Federal Preemption of Local Laws: Implications of the Small Business Administration’s Interim Final Rule on Disaster Relief

by Andrew Pyles, Associate Member, University of Cincinnati Law Review Vol. 94

I. Introduction

Local governments have relied on building and zoning codes since the early 1900s to determine what structures may be built, their permitted uses, and the standards governing their development.¹ Before construction may begin on a project, builders secure the necessary permits from the city to do so. Permitting.² States have long possessed the constitutional authority to authorize local governments to enact land-use regulations. an interim final rule issued by the Small Business Administration (“SBA”) preempts localities from enforcing certain zoning and permitting requirements and replaces them with a self-certification system that allows builders to certify that their projects comply with regulations.³ This rule reflects a broader pattern during the Trump Administration of federal initiatives that diminish state authority, and in turn, restrict local regulatory authority.

This article discusses the new SBA interim final rule (the Rule) within the broader context of state and local zoning authority, recognized by the Supreme Court in Village of Euclid v. Ambler Realty Co..⁴ Part II provides background on presidential executive power, the historical evolution of zoning laws, and the circumstances surrounding the issuance of the Rule. Part III analyzes the federalism concerns raised by the Rule and its potential impact on local health and safety protections. Finally, Part IV concludes by arguing that federal preemption of local permitting processes endangers lawmaking authority that has historically rested solely with state and local governments.

II. Background

Federal authority over local permitting processes, like those governing construction and land use, has been limited, as regulation in those areas has been left to the states.⁵ Legal challenges to these permitting processes have focused on the municipality’s ability to enact zoning laws.⁶

A. Zoning and Building Codes

Zoning is a regulatory scheme that designates land for particular uses and imposes rules governing how structures may be built.⁷ Municipal governments have exercised primary decision-making authority over zoning since the early twentieth century, when cities first adopted zoning laws largely to combat overcrowding and urban congestion.⁸ The Supreme Court affirmed both the legitimacy of zoning ordinances and the authority of municipalities, acting through state delegation, to enact and enforce them in Village of Euclid v. Ambler Realty Co.⁹

In Euclid, the challenged ordinance divided the village into six classes of districts, each restricting the land to specified purposes.¹⁰ For example, one district restricted use to only single-family dwellings, public parks, water towers, and other government uses.¹¹ The ordinance also established detailed provisions regulating the building height, lot and yard widths, and the use of billboards and advertising signs.¹² Enforcement authority was vested in a building inspector, while the zoning board of appeals had the power to adopt rules and regulations to carry out the ordinance and to review enforcement decisions.¹³

The landowner in Euclid facially challenged¹⁴ the village ordinance under Section 1 of the Fourteenth Amendment, arguing that it deprived him of liberty and property by restricting and controlling the lawful uses of his land. The Court rejected this argument and upheld the ordinance, concluding that zoning regulation fell within the state’s police power and may be validly delegated to the municipal government.¹⁵ In reaching this conclusion, the Court identified several legitimate government interests that were rationally advanced by zoning regulation, including fire safety, enforcement of traffic laws, and protection of the community’s health and safety.¹⁶

Importantly, the Court emphasized the municipality’s authority to regulate land use in accordance with the preferences and welfare of its residents, who retain the right to influence where and how development occurs within their community.¹⁷ While the Court did not foreclose the possibility that a case could arise where the general public interest would “so far outweigh the interest of the municipality” that its authority to establish zoning laws could be diminished, it made clear that generalized economic concerns are insufficient to strip the municipality of its ability to protect the health interests of its residents.¹⁸

B. Preemption and Arizona v. United States

The Supremacy Clause of Article II of the United States Constitution provides that “the laws of the United States…shall be the supreme Law of the Land…[and] Laws of any State to the Contrary notwithstanding.”¹⁹ In Arizona v. United States, the Court noted that the Supremacy Clause requires state law to give way to federal law when: (1) Congress enacts a statute containing a preemption provision; (2) Congress determines that a field must be regulated by it alone; or (3) when a state law conflicts with a federal law.²⁰ The Court continued, stating that a conflict sufficient to require preemption exists where the challenged state law “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.”²¹

However, the Court emphasized that preemption analysis must begin with a presumption that “‘the historic police powers of the States’ are not superseded ‘unless that was the clear and manifest purpose of Congress.’”²² Applying these principles in Arizona, the Court held that three of the four challenged provisions of Arizona’s immigration statute were preempted by federal law because, in part, of the federal government’s significant power over immigration regulation.²³

