People have many reasons to work at home: rearing children, physical disability, age, little startup capital to rent office space and, of course, who wouldn't want to work in their bunny slippers? So, it should be unsurprising that the arrangement is popular. In fact, the US Census Bureau reports that 51.6 percent of all businesses are "operated primarily from someone's home."
The Great Recession and better technology have made working out of the home more urgent and more practical. The Des Moines Register writes, "Downsizing and office closures following the 2008 recession as well as greater access to broadband Internet have all contributed to more people working from home."
Home based businesses also bring goods and services into areas whose needs are not being met because they are far from commercial centers. Many provide a second source of income to workers who already have a day job helping to make ends meet.
Despite all the benefits provided by home based businesses, some cities are on the war path.
Last year, Nashville, Tenn., destroyed 63-year-old Pat Raynor's home based hair salon. Pat was forced to move her equipment, her lone barber chair, and her livelihood from her converted garage into an expensive commercial space. Her crime? Seeing customers at her house one at a time.
Nashville allows home based businesses but prohibits clients or patrons from being served on the property. In the Music City, it is even illegal to teach piano lessons in a living room.
Up the road in Knoxville, a stay at home morn and entrepreneur, Jacoyia Wakefield, followed all the rules and obtained the necessary licenses to operate a small daycare in her house. But NIMBY neighbors were able to exert more political influence than she and convinced the city council to overturn the planning commission's permit.
Jacoyia was forced to hire legal counsel and, months later, was still battling hostile neighborhood groups outraged that she was offering to watch their kids in a safe and convenient location at a low price.
North Ogden, Utah, recently wiped out a whole swath of home based businesses. On March 31, the city council opted not to take the usual path of grandfathering in existing, non-conforming uses, but chose instead to shutter some businesses immediately and to put others through an "amortization" process, slapping a sell by date on them.
The local paper editorialized, "Longtime home businesses have provided services over the years to area residents that were not conveniently located nearby." But the council kept repeating that they want any home based businesses to be "invisible."
These types of regulations are all too common. As IJ's Beth Kregor explains, "Numerous American cities have strict rules about what businesses can operate as home based businesses. Zoning departments loyally adhere to an aesthetic ideal of residential neighborhoods that are havens from the workplace."
Cities often prevent home based businesses from hanging signs, parking commercial vehicles on the street, receiving clients, or bringing employees into the home. But these rules are outdated and unsuited for the new economy. Kregor continues:
"Flat restrictions on home based businesses, regardless of their externalities or impact on the neighborhood, ban the very kind of low budget, experimental market testing that is necessary for an innovative start-up. Chicago's rules against operating a business in a garage or making a product that is sold elsewhere would have outlawed Amazon, Dell, Microsoft, and Chicago's own The Pampered Chef. If those businesses had never started, America would have lost hundreds of thousands of jobs."
Chicago's regulations seem particularly burdensome when compared to those of smaller, more innovative Midwestern cities. Clive, Iowa, recently overhauled its code to make it easier for home based businesses to get permits.
In nearby Norwalk, graphic designer Lucinda Sperry operates a 600-squarefoot home studio so that she can keep an eye on her kids. She couldn't do that in the Windy City which limits home businesses to permanently occupying no more than 10 percent of the floor area of any single family residence and never more than 300 square feet.
There's something especially onerous about dictating what goes on at a home based business within the four walls of the house. Chicago's floor area limitations may be outdone by Phoenix's requirement that home based business activity "shall be limited to the hours between 7:00 a.m. and 10:00 p.m." That doesn't just mean serving customers or rebuilding a car late at night, that means all work after I0:00 p.m. That is precisely the time when many self employed, home based business entrepreneurs may find the time to work, after having put their children to sleep or come home from another job.
With so many cities kicking businesses out of the house, some states have stepped in to champion stay at home entrepreneurship. According to a study by the Small Business Administration:
States can enact home occupation legislation that is supportive of home based businesses. Some states have done this, and some of the state legislation is explicit or forceful:
Maryland statutes include a definition of "no-impact" home occupation which is a broadly adopted standard.
Vermont forcefully states the right of a person to operate a business in his home.
California statute requires all local jurisdictions to allow day care homes, and it goes so far as to void any contractual agreements to the contrary.
California has also made waves by legalizing "cottage food" businesses that sell edible goods prepared in a home kitchen, resulting in thousands of new jobs. And Lucinda Sperry, the graphic designer from Iowa, received help crafting her initial business plan from the Iowa Small Business Development Center.
