On Jan. 29, 2026, the Small Business Administration (SBA) issued an interim final rule allowing SBA Disaster Loan Program recipients to bypass certain state and local permitting requirements that delay rebuilding efforts in the wake of a Presidentially-declared disaster. SBA published its new rule, without public comment, two days after President Trump ordered SBA and the Federal Emergency Management Agency (FEMA) to promulgate new rules preempting state and local laws that “unduly impeded the timely use of Federal emergency-relief funds.”
Only some state and local requirements are preempted by SBA’s new rule. The rule preempts state or local laws that require a permit or approval as a condition-precedent to conducting disaster-related rebuilding activities, but only if those laws cause delays of over 60 days. The rule also does not preempt “substantive underlying requirements that would form the basis of [a] permit or approval,” such as “building codes.” The rule, however, does not define which state and local laws are considered “substantive” beyond listing four examples— “building standards, health and safety requirements, inspections, or certificates of occupancy.”
Although building permitting is traditionally an area of state and local control, SBA’s rule cites the U.S. Constitution’s Supremacy Clause for the authority to broadly preempt state and local building laws that “stand as an obstacle” to accomplishing federal purposes and objectives, including the “rapid, effective deployment of assistance in the wake of a disaster.”
As noted by SBA, while the new rule applies immediately to the ongoing wildfire rebuild in California, “the same process will apply in the future to any local jurisdiction.”
Comments can be submitted on SBA’s interim final rule until Mar. 2, 2026.
Background:
From Jan. 7 to Jan. 31, 2025, a series of devastating wildfires swept across Southern California, causing 32 confirmed fatalities and extensive property destruction in Los Angeles County. On Jan. 27, 2026, President Trump issued an Executive Order, Addressing the State and Local Failures to Rebuild Los Angeles After Wildfire Disasters. The order blamed California’s state and local governments for both the spread of the fires and the slow pace of rebuilding, asserting that officials “failed to contain [the] wildfires” and “failed to engage in responsible forest management systems out of a misguided commitment to naturalist and climate policies.”
In the Order, President Trump ordered FEMA and SBA to consider promulgating regulations to “preempt State or local permitting processes” that “unduly impeded” rebuilding efforts, and enable builders to “self-certify” to the federal government that their proposed projects “compl[y] with all applicable substantive State and local health and safety standards.”