Rescaling state responsibilities and capacities not only triggers an uneven distribution of regulatory and fiscal powers across scales but also creates complex governance relationships that result in distortions in local processes of urban development. Within this framework, this article analyses how Single European Market regulations affect urban governance capacity through their impact on localized networks of governance. This analysis is based on case studies of public and private cooperation in land development in the Netherlands. The article focuses on two regulations (state aid and public procurement) that are part of European competition policy. It also analyzes the manner in which these regulations, aimed at creating a single market at the supranational scale, had local consequences. The article concludes that local interactions are contested and distorted by the interference of the Single European Market regulations at the supranational level, which impacts local governance relations and processes.