The Trump administration is taking an unprecedented step to control post-disaster rebuilding efforts by preempting local regulations that it says have delayed projects that are funded with federal loans.
The move applies to thousands of homes and businesses that are rebuilt each year with low-interest disaster loans from the Small Business Administration. It took effect Thursday under an 18-page rule the SBA issued with no public input.
Although the program is limited to SBA-funded projects, it raised concern among some groups specializing in disasters that the Trump administration would use other grant or loan programs to waive state and local rules, particularly environmental regulations that restrict development in areas such as flood zones.
“The question we all have is, is this the first test case?” said Chad Berginnis, executive director of the Association of State Floodplain Managers. “I have to wonder if the bigger target is [state and local] environmental and zoning laws they find objectionable.”
The SBA rule was released one day after President Donald Trump issued an executive order Tuesday aimed principally at stripping the authority of California and Los Angeles officials to approve permits for rebuilding homes and other structures destroyed in the January 2025 wildfires. The order indicated that federal officials would takeover the rebuilding process. On Wednesday, Trump gave that job to EPA Administrator Lee Zeldin. The move was denounced by state and local officials, whom Trump blamed for overseeing what he said was the slow-paced reconstruction of tens of thousands of destroyed or damaged properties.
His executive order also directed the SBA and the Federal Emergency Management Agency to investigate ways to preempt state and local regulations that he said have “unduly impeded” disaster recovery.
“Today, it’s the SBA program. Tomorrow, it’s FEMA programs. What is after that?” Berginnis said.
Former FEMA chief of staff Michael Coen said federal efforts to preempt local regulations would be challenged in court.
“This is something the federal government has never done before. Permitting and things like that are really under the purview of local governments,” said Coen, who worked at the agency during the Biden and Obama administrations. “FEMA doesn’t have the expertise on permitting for home construction. It’s not something in FEMA’s mission.”
White House spokesperson Abigail Jackson said California Gov. Gavin Newsom (D), whom she called “Newscum,” is “sitting on billions in unspent dollars for disaster prevention. Newscum doesn’t need more money, California needs relief.”
In a statement Thursday, SBA Administrator Kelly Loeffler addressed the rule’s effect on Los Angeles wildfire victims.
“The SBA is opening an expedited path to recovery for every borrower who has been held hostage by the bureaucracy of Gavin Newsom and Karen Bass,” the statement said, referring to the mayor of Los Angeles, a Democrat.
The new SBA policy gives the agency authorization to waive certain state and local laws and regulations for homeowners and businesses that received a SBA disaster loan.
Borrowers who have not received a state or local permit 60 days after applying for one can fill out two brief forms on the SBA website, according to agency guidance published Thursday.
“SBA will review the submission. A case manager will contact you with next steps or any additional requirements,” the guidance said. The process aims to “reduce unnecessary barriers, speed up rebuilding, and support your community’s full recovery.”
SBA spokesperson Maggie Clemmons said the agency will post additional information about the program.
The rule marks the Trump administration’s latest attempt to use federal loans and grants to dictate state and local policy.
Last year, the administration tried to force states, counties and municipalities to comply with immigration enforcement actions by making it a condition of receiving FEMA disaster aid. Dozens of Democratic-led jurisdictions sued, and in December, a federal judge in Oregon blocked the administration from imposing the requirement.
The new SBA rule is a “logical tactic if they want to force states and locals to behave differently,” said a former senior FEMA official who was granted anonymity to avoid retaliation. “Grant conditions are the way you would go. It’s a pretty aggressive use of grant conditions.”
The rule says SBA had “identified recurring delays to recovery caused by state and local permitting requirements.” The delays have prevented homeowners and businesses from using their SBA disaster loans, “frustrating the core objectives of the Disaster Loan Program,” it added.
The SBA approves roughly 20,000 disaster loans a year, amounting to about $1 billion. Most of them go to homeowners.
The SBA waivers have limitations. They do not preempt “any substantive state and local building requirements” such as “building standards, health and safety requirements, inspections or certificates of occupancy.” The rule does not define “health and safety requirements.”
One target of the rule could be the California Environmental Quality Act, which requires state agencies to review the environmental effects of their actions. Newsom revised the law last year to accelerate housing construction amid skyrocketing home prices and rent.
“I’m sure a target of this is the California Environmental Quality Act,” said Berginnis of the floodplain association. “I wonder if this [rule] is saying, you don’t have to follow it.”
Trump’s executive order also targets $3 billion in FEMA grants that California has not spent for strengthening its resilience against natural disasters. The order gives FEMA 60 days — until April 28 — to audit resilience grants that California has spent to determine if projects were finished on time and whether they “demonstrably mitigated” wildfire risk.
It’s unclear if FEMA would impose regulations similar to the new SBA rule that would allow it to preempt state and local regulations that affect disaster spending. Trump’s executive order asks FEMA and SBA to propose laws that would accelerate disaster response.
Coen, the former FEMA chief of staff, pointed to property insurers who haven’t paid homeowners claims as the main culprit for delays in rebuilding Los Angeles.
“Homeowners are having this back-and-forth with their insurance companies,” Coen said.
Another target of the Trump administration could be FEMA’s review process for determining whether agency-funded projects comply with federal environmental and historic-preservation laws. The review process has drawn complaints from state and local officials nationwide for slowing disaster recovery.
“It’s a big problem,” said the former senior FEMA official who was granted anonymity. The review process “has a purpose, to ensure we’re not causing undue harm to the environment. But when you’re talking about an area that had been completely destroyed, there’s a pretty good argument to say waivers are needed.”