C. California Wildfires

On January 7, 2025, wildfires ignited across the Los Angeles metropolitan area, rapidly spreading through surrounding communities, killing more than twenty people and destroying over 15,000 homes and businesses.²⁴ In response, more than 7,500 local and state firefighting and emergency personnel were deployed.²⁵ California declared a state of emergency, and President Joe Biden approved Governor Gavin Newsom’s request for a Major Disaster Declaration to support the response efforts.²⁶ The Federal Emergency Management Agency (“FEMA”) subsequently opened two disaster recovery centers to help residents apply for federal assistance for basic home repairs and personal property losses, among other needs.²⁷

Since its creation during the Carter administration, FEMA has primarily focused on providing large-scale federal assistance after disasters.²⁸ Such aid is initiated only upon a request from a local government official and distributed through a formal application process.²⁹ Meanwhile, the SBA’s Disaster Loan Program, which operates alongside FEMA’s relief framework, offers individuals, households, businesses, and nonprofits low-interest loans after a major disaster declaration.³⁰

Between the two agencies, federal assistance for the California wildfires totaled more than $2 billion as of March 2025.³¹ However, FEMA funding directly to the state of California has been lagging.³² On February 7, 2025, Governor Newsom requested nearly $40 billion in congressional disaster relief, including approximately $16.8 billion for FEMA.³³ Aside from a late-January 2025 Executive Order authorizing the release of water resources and the removal of debris,³⁴ the Trump Administration has relied on California and other states to handle disaster relief on their own.³⁵ More than a year elapsed after the blaze began before President Trump publicly addressed the continued federal response to the California wildfires.³⁶

D. The Executive Order and the Interim Final Rule

In President Trump’s second term, his administration has targeted state and local governments and the authority that they have historically held. In 2025, the Trump Administration deployed or attempted to deploy the National Guard in multiple cities, redirecting local police in the process.³⁷ Further, he has threatened to cut federal funding to local school boards that have policies that are disfavored by the Administration.³⁸ The Trump Administration also seems to be targeting local permitting processes that it finds to be “unduly impeding” the rebuilding of Los Angeles after wildfires tore through the region in early 2025.³⁹

On January 27, 2026, President Trump issued Executive Order 14377, Addressing State and Local Failures To Rebuild Los Angeles After Wildfire Disasters.⁴⁰ The Order directs FEMA and the SBA to consider enacting regulations that preempt state and local permitting requirements found to impede the use of federal emergency relief funds, and replace those requirements with a self-certification process to expedite rebuilding.⁴¹ The Order specifically targets “unnecessary, duplicative, or obstructive permitting requirements that prevent families and businesses from rebuilding.”⁴²

Two days later, on January 29th, 2026, the SBA issued the Rule pursuant to the Executive Order.⁴³ Under the Rule, “any State or Local requirement shall be preempted where it is the but-for cause of a delay in conducting” activities financed in any amount by an approved SBA disaster loan.⁴⁴ The provisions most directly affected are state and local laws, regulations, and ordinances that impose permitting requirements or similar pre-construction conditions on rebuilding, repair, or new construction generally.⁴⁵ While the Rule only preempts those laws as to projects supported by SBA disaster funding, the federal government reported that nearly 12,600 disaster loans were approved in FY25 for victims of the Los Angeles wildfires.⁴⁶

The Rule cites the Supremacy Clause and Arizona v. United States as the legal authority that supports its preemption of state and local regulations. Specifically, the Rule explains that state and local permitting laws stand as “an obstacle to the accomplishment and execution of” Congress’ objectives in passing the Small Business Act and authorizing the Disaster Loan Program.⁴⁷ The Rule concludes that frustrating the goal of providing effective assistance to disaster victims justifies preemption.⁴⁸

While neither the Interim final rule nor the Executive Order has been challenged in court yet, state and local authorities in California have signaled that they believe the federal government lacks authority over local permitting processes.⁴⁹

III. Discussion

The Executive Order and the Rule run counter to the Court’s reasoning of Arizona and Euclid and may endanger state and local governments’ historic roles in regulating land use and construction.⁵⁰ The Rule can be challenged under the Administrative Procedure Act (“APA”) if it is “arbitrary or capricious, an abuse of discretion, or…[is] otherwise not in accordance with law.”⁵¹ This section addresses the potential challenges to the Rule under the current federalism framework and considers its broader implications for local regulatory authority.

