San Francisco Pauses Data Centers as AI Boom Fuels Backlash Over Power Bills, Water Ahead of Midterms

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San Francisco has temporarily halted data center development citywide as officials examine the potential impact of AI infrastructure expansion on electricity costs, water resources, and surrounding communities.

San Francisco Imposes 45-Day Data Center Moratorium

On Friday, Mayor Daniel Lurie signed a 45-day moratorium, directing the San Francisco Planning Department to assess the effects of data centers and develop regulatory controls.

On X, he said, “San Francisco is the national leader in innovation, and that innovation is one important driver of our city’s recovery. We can never take that position for granted.”

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Lurie added that the city would spend the next 45 days developing a data center framework that “allows for the technology infrastructure our hospitals, office buildings, academic institutions, and government rely on while prioritizing community needs, keeping electricity rates low, and protecting the clean water and air our residents deserve.”

Today I signed the data center moratorium legislation.

San Francisco is the national leader in innovation, and that innovation is one important driver of our city’s recovery. We can never take that position for granted. As our city recovers, our administration is working to…

— Daniel Lurie 丹尼爾·羅偉 (@DanielLurie) October 16, 2026

The Board of Supervisors unanimously approved the measure, introduced by Supervisor Shamann Walton, last week. Board President Rafael Mandelman expedited its consideration, the San Francisco Standard reported.

The signing deadline was Friday. Under the ordinance, the moratorium would have taken effect even without the mayor’s signature.

Data Center Expansion Raises Local Concerns

San Francisco has at least six data centers, including two in Bayview-Hunters Point, a southeastern neighborhood with more industrial zoning than any other part of the city, according to market intelligence firm Data Center Map.

Walton has raised concerns about the city’s zoning rules, arguing that they lack a clear definition of data centers. He has noted the need to understand how these facilities affect local communities.

Data centers power AI systems and cloud computing services but can require substantial electricity and water, intensifying concerns about infrastructure capacity, utility bills and environmental impacts.

New York Restrictions Draw Trump’s Criticism

Earlier, investor Michael Burry criticized major technology companies for aggressively funding data center expansion. Burry argued that firms expect to become an oligopoly too important to fail.

JPMorgan projects AI capital expenditure could reach $1 trillion in 2027.

In July, New York Gov. Kathy Hochul signed an executive order pausing construction for up to one year on new data centers requiring at least 50 megawatts of power.

President Donald Trump criticized the move on Truth Social, calling it a “terrible decision” that could shift investment, tax revenue and jobs elsewhere.

He described data centers as “Money Machines” for states that welcome their development.

AI Data Center Backlash Emerges As Midterm Election Issue

The growing backlash against data centers is emerging as an issue ahead of the U.S. midterm elections. Last month, the Senate blocked the Ratepayer Protection Act in a 57-43 vote, falling short of the 60-vote threshold.

Rep. Ro Khanna (D-Calif.) has also warned that AI data center expansion is straining local infrastructure and the environment. His proposed Data Center Bill of Rights would give communities more power to oppose projects and restrict development in residential areas and farmland.

Morgan Stanley expects AI infrastructure investment to continue under tighter conditions, with state and local governments playing a bigger role in shaping data center policy — a trend the firm calls a “conditional buildout.”

Image via Shutterstock

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