Data Center Backlash Could Decide Which Party Controls the Senate

As Americans consider how to cast their votes in the midterm elections, data centers are the wedge issue in some of the most important Senate races.

Republicans are in a bind, as President Donald Trump's ambitions to achieve what he terms "super intelligence" collide with widespread public opposition to data center development. Democrats have pounced on voter anxiety over how the large developments affect electric bills, water supply, and air quality in their neighborhoods.

Now, many of the closest races in the Senate are in states with major data center developments, and control of the chamber is expected to hinge on a handful of those toss-up races. And many of those candidates are leaning into rapidly souring opinions on the major developments, using them as an attack line against incumbents.

Recent Realtor.com® research on data centers found they're increasingly moving into rural areas. While they do affect property taxes, how they affect the average homeowner's tax burden is complicated. And while the study found no impact on property values, that data tracks only large facilities in the two years after they open.

The public has become only more wary as time has gone on. A poll by the Washington Post, ABC News, and Ipsos found 72% of Americans oppose data center construction in their communities. Two in three don't want them built anywhere in the nation at all.

Attack ad spending spree

By the end of August, AdImpact already tracked 15,000 airings of ads on data centers, and this year campaigns have spent $45 million running ads on the topic. Top spenders were campaigns in Ohio, Wisconsin, Pennsylvania, and Texas. Democrats made up 73% of spending on the topic, either attacking Republicans for supporting data centers or linking them to new developments.

Marketing Brew and AdImpact also estimated in separate studies that data center ads jumped sharply. The latter estimates this will be the most expensive midterms in history with $11.6 billion in campaign ad spending overall, including $2.8 billion just on Senate races.

In the Senate, Decision Desk HQ considers Ohio, Texas, Maine, and Iowa toss-ups. Republicans will likely have to win three of those four races to maintain control of the Senate.

In Ohio, a close race between Republican Sen. Jon Husted and former Sen. Sherrod Brown, a Democrat, has hinged on data center policies. Both celebrated in the years that the state attracted $40 billion in data center investments. Public opinion has shifted as developers avoided $2 billion in taxes from the state's incentives program, far more than officials had expected from the exemptions.

Now, Brown is attacking Husted as "the face of data centers in Ohio" and Husted is attacking Brown as a "chameleon" who "flips" from his prior support of them.

But candidates themselves aren't the only ones pouring money into ads. The Guardrails Alliance, a super PAC pushing for more regulation in the artificial intelligence industry, has dropped $3.13 million on attack ads this year. It targets both parties, including Republicans Laurie Buckhout in North Carolina and Jay Feely in Arizona, and Democrat Jimmy Gomez in California.

"From California to North Carolina, out of touch AI Billionaires should not get to control who represents working Americans nor the guardrails that are put in place to protect us," Shaunna Thomas, Guardrails executive director, said in a statement.

Wedge issue in Texas Senate race

In Texas, the tight Senate race between Democrat James Talarico and Republican Ken Paxton coincides with the state's emergence as a top hub for data center development, according to commercial real estate data firm JLL. But the state has halted at least 17 projects in recent months amid a pause.

Now, Talarico and Paxton have each released a blueprint for data center regulation, while attacking the other as too beholden to the industry.

Congress has proposed some limited measures to rein in data center development. One, the Ratepayer Protection Act, passed overwhelmingly in the House but was blocked by the Senate after Democrats said it didn't do enough. Democrats have instead put forth a bill with more enforcement power against developers.

Even a promise of more congressional action won't appease voters, though, Freedom Smith, a partner in environmental law at Ice Miller LLP, tells Realtor.com. Instead, the public needs to understand how the data centers affect their communities and what politicians at all levels are doing to measure and abate those harms.

"These bills are mostly focused on grid impacts and not the other things these communities might be worried about, like water and air quality emissions," Smith adds.

Data center developers navigate uncertainty

And for the industry, the uncertainty is making it difficult to know how to proceed, says Balaji Tammabattula, CEO of BaRupOn LLC, which develops energy infrastructure for data center companies.

"It's very chaotic," Tammabattula tells Realtor.com. "The politics behind this thing is making it messy and difficult for companies like us to figure out how we plan our investments."

In some cases, the data center developers are pivoting. He notes one project in the Permian Basin in West Texas that was canceled in favor of another site in North Dakota where there was less resistance.

Data center developers anticipate more constraints if Democrats take control of the Senate. Even Republican control, though, won't necessarily mean things go back to normal.

"There definitely will not be more tax abatements; all of those are disappearing," Tammabattula says.