Rise of the Machines: Algorithmic Zoning for Climate Risk

Stephanie M. Stern & Cherie Metcalf

Fires, floods, storms, and other extreme events related to climate change are responsible for billions of dollars in property damage and thousands of deaths in recent years across North America. In this Article, we propose a new model of local zoning to address the escalating threat of climate harm: climate algorithmic zoning (“CAZ”). This model draws on the emerging potential to harness large, independent data sets to generate more granular, location-specific climate risk predictions and regulations. These predictions can guide a range of traditional zoning functions, including building codes and permits, restrictions on existing development, and local planning and infrastructure. We anticipate that CAZ will arise in the highestrisk localities where climate threats and damage outweigh political opposition from the development lobby and homeowners. Within those localities, CAZ will tilt toward regulating new construction or reconstruction, for both political and constitutional reasons.

There is no future in which algorithmic climate risk prediction does not affect residential investment, property valuation, insurance, and protection. Insurers and lenders have already embraced climate risk algorithms. Rather than shying from CAZ, we contend that local governments should adopt a complementary approach that integrates CAZ into land use regulation proactively and leverages local governments’ distinct institutional and democratic advantages. These competencies include the ability to zone and plan to prevent climate damage, knowledge of local conditions and culture, and the ability to engage communities democratically.

Algorithmic, big data approaches carry risks and shortcomings; the approach can entrench existing biases that disadvantage vulnerable communities, create and amplify risk assessment errors, produce rapid shifts in decision-making that upset expectations, and reduce transparency. CAZ at the local level can leverage traditional tools of local governance to mitigate these challenges, for example, through more democratic design of algorithms, use of CAZ as non-exclusive inputs into broader decision frameworks that incorporate important local values, and retooling existing legal doctrines of zoning, such as substantive due process and amortization.

Standing Against Housing

Brian M. Miller

After decades of harmfully restrictive housing policies, cities and states are answering the call to allow for more housing. But in many of these jurisdictions, opponents have taken to the courts to challenge these critical reforms. Even when those legal challenges ultimately fail, drawn-out litigation and administrative appeals inflate the costs of some housing projects and simply deter others. This Article examines the interplay between standing doctrine and zoning law and argues that permissive application of standing rules in many states allows third parties with shaky assertions of harm to impede housing reform efforts.

Standing rules traditionally require plaintiffs to demonstrate a concrete and particularized injury within the zone of interests protected by law. But in zoning disputes with third-party challengers, courts often allow challenges based on grievances that would be insufficient for standing in other contexts. These relaxed standards thus not only have harmful policy consequences; they also misalign with broader legal doctrine both of standing and of zoning. This Article critiques these inconsistencies and highlights how zoning’s legitimate purpose—to promote public welfare through orderly urban development—has been overshadowed by litigation that prioritizes subjective and diffuse concerns better suited for the political process.

This Article then proposes a refocusing of standing requirements for aggrieved third parties in zoning disputes. This approach would confer standing only on third parties who credibly allege interferences with property use and enjoyment as contemplated by nuisance law. In doing so, the proposed framework balances the need for judicial oversight to safeguard residents from harm with the imperative to streamline housing development. It ensures that only claims grounded in cognizable legal interests can proceed, reducing delays and costs associated with litigation while preserving remedies for genuine threats to property interests and public welfare.

Small Enough to Fail: The 2018 Amendments to the Dodd-Frank Act, Regulatory Stress Tests, and Post-Pandemic Bank Failures

Jacob R. Bourgault & Edwards Adams

As a result of the 2008 financial crisis, the United States lost 8.7 million jobs and U.S. households lost approximately $19 trillion in net worth. The unemployment rate doubled, gross domestic product (“GDP”) fell 4.3%, and the country saw its deepest and longest recession since World War II. In order to prevent the situation from getting worse, nearly $498 billion in taxpayer money was given to, primarily, the large unsecured creditors of large financial institutions. As a result, the hardships fell “disproportionately on low income, working class families.” It again became clear that the banking world was not going to regulate itself—there was too much money to be made and not enough disincentives to prevent large financial institutions from taking advantage of the American public.

