data center development countywide on a 7–2 vote (LoudounNow).

"By right" is the pathway that lets a use be approved without a discretionary vote: meet the standards, get the permit, no hearing required. The industry had leaned on it in Loudoun harder than anywhere. Now every new proposal needs a special exception instead: a full legislative review with public hearings before both the Planning Commission and the Board of Supervisors (Holland & Knight). The county also raised the minimum residential setback from 200 feet to 500 feet, grandfathering only applications under review as of February 12, 2025 (Loudoun County). It has since opened a "Phase 2" for further standards.

If the birthplace of the industry no longer treats the use as by-right, the assumption that industrial zoning means data-center-eligible is dead as a national default.

The Texas wrinkle: the state can overrule the city

Everything above is a fight between a developer and a local government. Texas added a third party to the table.

A 2025 Texas preemption law bars cities from banning data centers outright on land already zoned industrial. It keeps the tools cities use short of a ban: setbacks, noise ordinances, and the power to bar the use in residential and commercial districts. Reporting on the San Marcos ordinance ties the preemption to Senate Bill 2272 (Planetizen).

That is what makes the San Marcos ban contestable rather than settled. State Sen. Paul Bettencourt has said he will challenge it, resting his grounds on House Bill 2559 and the 2023 "Death Star" law rather than the industrial-zoning statute itself (Texas Tribune). The exact vehicle is still being sorted out. The direction is not. A Texas city can still restrict data centers; what it may no longer do is ban them outright on industrial land.

For a developer, that means the question is contested from above and below at once: a local vote can remove the use, a state law can put it back, and neither is final while the other level of government is still moving.

The second Texas layer is the grid, and it runs on its own clock. Senate Bill 6, signed June 20, 2025, directs the Public Utility Commission of Texas to set interconnection standards for "large load" customers, with a default threshold of 75 megawatts at a single site (Baker Botts). Any hyperscale data center clears that easily. The regime front-loads deadlines: site control, interconnection studies, and energization schedules that start ticking well before a shovel moves.

That clock is what turned the Hill County moratorium into a lawsuit in three weeks. RCM Hill, LLC filed in federal court on May 27, 2026, arguing the county had exceeded its powers and that the pause threatened its ability to hit the state's grid-interconnection deadlines. A municipal pause and a state interconnection clock can't both win. The county blinked.

Read next to San Marcos, the pairing is sharp: a city ban that has held so far, and a county moratorium dead inside a month. Same state, two levels of government, two survival odds. The storage wave never had this second clock. A storage developer waiting out a city freeze wasn't also racing a 75-megawatt interconnection deadline set by a state regulator.

Why they're doing it, and why it isn't inevitable

The rationale is consistent across the country and has little to do with safety. It's power draw, water, noise, and opportunity cost: a data center is an industrial-scale energy user that employs almost no one and eats land a jurisdiction might have wanted for something else.

The politics are not close. A Gallup poll fielded March 2–18, 2026 (N=1,000, ±4 points) found 71 percent of Americans oppose an AI data center in their local area, 48 percent strongly (Gallup). In the same survey, 53 percent opposed a local nuclear plant. Data centers poll as less welcome than nuclear power.

None of that makes the restriction automatic. Marshalltown, Iowa looked at the same menu and picked none of it, voting 5–2 against a moratorium on June 23, 2026, then passing a substitute 6–1 to negotiate development agreements through the local Chamber of Commerce instead (Times-Republican). Mayor Pro-Tem Jeff Schneider called the pause "a terrible idea" and warned of "reputational damage." The wave is a live choice, and jurisdictions are making it differently, which is exactly why a national assumption about permissibility is worthless.

The scale is what makes it hard to track. Indiana University's Environmental Resilience Institute counted, as of July 2026, roughly 30 of the state's 92 counties restricting data centers in some form: eleven with new ordinances, seventeen or more with moratoria, and two, including Marshall, with outright bans (WFYI). Nearly a third of one state's counties, most of it inside a single year.

Even a yes isn't final

A granted approval isn't the end of the risk, either. The Prince William Digital Gateway in Virginia — 23 million square feet across 2,100 acres near the Manassas battlefield — survived a 29-hour public hearing and a Board of Supervisors rezoning in December 2023. It did not survive a missing newspaper ad (Virginia Business).

A circuit court voided the entire rezoning in August 2025 because the county's first legally required public notice never ran. The Court of Appeals affirmed on March 31, 2026, and the last developer standing, QTS, withdrew on July 2, 2026. One of the largest data center projects ever proposed in the country, undone by a notice requirement nobody confirmed.

This is a procedural death, not a zoning vote. It pairs with Loudoun as the other half of the Northern Virginia backlash: Loudoun prevents the use, Digital Gateway undoes an approval already granted. Zoning risk and legal-process risk stack; clearing the first doesn't clear the second.

Removal carries its own slow risk for existing facilities. When a jurisdiction drops the use from a district, the buildings already standing don't close. They turn "legal nonconforming," allowed to operate as they are but usually barred from expanding and often from rebuilding if they burn. Buying an existing facility in a removal jurisdiction means buying a frozen asset, whether the offering memo says so or not.

What to check before the LOI

All of this hides in a layer most buyers never open. A broker's comparable sales tell you what data center land traded for, not that the use table changed last quarter. The engineering firm's first pass designs to the site and assumes the use is allowed. Neither answers the question that now decides the deal: is a data center permitted on this parcel today, and is that about to change from either direction?

This is layer one of the entitlement stack, the base-district use permission that everything else is built on. We've written about the entitlement stack and deed restrictions that override zoning outright. Data centers add a layer the storage version didn't have: a state that can override the city, and a grid regulator running a parallel clock.

So before option money goes hard, run a municipal use-permissibility read. Pull the current use table for the parcel, not the version from the last deal in that jurisdiction. Check for a pending moratorium or zoning study, because a proposal floated at Tuesday's meeting won't show up on any map you can buy. Map the setback, noise, and buffer overlays onto the lot. And in Texas, read the state-preemption and grid-interconnection posture on top of it, because the local answer may not be the last word.

Here is the part that inverts the usual instinct. Zoning normally runs one direction: every layer above the base district can tighten the use, never loosen it. Texas just broke that rule for data centers. On land already zoned industrial, Senate Bill 2272 puts the state between the city and a ban, so the higher layer protects the use instead of restricting it. On residential or commercial land, the city keeps the power to zone the use out, and the state stays home.

So the decisive fact on a Texas data center parcel isn't whether the use is allowed today. It's which zoning bucket the parcel sits in, because that single classification decides who gets the last word when the fight goes to the mat: the city, or the state. Two lots across the street from each other, one industrial and one commercial, can carry opposite odds of surviving a local ban. Confirm which one you're standing on before you spend a dollar you can't get back.