New York’s data center freeze misses the credit markets

• Key insight: New York’s executive order freezes state environmental permits for data centers of 50 megawatts or more. The governor says the pause will last up to a year, but the order sets no end date and the environmental review behind it carries no deadline.
• Supporting data: Banks lent an estimated $14.9 billion against data centers in the four quarters through September, and large banks “are not materially concentrated” in the property type as a share of their core capital, according to the Federal Reserve Bank of Chicago.
• Forward look: Northern Virginia, Atlanta and Dallas-Fort Worth dwarf New York as data center markets, and a moratorium in Virginia, Georgia or Texas would reach a scale of collateral that New York’s does not.

Overview bullets generated by AI with editorial review.

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New York Gov. Kathy Hochul signed an executive order Tuesday that stops the state from issuing environmental permits for the largest data centers in its development pipeline.

The order does not say when permitting will resume, but the governor has framed it as temporary and says it will last up to a year.

Executive Order 62 tells the New York State Department of Environmental Conservation, or DEC, to freeze every application for a discretionary state permit to build or expand a data center that “consumes or can consume 50 megawatts of energy or more.”

Applications the agency had already judged complete go forward. Everything else waits.

The freeze reaches little of the money already flowing into data center construction. Permitting is not a risk that lenders price; it is a box the developer checks before anyone lends against the building, and the firms that rate the bonds say they insist on it.

“On the project finance side, we generally ensure that all material permits are in place before issuing a rating,” said Andrew Giudici, global head of corporate, project and infrastructure finance at KBRA, the bond rating agency.

In other words, a project that cannot get its permits does not get marked down; it never reaches the credit markets at all. The New York moratorium does not touch the money already financing the data center boom.

However, it could still block financing and construction for some new data centers and set a precedent for other governors. Seven in 10 Americans oppose building an AI data center in their local area, Gallup found in a survey it conducted in March.

Politicians who favor the projects “are likely taking a politically risky stance,” the pollster concluded.

Why the banks are fine

Data center construction usually runs on a so-called mini-perm loan, short for mini-permanent. It covers construction plus the first stretch of a building’s operating life.

The developer pays it off by refinancing the finished building on the bond market. The debt gets packaged into securities backed by the property and its tenant payments.

Those securities are asset-backed securities and commercial mortgage-backed securities, known as ABS and CMBS. The freeze does not threaten that payout, according to Giudici.

“Generally, permitting is not a significant consideration in data center ABS or CMBS because those financings are typically backed by stabilized, operating facilities,” Giudici told American Banker.

A rating agency sizing that refinancing also gives the developer no credit for whatever it plans to build next, so a frozen expansion cannot dent debt that is already rated.

“We generally do not take future expansions into consideration when evaluating the takeout,” Giudici said. “Our analysis is based on the in-place asset and its contracted or existing cash flows at the time of the financing.”

The loan book is smaller than it looks

Banks lent an estimated $14.9 billion against data centers during the four-quarter period that ended in September, according to MSCI Real Capital Analytics figures cited in an analysis earlier this year from the Federal Reserve Bank of Chicago.

Relatedly, lenders committed $121.91 billion of credit to data center properties in 2025, according to research from S&P Global Market Intelligence released the same month.

The two numbers count different things, and the gap is “almost definitely due to commitments versus outstanding balances,” said Thomas Mason, the S&P analyst who produced the company’s estimate.

Many of the loans in S&P’s data work like credit facilities, meaning a bank reports the most it is willing to lend rather than what the borrower has actually drawn, Mason told American Banker.

Other lines of credit are packaged into bonds, in which case “the banks might have much less direct lending exposure, if any at all, in those deals,” he said.

Neither figure compares to the banking industry’s overall balance sheet. Large banks “are not materially concentrated” in data centers as a share of their core capital, the Chicago Fed found.

The study warned about tail risk down the road, not about the size of the overall exposure today.

What the freeze does do

Neither the order nor the accompanying Tuesday announcement says how many applications the freeze affects or what they are worth.

A spokesperson for the governor’s office did not immediately respond to a request for comment. A spokesperson for DEC did not immediately answer questions about that count.

The order does disclose the scale of what was in the pipeline. Nearly 12 gigawatts of data center load requests sat in the queue to connect to New York’s electrical grid as of May, and more than eight gigawatts of that got requested in 2025 alone, according to the order.

Those projects now wait, and the order does not say for how long. The freeze runs until the New York State Department of Public Service finishes a review of how data centers affect the state’s water, air and power grid.

The governor’s announcement says it “will take up to a year,” but New York’s environmental rules impose no such limit, and the executive order has no deadline written into it.

Executive orders in the state stay in force until a governor revokes, supersedes or modifies them.

For example, when Hochul reviewed her predecessors’ orders in October 2021, she left in force Executive Order 42, which Gov. Nelson Rockefeller signed in October 1970 to establish formal procedures for the state employees to submit and settle certain grievances.

New York is first, not last

One reason to watch the order is that other states could copy it.

New York is a small piece of the national data center map. Northern Virginia is by far the largest market, with 4,040 megawatts of inventory at the end of 2025, and it delivered more than a gigawatt of new capacity that year, according to CBRE. Atlanta and Dallas-Fort Worth follow, each at roughly a gigawatt of inventory.

Legislatures in Virginia, Georgia and Texas have all taken up data center bills this year, most of them written to rein in projects rather than court them.

They are part of a family of more than 300 data center bills filed in statehouses in the first six weeks of 2026, according to Data Center Watch, a research project of the artificial intelligence security firm 10a Labs.

A moratorium in Virginia, Georgia or Texas would impact a scale of collateral that New York’s does not.

The Empire State has another moratorium decision still waiting on Hochul; the Responsible Data Center Development Act, which passed both chambers of the legislature on June 4, would pause projects as small as 20 megawatts (rather than Hochul’s 50).

The bill has a defined term of one year, unlike the Tuesday executive order.