Democrats Eye Tougher Data Center Regulations as They Regain Control of Congress

Democrats who rode data center discontent to victory in the midterms are expected to pursue strict new regulations on data centers when they take control of Congress in January.

The Democratic sweep flipped dozens of House and Senate seats, and a number of those races hinged on broadsides against Republicans for their purported support of the industry. Meanwhile, voters considered more than 40 local measures to constrain data center development, and almost all of them passed.

The results are likely to bring new life into Democrats' efforts to add guardrails to the artificial intelligence buildout. But their majority does not go far enough to override a veto from President Donald Trump, who has sought to aggressively promote data centers in the United States, in the pursuit of what he dubs "super intelligence."

Polls show broad concerns that the pace of data center construction could drive up power costs, raise land prices, and create environmental problems. Recent Realtor.com® research on data centers found they're increasingly moving into rural areas.

"If the Democrats take control of Congress, it could be a major problem for data center developers," Balaji Tammabattula, CEO of BaRupOn LLC, which develops energy infrastructure for data center companies, recently told Realtor.com.

Data center companies, he said, are already reconsidering future investments. In Texas, Senate winner James Talarico released a blueprint for data center regulation with more enforcement. The state has a temporary moratorium on data centers in place, which Democratic Gov.-Elect Gina Hinojosa has pledged to extend.

Just a few hours before polls closed, The Hill reported that Microsoft, Amazon, Meta, Google, and other tech companies were considering a more formal framework for data center development.

"Data centers in space looking pretty appealing right now," Elon Musk posted on X shortly after the results came in.

What's on the table

Congress' one effort to rein in the impacts of data centers fell short just before the midterms. Several weeks ago, the House passed a bill to encourage utilities to shield ratepayers from the costs associated with data center buildouts, the Ratepayer Protection Act.

That followed widespread backlash against data center buildouts. But Senate Democrats tanked the bill because it didn't go far enough. They've coalesced around a few competing ideas for how to regulate data centers at the federal level.

In the meantime, Democrats put forth their own bill, the Guaranteeing Rate Insulation from Data Centers (GRID) Act, with more enforcement power and penalties. Among its powers, it would require data center developers to provide their own energy, so they don't pull from the local power grid. It would also require more disclosure about data center developments and give the government the power to issue fines.

Also, 20 Democrats signed on to a bill that would create a total moratorium on data center development. But the president has veto power, and he has opposed such a harsh move.

Trump has advocated for data center development in the United States to prevent the technology being developed abroad. In the face of public backlash, he convened technology leaders in Washington in September and asked them to self-police the build-out of super intelligence.

The White House also released an accord signed by those major companies committing to developing the technology safely. Trump called it "morally binding."

What it means locally

While data centers affect property taxes, the exact impact on homeowners' tax burden is complicated. And the study found no impact on property values from large facilities in the two years after they open.

Democrats may find an opening to create more rules around data center construction. Although Democrats also took control of governor's offices in many major states with data center developments, Realtor.com senior economist Jake Krimmel says that doesn't necessarily mean they will lead to sharp constraints on data centers.

"Utilities costs, rather than home values, are probably the biggest immediate change voters are feeling or fearing," Krimmel says. "Our analysis of data center impacts on the housing market found essentially no effect on inventory or sales behavior so far."

The Urban Institute suggested a few levers to help data centers support housing affordability. It suggested tax relief or energy cost offsets for communities that host many data centers. Otherwise, they risk straining local housing markets due to rising electricity costs, especially in high-growth regions.

Meanwhile, Brookings suggested an electricity tax on data centers or some kind of offset to local governments. But it warned that regulation of the sector could encourage developers to build more centers overseas.

It's unlikely the currently divided Congress will use the remainder of its term to pass rules around data centers. But when the new one comes in, it can reintroduce the GRID Act or other bills. The GRID Act’s 20-megawatt threshold would cover essentially the entire pipeline, more than 99% of planned capacity, Krimmel says.

"That would give homeowners the most direct protection on rates," Krimmel explains. "Requiring new projects to bring their own power could also slow data center development, and the jury is also still out on the local economic and labor market impacts of data centers on localities."