Not sure this will pass legal challenges as you have described it. You say that the law will prohibit recreational "flying" within 5 miles of an airport. It is well established that cities/counties/states do not have the authority to regulate the air. (Although there is pending legislation in Congress that might allow some delegation up to 200 feet) That is well within FAA jurisdiction. What cities/counties/states can do is prohibit landing/taking off within 5 miles of an airport. (Typical land use/zoning laws) Yes, it is a very small minor distinction, but it makes the difference as to whether it will withstand legal challenge or not. Even if they make the minor change, it could be challenged because they are singling out private property within 5 miles of an airport that doesn't apply to others within the same zoning district. This is all so new, it's going to take years for the legal wrangling to get all settled on where that line is. Which is a challenge for those who travel and like to fly in different locations.
Like the previous poster said, Class E to 700ft wouldn't impact recreational as the limit is 400 feet anyway. It could possibly impact Part 107 flights because under those rules, if you fly higher than 400 feet, you must remain within 400 feet of a structure. In a case where you had to inspect the top of a 40 story building or tower, you could actually fly above it up to an additional 400 feet. In that case, you would indeed encroach on the Class E airspace and would need an airspace authorization.