SBA issues new rule affecting local permitting in post-disaster rebuilding

Key Takeaways

The U.S. Small Business Administration (SBA) has issued an interim final rule that changes how rebuilding projects financed with SBA disaster loans following a Presidentially declared disaster interact with state and local permitting requirements. The rule allows the federal government to preempt certain local and state approvals when those requirements delay rebuilding, with the stated goal of accelerating recovery after presidentially declared disasters.

The SBA says it has identified recurring situations where homeowners and businesses receive disaster loans but are unable to use the funds because local permitting processes take months to complete. Under the new approach, if a borrower has submitted a complete permit or approval application and has not received a decision within 60 days, the SBA may allow the project to move forward without that specific requirement.

While the policy is limited to SBA-funded projects, it represents an uncommon use of federal authority to override local processes that have traditionally been under county and municipal control. The rule took effect in late January and applies to SBA disaster loans approved on or after January 1, 2025. The SBA is accepting public comments through March 2, 2026.

See the Rule

Overview of the new SBA rule

Under the rule, the SBA may override specific state and local permitting or approval requirements when those requirements that delay SBA-financed rebuilding for more than 60 days after a complete application is submitted.

Key provisions include:

• Federal preemption trigger: If a local or state approval delays rebuilding beyond 60 days, the SBA may allow the borrower to proceed without that requirement.
• Limited scope: The policy applies only to projects financed with SBA disaster loans and only to procedural requirements such as permits or approvals.
• Safety standards are unaffected: The rule does not waive substantive building codes, health and safety requirements, inspections or certificates of occupancy. Builders must certify compliance with all non-preempted local and state standards.
• Restrictions on enforcement: State and local governments may not issue stop-work orders or penalties solely for failure to comply with a preempted requirement.

The SBA frames the rule as a way to remove administrative barriers while maintaining essential safety protections. Counties and other local governments, however, note that permitting processes often serve broader purposes related to land use, environmental conditions and long-term risk reduction.

Impact on counties

For counties, the rule raises concerns about federal preemption of local authority. Counties are closest to their communities and best positioned to understand local risks, infrastructure capacity and environmental conditions. Even with core safety standards preserved, bypassing local permitting processes may limit counties’ ability to ensure rebuilding aligns with local hazard mitigation, resilience planning and land-use priorities.

At the same time, the rule may help speed rebuilding for residents and businesses, supporting faster community and economic recovery after disasters. Quicker rebuilding can reduce displacement and ease pressure on county emergency response and social service systems.

Counties may also face added coordination and administrative challenges, including tighter permitting timelines, increased interaction with SBA and borrowers and greater reliance on post-construction inspections and compliance reviews.

As the SBA seeks feedback on this interim rule, counties have an important opportunity to share how disaster recovery programs can balance the need for speed with respect for local expertise, authority and long-term community resilience.