How can I enable local deletion

This is expected behavior when using OneDrive Files On-Demand.

Files marked as "online-only" do not exist locally on the computer. Because of that, Windows cannot move them to the local Recycle Bin when they are deleted.

The warning message only indicates that the file will not be sent to the Windows Recycle Bin. It does not mean the file is permanently deleted from OneDrive.

When an online-only file is deleted, it is typically moved to the OneDrive (or SharePoint) Recycle Bin, where it can be recovered for a retention period according to your organization's settings.

Therefore, this message is informational and is intended to clarify the difference between deleting a locally available file and deleting an online-only file.

If you need to review or restore deleted files, you can do so from the OneDrive web portal Recycle Bin.