A. The Rule May Be Challenged on Grounds That It Conflicts With Euclid and Arizona.

The Rule identifies Arizona v. United States as a primary source of legal authority.⁵² Yet in Justice Kennedy’s opinion, he expressly directs courts to assume that “the historic police powers of the States” are not superseded “unless that was the clear and manifest purpose of Congress.”⁵³

Despite their differences, zoning and building codes share common governmental objectives and depend on permitting schemes as their primary enforcement tool. The Court in Euclid identified multiple state interests that could be furthered by such a scheme, including improving fire protection, enforcing traffic regulations, and suppressing disorder.⁵⁴ In both Euclid and subsequent cases like Goldblatt v. Town of Hempstead,⁵⁵ the ability of a town to pass an ordinance regulating buildings has been upheld as an exercise of a state’s police power.⁵⁶

If building codes and permitting schemes, like zoning, represent historic exercises of state police power, the Rule’s validity is doubtful absent clear congressional intent to preempt them. The Small Business Act, 15 U.S.C. § 631, authorizes a federal disaster loan program, but does not clearly and manifestly preempt any state or local laws. Even if Congress intended some degree of preemption, the nature of local permitting laws differs from the federal objective identified in the Rule—namely, the “rapid effective deployment of assistance in the wake of a disaster to avoid additional harms to victims.”⁵⁷ The Rule is vulnerable to challenge because local permitting procedures do not affect the federal government’s ability to administer or disburse disaster loans.

B. The Rule, If Upheld, Threatens the Historic Role of Local Governments in Zoning and Construction Regulation.

Although the federal government has long played a small role in influencing state and local building standards,⁵⁸ such as the development of model building codes, direct federal intrusion into a local matter like construction poses unique risks to local autonomy.

First, the Rule may create precedent for broader federal intrusion into zoning, environmental regulation, and related land-use controls that they find objectionable.⁵⁹ While the Rule only targets the permitting processes in place in the Los Angeles region, other executive orders issued during the second Trump administration suggest possible expansion. For example, Executive Order 14260 directs federal agencies to identify state and local laws that burden domestic energy production.⁶⁰ Although broader in scope and not yet fully implemented, such directives indicate a willingness to characterize substantive local regulation as an obstacle to federal objectives.

Second, this development may slow or stall ongoing state zoning reforms with a more far-reaching impact.⁶¹ Local regulations have been criticized for contributing to the legacy of racial exclusion⁶² and to the modern housing crisis.⁶³ In response, some states have increasingly pursued legislative reforms designed to overcome entrenched local resistance.⁶⁴ Sweeping federal preemption, however, risks undermining state-driven efforts to eliminate exclusionary zoning policies, even though conditional federal spending could otherwise be used to combat it.⁶⁵ While solutions like this could, in theory, yield significant outcomes for housing and zoning reform, the current Rule and its preemptive precedent do not target such inequities and instead threaten to disrupt the existing balance of land-use governance.⁶⁶

Finally, the Rule may impair local government’s ability to protect its residents. Builders and construction companies are incentivized under the Rule to merely self-certify that local building codes are being followed, as it is much easier than going through the usual processes that ensure safety on every construction site and in every completed building. Without local agency enforcement of their rules, local governments may lose much of their power to protect their residents from the reconstruction of buildings funded by SBA Disaster Loans that are not up to code.

IV. Conclusion

The second Trump administration has increasingly directed federal policy toward limiting state police powers and local regulatory authority to advance federal priorities. However, the SBA Rule purporting to aid disaster recovery by preempting local permitting processes is likely an overstep of federal authority. While the destructive California wildfires destroyed many homes and businesses, rebuilding is a process that should be handled by local governments through established procedures designed to protect residents’ health and safety. The local laws that President Trump’s Executive Order refers to as “overly burdensome, confusing, and inconsistent” are also the laws that local lawmakers believe are necessary to ensure safe buildings and structures.⁶⁷ As President Trump continues to test the limits of the Executive’s powers, it will be important for local governments to safeguard the health, safety, and welfare policies they have been empowered to enforce.