Contemporary banking regulations prior to the 2008 collapse had their roots in regulatory responses to bank failures during the Great Depression. As these proved insufficient after the 2008 crisis, one of Congress’s responses to the crash was the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). These changes had significant opposition from various members of Congress and most Wall Street executives due to their restrictive burden on banks, which, they alleged, could potentially stifle business. This opposition did not dispel over time, with political leaders pledging significant changes to the Dodd-Frank Act. This opposition would bear fruit in 2018, when subsequent legislation modifying provisions of the Dodd-Frank Act was enacted.

In 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (“2018 Amendments”) was signed into law. While this did not dismantle the Dodd-Frank Act, the 2018 Amendments narrowed some of its applications. One of the changes was the development of a new categorization for banks with between $100 billion and $250 billion in assets, which reduced the frequency of supervisory stress tests for these banks from annually to every other year and eliminated the requirement for internal capital stress tests. The alteration of these requirements excluded First Republic Bank ($212 billion), Silicon Valley Bank ($209 billion), and Signature Bank ($110 billion) from being subject to the enhanced prudential standards, and may have failed to prevent the second-, third-, and fourth-largest bank failures in U.S. history. This Article examines the failures of First Republic Bank, Silicon Valley Bank, and Signature Bank to consider whether the regulatory framework prior to the 2018 Amendments could have prevented or foreseen their collapse. By looking at historical and contemporary financial regulations, paired with their effects on bank stability, this Article argues that Congress should implement various regulatory and legislative changes to prevent future bank failures. This Article also delineates the history of banking regulations and their correlation to financial catastrophes, with the conclusion that the collapses of these banks should have been foreseeable, but were not accounted for in the current regulatory framework. Since there is a historical pattern between decreased regulation and financial catastrophes, it is evident that Congress should use its constitutional authority to protect consumers and safeguard macroeconomic stability. As this Article argues, Congress can accomplish this by strengthening the financial sector’s regulatory framework, particularly regarding stress tests. This Article ultimately calls for the incentivization of financial institutions to conduct comprehensive stress testing internally, regulations that account for more variables, such as interest rate risk and deposit beta assumption, returning to pre-2018 Amendment capital requirements, and moving the regulatory oversight responsibilities away from the Federal Reserve.

The New Old SEC

Eric C. Chaffee

The administrative state is under attack, and the U.S. Securities Exchange Commission (“SEC”) is no exception. Through executive orders, the Trump Administration has called into question the independence and staffing of the SEC, and the Supreme Court has issued opinions that have eroded the agency’s authority and power, including eliminating Chevron deference, which was viewed by many as a cornerstone of administrative law.

This Article explores the scope of the SEC’s authority and the mandates for it to act by examining two of the potentially broadest grants of power that appear ubiquitously within federal securities law, i.e., the terms “for the protection of investors” and “in the public interest.” Although the assertion has been made that these terms provide broad power to engage in social engineering—including regarding the initially proposed version of the SEC’s climate disclosure rule—a textual analysis of these terms demonstrates that their meaning is much narrower. Such an analysis shows that “for the protection of investors” means providing investors with the truthful material information necessary to make informed investment decisions, and the term “in the public interest” is focused on the protection of securities markets through the creation of efficient markets and the prevention of market failures.

This Article contributes to the existing scholarship in four main ways. First, this Article provides the first focused academic piece on the meaning of the terms “for the protection of investors” and “in the public interest” within the field of federal securities law. Second, this Article provides the first academic study of how those terms ought to be understood textually in a post-Chevron world and considering the Roberts Court’s aversion to administrative deference generally. Third, this Article offers the first exploration of the mandates that the SEC has under the federal securities law to act “for the protection of investors” and “in the public” that will be complicated by the Trump Administration’s dramatic reshaping and downsizing of the federal government. Fourth, this Article provides the first examination of how a textualist analysis of the terms “for the protection of investors” and “in the public interest” impacts expansive efforts by the SEC, such as the recent proposed climate disclosure rule. The SEC must understand its role. The discussion contained in this Article helps to clarify it.