New York just did something no state had done before. Governor Kathy Hochul signed an executive order banning the construction of new large data centers, the warehouse-sized facilities filled with computer servers that power everything from AI tools to cloud software. The ban covers buildings that use 50 megawatts or more of electricity, which is roughly what 40,000 homes consume. It will stay in place for up to a year while state regulators build a set of rules from scratch.
The politics behind this are straightforward. A June poll found that 46% of New Yorkers supported a one-year pause on new data center permits, while only 21% opposed it. Nearly three-quarters of Americans say they do not want a data center built near their home. The public mood has shifted sharply, and Hochul, who faces a reelection campaign later this year, read it clearly.
The underlying frustration is not abstract. Data centers are genuinely expensive neighbors. Utilities often must upgrade power grids to handle the extra load, and those costs flow through to consumers and businesses via higher electricity bills. In one region stretching from Illinois to North Carolina, data centers drove an estimated $9.3 billion increase in electricity costs for the 2025-26 period alone. In Virginia, one county found that its data centers were consuming more electricity than all residential customers combined.
Water is the other issue. These facilities use enormous volumes of water to cool their servers. US data centers consumed an estimated 66 billion liters of water in 2023. By 2030, AI data centers alone are projected to consume enough water annually to fill hundreds of millions of Olympic swimming pools. In a dry year, that matters.
New York is not an isolated case. It is the most visible point of a very wide trend. At least 50 local moratoriums are currently active across the United States, from Seattle to Sarasota County in Florida to multiple counties in Maryland. Arizona paused its data center tax incentives for three years. Illinois and Ohio did the same. Texas, which has the second-highest concentration of data centers in the country, is now requiring that facilities pay their own grid connection costs so that residential customers are not left holding the bill. Since 2024, more than 120 data center projects have been canceled, largely due to community opposition.
The federal government is pulling in the opposite direction. The Trump administration has pushed to speed up permitting and reduce oversight for data center construction, framing it as essential to keeping the United States ahead of China in AI. But federal executive orders do not override state authority over land use, zoning, or utility regulations. That legal gap means the tension is real and unresolved.
New York itself is not currently a major hub for the largest data centers. That distinction belongs to Virginia, Texas, and a handful of other states. But the symbolism matters: if the largest state economy in the Northeast can pull the brake, others will follow. More than a dozen states already have moratorium bills in motion or under discussion.
For business operators outside the tech industry, this is worth watching for one specific reason. The AI tools your teams are beginning to use, or that your competitors are already using, run on physical infrastructure that is now politically contested. The cost of building and running that infrastructure is rising. If the supply of new data center capacity is constrained while demand from AI continues to grow, the cost of AI services will likely go up, and access may become less even across regions.
Hochul's order is also a signal that the old deal, where states offered tax breaks and fast permits in exchange for data center investment, is expiring. New Jersey just passed a law requiring large data centers to commit to covering 85% of their projected power costs for a decade. Virginia added a new per-unit energy tax. The era of states competing to offer the cheapest terms is giving way to one where communities are negotiating much harder.
The one-year pause in New York ends when the state finalizes its environmental review process. What comes out of that process will likely set a template that other states use as a starting point. That is worth watching.