Cover Photo by Marcus Kauffman on Unsplash

Andrew Pyles

References

1
Brian Potter, How Building Codes Work in the US, Construction Physics (2022), https://www.construction-physics.com/p/how-building-codes-work-in-the-us [https://perma.cc/7BAF-M7YR]. See N.Y.C., N.Y., Zoning Resolution art. II, ch. 2, § 22-00 (2024).
2
42 U.S.C. § 2000cc-5(5).
3
Improving SBA Disaster Loan Ability To Provide Meaningful and Timely Assistance, 13 C.F.R. 123 (2026).
4
272 U.S. 365 (1926).
5
See U.S. Const. amend. X. While this article will pay particular attention to the Supremacy Clause and the federal government’s ability to preempt state laws, the police powers of the state are derived from the Tenth Amendment’s reservation of state power where the Constitution is silent.
6
See James Metzenbaum, The History of Zoning–A Thumbnail Sketch, 9 W. Rsrv. L. Rev. 36 (1957).
7
Megan VanGilder, Comment, The Good, the Bad, and the Gentrified: How the Historical Misuse and Future Potential of Zoning Laws Impact Urban Development, 92 U. Cin. L. Rev. 1258, 1265 (2024).
8
Jonathan Rothwell, The Origins of Zoning: Rural Settlements vs. Urbanization 2-3 (2009); Developments in the Law—State Preemption of Local Zoning Laws as Intersectional Climate Policy, 135 Harv. L. Rev. 1592, 1592 (2022).
9
272 U.S. 365 (1926).
10
Id. at 380.
11
Id.
12
Id. at 382.
13
Id.
14
A facial challenge to a law argues that it is defective and must be invalidated as applied to everyone, not just the party seeking relief in court. Richard H. Fallon Jr., Facial Challenges, Saving Constitutions, and Statutory Severability, 99 Tex. L. Rev 215, 228 (2020).
15
Id. at 392.
16
Id. at 391.
17
Id. at 389.
18
Id. at 390.
19
U.S. Const. art. VI, § 2.
20
Arizona v. United States, 567 U.S. 387, 398-99 (2012).
21
Id. at 399 (citing Hinez v. Davidowitz, 312 U.S. 52, 67 (1941)).
22
Id. at 400 (citing Rice v. Santa Fe Elevator Corp. 331 U.S. 218, 230 (1947).
23
Id. at 416.
24
Rebecca Lindsey, The weather and climate influences on the January 2025 fires around Los Angeles, Nat’l Oceanic and Atmospheric Admin. (Feb. 19, 2025), https://www.climate.gov/news-features/event-tracker/weather-and-climate-influences-january-2025-fires-around-los-angeles [https://perma.cc/SQT7-F5HE].
25
Press Release, Gavin Newsom, Cal. Off. Governor, More than 7,500 firefighting, emergency personnel deployed to fight unprecedented Los Angeles fires (Jan. 8, 2025), https://www.gov.ca.gov/2025/01/08/more-than-7500-firefighting-emergency-personnel-deployed-to-fight-unprecedented-los-angeles-fires/ [https://perma.cc/8L6C-6NW4].
26
Id.
27
Matthew Rodriguez, FEMA opens recovery centers at UCLA and Pasadena City College, CBS News (Jan. 14, 2025), https://www.cbsnews.com/losangeles/news/fema-opens-recovery-centers-at-ucla-and-pasadena-city-college/ [https://perma.cc/2YEQ-37UG].
28
See Sarah Ahmad & David Wessel, What does the Federal Emergency Management Agency (FEMA) do, and how is it funded?, Brookings Inst. (June 18, 2025), https://www.brookings.edu/articles/what-does-fema-do [https://perma.cc/QU79-EUTW].
29
Id.
30
Bruce R. Lindsay, Cong. Rsch. Serv., R44412, SBA Disaster Loan Program: Frequently Asked Questions 1 (2026).
31
Press Release, Gavin Newsom, Cal. Off. Governor, Assistance continues to flow to families and business as federal aid for LA fires tops $2 billion (Mar. 26, 2025), https://www.gov.ca.gov/2025/03/26/assistance-continues-to-flow-to-families-and-businesses-as-federal-aid-for-la-fires-tops-2-billion/ [https://perma.cc/YB3W-U2U5].
32
Ana Ceballos & Melody Gutierrez, Newsom, seeking federal funds for L.A. wildfire recovery, is denied meeting with key Trump officials, L.A. Times, (Dec. 5, 2025), https://www.latimes.com/california/story/2025-12-05/newsom-visits-washington-to-renew-calls-for-federal-la-fire-funding [https://perma.cc/L9TY-DSYG] (”Newsom is urging the Trump administration to send Congress a formal request for $33.9 billion in recovery aid needed to rebuild homes, schools, utilities and other critical infrastructure destroyed or damaged when the fires tore through neighborhoods beginning Jan. 7.”).
33