There are better ways to regulate home based businesses than what is found in Nashville and elsewhere. Rather than city councils attempting to predict future business models and decide which of those are permissible, municipalities should presume that home based business are OK up until they bother someone, at which point existing nuisance laws and the accompanying procedures take over. Worse still is creating an environment where the decisions about which home based businesses are allowed and which are not inevitably turns upon who has better access to decision makers.
Restrictions on home based businesses have an enormous effect on millions of entrepreneurs chasing the American Dream and struggling to earn an honest living. As the same SBA study says, "Government regulations typically have a disproportionately large impact on very small businesses." Imagine a world where every government white paper opened with that outlook. IJ is working toward that world, and we want you as part our team. If you are a home business owner facing burdensome regulations, we want to hear about it.
You might want to avoid driving through Estelline, Texas.
This tiny town (population: 141) on U.S. Route 287 pulled in a staggering 89 percent of its gross revenues in fiscal year 2012 from asset forfeiture and traffic fines. Under civil forfeiture, someone does not have to be convicted of a crime, or even charged with one, to permanently lose his or her cash, car or even home. Moreover, under Texas law, law enforcement can keep up to 90 percent of the proceeds from a forfeited property.
While Estelline, once described as the second worst speed trap in Texas, surely generates a large proportion of its budget from forfeiture, it's not alone in "policing for profit."
According to "Forfeiting Justice," a report by the Institute for Justice, law enforcement agencies in Texas on average generated forfeiture proceeds equal to about 14 percent of their budget in 2007. For the top 10 agencies that took in the most forfeiture proceeds, they earned the equivalent of more than one-third of their budgets.
Estelline's forfeiture procedures also led to a $77,500 settlement with a 64-year-old woman reached last month.
On November 29, 2012, Officer Jayson Fry, the town's only police officer, pulled over Laura Dutton for speeding. He contacted an officer in Memphis, Texas, who brought over a drug sniffing dog. According to Fry, the dog alerted, though no drugs were found during a search of Dutton's F-150 pickup.
Instead, officers found over $29,000 in Dutton's purse, still in bank currency wrapping. Dutton said she received that cash from a recent property sale. Police contacted her two sisters who verified her story. But Dutton was arrested anyway for money laundering and spent the night in jail.
In January 2013, the local district attorney refused to prosecute the case. Estelline returned $29,640 of Dutton's cash and dropped a citation for speeding. "I just think that this is such a sham, flim-flam," Dutton said last year. "I want to say, it's just 'policing for profit.'"
Yet according to Dutton, Estelline still kept an additional $1,400 of her cash. She filed a lawsuit arguing the town violated her Fourth Amendment rights. As part of the settlement reached in July, Dutton will collect more than $46,000.
Yet it doesn't change Estelline's worrisome procedures. As the Amarillo Globe-News reported, the town "had no written drug dog policy, no written arrest policy and no established forfeiture policy. The city also maintained no written records of past searches or seizures."
Carrying a badge as an armed "special conservator of the peace" requires 40 hours of training in Virginia. But getting a license to cut someone's hair takes 1,500 hours of training, almost 40 times as many hours. Welcome to the absurd world of occupational regulations.
Currently, Virginia law lets private citizens become SCOPs, which have the authority to arrest people and even carry a badge and a gun. SCOPs can also identify themselves as "police" and use the Commonwealth seal on their badges and uniforms. A bill passed by the legislature would raise the minimum amount of training to 130 hours for armed SCOPs.
Yet even with this increase, many far less dangerous occupations have to endure a greater regulatory burden. Licenses for nail technicians, also known as manicurists, require 150 hours of experience. Barbers and cosmetologists have to complete at least 1,500 hours of training before they can work. Midwives need two years of training even though that occupation isn't licensed in neighboring Maryland and North Carolina. Virginia forces many aspiring construction contractors to more than two years to experience before they can obtain their licenses. Yet Maryland and Kentucky do not license several of these contractor occupations, like drywall installers and painters.
A 2012 report by the Institute for Justice found that Virginia has the eighth most burdensome licensing laws and is the 11th "most extensively and onerously licensed state" in the entire nation. According to a new study by the Brookings Institution, more than a fifth of all workers need either a license or certification to work in Old Dominion. That has damaging consequences for the economy. As the Brookings study estimates, "the restrictions from occupational licensing can result in up to 2.85 million fewer jobs nationwide with an annual cost to consumers of $203 billion."
The difference in hours makes no sense from the perspective of public health and safety. It makes sense only from a political perspective, where vocational schools and market incumbents benefit from higher entry barriers. It's time Virginia takes a new look at the opportunities its occupational regulations are crushing.
