How Government Thwarts Hot Chocolate, Hostas, and the American Dream

April 30, 2020
By Christina Sandefur

Home-based businesses empower people to earn and save money, maintain a flexible schedule, and realize their dreams of self-employment. The vast majority of small businesses start out of someone’s home, and many continue to operate that way for years. And the current health crisis has made the ability to work from home even more important.

Yet cities and counties nationwide are using outmoded zoning, licensing, and permit requirements to stifle home-based businesses. These arbitrary, one-size-fits-all restrictions fail to recognize that the typical home-based business is a quiet, responsibly run operation that neighbors never even notice. Forcing entrepreneurs to comply with such obsolete restrictions deprives them of economic opportunity, provides consumers with fewer options, and punishes responsible citizens.

Arbitrary Rules

The lack of clear, fair, and uniform rules governing home-based businesses often leads to arbitrary restrictions that destroy people’s ability to earn a living from home but do nothing to actually protect the surrounding neighborhood.

A few months ago, Marietta Grundlehner was forced to shut down her successful internet clothing business because local zoning doesn’t permit “retail sales establishments” in people’s homes—even if those sales only occur online.

Marietta, a former teacher, had left that job to raise her young son and began earning money instead through Lularoe, an online clothing company that allows retailers to buy clothes wholesale and sell it at retail prices. For years, she sold clothes on Facebook and through her personal website. Marietta felt blessed to be able to be at home with her son and to be part of an “amazing community of retailers and consumers who were revolutionizing the fashion industry, and empowering women at the same time.” Then the trouble began.

When a neighbor complained that she was running a home business, Marietta immediately got a home-based business license. Her business caused no extra noise or traffic in the neighborhood, and customers never came to her house. But that wasn’t good enough, officials claimed. Marietta was running a “retail business” and carried “inventory,” which was against the rules, no matter what. Fairfax County officials told her to shut down her business—and gave her just five days to get rid of all of the clothing.

She lost $30,000 of her income.

Had Marietta’s closets been full of clothing she intended to wear, she wouldn’t have run afoul of the law. But because the clothes were intended for sale, they were illegal. Such a rule makes no sense—stopping people from selling makeup or Tupperware online does nothing to keep neighborhoods safe. As Marietta pointed out on her Change.org petition—which has been signed by thousands of people—“These women are using these businesses to pay for their child’s music lessons, or pay their mortgage! Not allowing those of us who are in direct sales to carry inventory is preventing us from making a living, and supporting our families.”

In 2009, Frank O’Brien, who conducted safety tests on medical devices out of his Chelmsford, Massachusetts, home, was told to shut down or face criminal charges. Town officials didn’t claim that testing blood-pressure monitors and defibrillators would disturb the neighbors—after all, the devices make no noise, and he had no clients coming to his house. Instead, they claimed he was using 40 percent of his home for his business, when the town only allowed people to use no more than 25 percent of a home’s combined floor area for business purposes. Also, Frank paid two employees, when the town prohibited home-based businesses from employing anyone who isn’t a member of the household. In other words, Frank could have a dozen people over his house to watch the Super Bowl or play cards, but he was not allowed to have two people on the premises for an inconspicuous home-based business.

Amazingly, officials sometimes prohibit home-based businesses from employing nonresident employees off-site. That’s what happened to Kim O’Neil when she wanted to run a quiet, unobtrusive medical billing company from her home. Working from home was critical for Kim, because it enabled her to care for her sick father. But the city of Chandler, Arizona, shut her down because her business had employees—even though they did not work out of the house.

Sometimes, local officials use rules against home occupations to shut down activities that aren’t even businesses. For 30 years, Lee Sepanek’s annual Christmas display and hot chocolate brought joy to people in the Phoenix, Arizona, area. But in 2017, local bureaucrats subjected him to a dizzying and confusing array of regulations that forced him to go dark that year.

The city told Lee that he was violating its Mobile Food Vending Ordinance, even though he was not operating any kind of “mobile” facility and was not engaged in vending. He didn’t charge for his hot cocoa—he just asked for donations for individually sealed packets, which visitors mixed with hot water themselves. The city told Lee that he would have to have the cocoa stored and prepped in a licensed commissary kitchen and would need a special event permit, requiring fees and onsite inspections. But the city also refused to tell him whether, even if he scrapped the cocoa, he could continue to host his light display. Vague and changing rules meant it was too late for Lee to get the lights up in time for Christmas. (Fortunately, the city changed course and let him resume the show in 2018.)