Jeremy Lindenfeld, Trump’s FEMA Proposals and Feud With Gavin Newsom Could Devastate California’s Disaster Response, ProPublica (July 9, 2025 at 05:00 ET) https://www.propublica.org/article/california-disasters-fema-trump-funding-fires [https://perma.cc/P6E6-439J].
34
Exec. Order 14181, 90 Fed. Reg. 8747 (Jan. 31, 2025).
35
Trump’s FEMA Proposals, supra note 32.
36
See Exec. Order 14377, 91 Fed. Reg. 3989 (Jan. 29, 2026).
37
See Conrad Wilson, Hundreds of federalized National Guard members demobilized in Oregon, Illinois and California, Or. Pub. Broad. (Jan. 6, 2026), https://www.opb.org/article/2026/01/06/oregon-national-guard-trump [https://perma.cc/6KUD-4Q8P].
38
See Exec. Order 14190, 90 Fed. Reg. 8853 (Feb. 3, 2025).
39
Exec. Order 14377, 91 Fed. Reg. 3989 (Jan. 29, 2026).
40
Id.
41
Id.
42
Id.
43
I Improving SBA Disaster Loan Ability To Provide Meaningful and Timely Assistance, 13 C.F.R. 123 (2026)
44
Id.
45
Id.
46
News Release, U.S. Small Bus. Admin., SBA Ready to Action President Trump’s Executive Order to Bypass Bureaucracy and Help California Residents Rebuild One Year After Wildfires (Jan. 27, 2026) https://www.sba.gov/article/2026/01/27/sba-ready-action-president-trumps-executive-order-bypass-bureaucracy-help-california-residents [https://perma.cc/BNQ6-2UJR].
47
Improving SBA Disaster Loan Ability To Provide Meaningful and Timely Assistance, 13 C.F.R. 123 (2026)
48
Id.
49
Karla Rendon, President Trump’s executive order bypasses local permitting process to rebuild post-fires, NBC 4 L.A.(Jan. 27, 2026) https://www.nbclosangeles.com/news/local/trump-executive-order-wildfire-rebuilding/3837294/ [https://perma.cc/32P3-E826] (noting that the mayor of Los Angeles issued a statement saying, “The President has no authority over the local permitting process.”).
50
Arizona v. United States, 567 U.S. 387 (2012).; Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926).
51
Thakur v. Trump, 787 F.Supp. 3d 955, 981 (N.D. Cal. 2025) (citing 5 U.S.C. § 706(2)(A)).
52
Improving SBA Disaster Loan Ability To Provide Meaningful and Timely Assistance, 13 C.F.R. 123 (2026).
53
Arizona, 567 U.S. at 400.
54
Euclid, 272 U.S.at 391.
55
369 U.S. 590, 595-96 (1962).
56
See Euclid, 272 U.S.at 392; Goldblatt, 369 U.S. at 598-99.
57
Improving SBA Disaster Loan Ability To Provide Meaningful and Timely Assistance, 13 C.F.R. 123 (2026).
58
See Fed. Emergency Mgmt. Admin, P-2325, Building Codes Toolkit for Homeowners and Occupants, 33-35 (May 23, 2023) (identifying limited roles played by federal government in guiding local governments to create building codes that meet federal requirements under specific executive orders while noting that the regulation of construction is a state constitutional right).
59
Thomas Frank, Trump moves to override local rules in post-disaster rebuilding, E&E News by Politico (Jan. 30, 2026), https://www.eenews.net/articles/trump-moves-to-override-local-rules-in-post-disaster-rebuilding/ [https://perma.cc/N5K9-NYH4].
60
See Exec. Order 14260, 90 Fed. Reg. 15513 (Apr. 8, 2025).
61
See Rothwell, supra note 6.
62
Jared Brey, Single-Family Zoning Linked with Income and Race Segregation, Governing (June 9, 2023), http://www.governing.com/housing/single-family-zoning-linked-with-income-and-race-segregation [https://perma.cc/5NCS-JZ5Y].
63
See Rothwell, supra note 6.
64
However, some states have done the opposite, and proposed preemption laws that have nullified local efforts to, for example create more housing. See Eva Rosen, Exploring the Double Edged Sword of Housing Preemption, Local Solutions Support Center (Nov. 16, 2023). https://www.supportdemocracy.org/the-latest/exploring-tensions-between-state-amp-local-governments-in-housing-issues [https://perma.cc/32UK-X8ST].
65
Id. at 1597.
66
Katy O’Donnell, Trump’s Plan to Make Housing Affordable is Faltering, Bloomberg (Jan. 31, 2026), republished by The Daily News, https://www.thedailynewsonline.com/news/trump-s-plan-to-make-housing-affordable-is-faltering/article_18d9171a-44fc-4081-97a3-aa1153967c7d.html [https://perma.cc/3R5D-FAKW].
67
Exec. Order. 14377, Fed. Reg 3989 (Jan. 29, 2026).