Unfair Processes

Responsible home-based business owners are often dragged through expensive, tedious, and futile permitting processes that do nothing to protect neighborhoods. Consider the case of Amy Berube. Needing the flexibility to work from home so she could care for her two young children, Amy left her full-time job and started a popular dog-sitting business, supervising and caring for five or six dogs at a time at her Newington, Connecticut, home. Clients liked leaving their pets with her because she sent them pictures and text messages throughout the day, showing that they were being well cared for. As her business grew in popularity, Amy stopped taking new clients so she could always limit the number of dogs in her home, ensuring that there would be no disturbances to her neighbors.

After operating successfully and without any issues for six years, city officials abruptly announced in 2018 that Amy would need to get a government permit to operate her business. She had been unaware of that rule, but she was happy to comply: “I filled out the application, I wrote a statement, I wrote my check and I handed it in feeling like if there was a way for me to do this and be legit then that’s great.”

But she did not get the permit. Instead, she wound up in the tedious and ultimately futile tangles of city hall red tape. Rather than rewarding Amy for following the rules, local officials decided to make more rules about the types of businesses that could operate from home. But they couldn’t seem to decide on what those rules should be. So Amy hired an attorney, and together they proposed a series of regulations for businesses like hers, including obtaining proof that the dogs are neutered or spayed, up to date on their vaccinations, and in good health; ensuring no excessive barking; and even obtaining a pet facility license from the state.

Ultimately, Amy’s permit was denied because they determined her business was “commercial.” But of course, this makes no sense – all businesses are “commercial.” And as a dissenting commissioner pointed out, “we are not dealing with a kennel here. We’re dealing with dog sitting.” Nevertheless, city officials refused consider tailoring its new rules to target any potential problems such as noisy barking. Instead, the city simply decided to ban the business outright.

Not only does changing the rules in the middle of the game unfairly prevent homeowners from earning an honest living, it can also leave them unable to recoup their financial investments. That happened to Linda Edwards, who sold hostas and daylilies to neighbors for over ten years from her home garden in Coralville, Iowa. That is, until 2010, when the city suddenly ordered her to shut down—or face a fine of $750 per day.

Linda and her husband John had done everything by the book. When they started their business, their home was located in unincorporated Johnson County, where it was legal to operate a home enterprise. When the city of Coralville annexed their neighborhood, officials assured Linda that, although “retail businesses” weren’t permitted in Coralville, hers would be grandfathered in.

So Linda was shocked when the city’s code enforcement demanded she stop selling her flowers. Relying on the city’s word, she had invested $2,000 for the upcoming season. But Linda didn’t have the bureaucrats’ agreement in writing, and when she tried to work with them, officials claimed her business could not be maintained because a delivery truck had recently blocked traffic on Linda’s street. Once again, city officials chose not to target a specific problem by, for example, enforcing traffic rules or imposing a fine to address that one-time situation—they took the easier route of simply telling Linda she had to close down.

Selective Enforcement

Most neighborhoods already have many home-based businesses that operate without anyone even knowing. But outmoded zoning restrictions empower busybody bureaucrats, NIMBY neighbors, or business rivals to shut down peaceful enterprises.

Tim Creek of Williamson County, Tennessee, learned that the hard way in 2011 when he was ordered to shut down his brand new guitar pedal shop. This came as a surprise to Tim, because the previous homeowners had operated a home-based business for over 30 years. Had Tim been a less astute, or less honest, businessman, he probably could have stayed under the county’s radar. But he followed the rules by getting a business license and advertised his custom guitar-effects pedals and music gear repair services with a local newspaper. That ended up attracting the county code compliance department’s attention, which told him to close up shop.

A Better, Fairer Way

All these stories share one thing in common: unfair and arbitrary rules that stopped hardworking people from earning an honest living when they were bothering nobody. Rather than implementing reasonable rules to prevent potential nuisances, government officials needlessly chose to block businesses entirely, and to dictate what people may do within the confines of their own homes.

Thankfully, state legislators can put an end to such overreach. The Home-Based Business Fairness Act protects homeowners from lengthy, uncertain, and expensive processes that don’t mitigate nuisances but just prevent people from working from home instead of in a traditional office. The Act refocuses zoning and other rules on what they’re designed for: ensuring buildings are safe, that traffic and parking aren’t blocked, and that noise isn’t excessive.

The ability to earn an honest living is the American Dream—and the flexibility to work from home has never had more significance than it does today. It’s reasonable for government to ensure that neighbors respect each other’s privacy and right to peacefully enjoy their property—but government goes too far when it needlessly intrudes on inoffensive businesses. It’s time to end these local abuses by establishing an important presumption of freedom: If a home-based business has no harmful effect on a residential neighborhood, a homeowner should be allowed to operate without first seeking permission.

Christina Sandefur is the Executive Vice President at the Goldwater Institute.