Taking Nashville to Court in Defense of Home-Based Business

Although home-based businesses have been commonplace throughout American history, the ability to earn a living from home is even more critical in the midst of the COVID-19 pandemic. Yet in Nashville, Tennessee, it’s illegal to operate a home-based business if it serves clients on-site, even if the business follows applicable health and safety standards and operates without disturbing the neighbors. Worse, the City enforces this rule arbitrarily, allowing some businesses—such as daycares, short term rentals, and historic home events—to operate out of people’s houses, while outlawing others. That’s irrational and unfair, and it violates the Tennessee Constitution.

Our friends at the Institute for Justice and the Beacon Center of Tennessee took the City to court on behalf of two Nashville residents who successfully ran small businesses from their homes: Lij Shaw, who owns a soundproof home recording studio, and Pat Raynor, a hairstylist who renovated her home to open a salon. A single parent, Lij began working from home so he could care for his daughter. Pat invested significant resources in repurposing her garage and getting state approval to open a hair salon in her home after her husband passed away. But after receiving anonymous complaints, Nashville officials shuttered both businesses, even though neither had harmed the surrounding neighborhood or violated any traffic, noise, or health and safety standards.

The Goldwater Institute filed a brief with the Tennessee Supreme Court in support of these hardworking home-based business owners, arguing that while it’s reasonable for cities to ensure that neighbors respect each other’s privacy and right to peacefully enjoy their property, they go too far when they needlessly intrude on inoffensive businesses.

After all, operating an enterprise from one’s home was the norm—not the exception—for much of America’s history. Indeed, this is what shaped the quintessential American Mainstreet—business owners frequently lived in or above their own shops. It wasn’t until the mid-twentieth century, when technological advances made it convenient and affordable, that most people began commuting to work. Now, changes in technology are once again empowering people to work from their homes.

In recent years, the internet, social media, and smartphones have given entrepreneurs unprecedented freedom to run businesses from their houses cheaply and easily. In fact, a 2012 U.S. Census Bureau study found that more than half of the businesses surveyed were operated primarily from a home. And as the Coronavirus pandemic continues to devastate and restructure the American economy, home-based businesses are becoming an increasingly attractive alternative.

Home-based businesses have many advantages. They can typically be headquartered in homes with no disruption to neighborhoods. Tutors, web designers, data entry technicians, accountants, lawyers, psychologists, gift basket designers, florists, personal trainers, podcasters, music teachers, bookkeepers, and countless others can all operate without causing noise or disruption to people next door. And not having to rent, maintain, and commute to a separate office means overhead costs are lower. Perhaps that’s why home-based business owners are more likely than other types of small business owners to have been unemployed or disabled immediately before starting their business. And home-based businesses offer a unique pathway to success and independence. In fact, 69 percent of entrepreneurs start their businesses at home, and over half continue to operate from home even when they’re past the startup phase.

The home-based option also gives stay-at-home parents, the disabled, and others who find it difficult to leave the house new options to earn money for their families. Indeed, with employment turnover, uncertainty about health risks, and children stuck at home, the desire of parents to find home-based work rather than traditional office employment is greater than ever. And many home-based businesses do not even need to keep traditional hours, which gives parents the freedom to work while their kids are napping or after they have gone to bed.

Yet even though the opportunities—and need—for home-based businesses has perhaps never been greater, cities like Nashville have failed to keep up with these innovations, making it impossible for people to work from home. Across the country, cities apply outmoded zoning, licensing, and permitting requirements to impede or thwart people’s ability to work from home. Many drag would-be home-based business owners through expensive, tedious, and often futile permitting processes that do nothing to protect neighborhoods. Others impose irrational rules, such as telling homeowners which rooms they can work in, prohibiting people from selling goods from their homes (even if those sales only occur online), and even barring home-based businesses from employing off-site nonresidents. Some cities even make operating a home-based business a crime.

Fortunately, at the Goldwater Institute, we’ve crafted a way for state legislators to address this problem in one fell swoop – by enacting the Home-Based Business Fairness Act. This state policy protects people’s right to work from home so long as they aren’t harming their neighbors or disrupting the residential area. And it forces cities to focus on keeping communities safe by policing actual nuisances rather than punishing people who happen to run a business from their living room instead of from an office.

The flexibility to work from home has never had more significance than it does today. People have a right to engage in a productive and peaceful enterprise in the privacy of their own home, as long as they don’t disturb their neighbors. We hope the Tennessee Supreme Court will protect that right. If not, the Tennessee legislature should adopt the Home-Based Business Fairness Act, freeing Nashville (and all Tennessee cities) to refocus local resources where they belong: on addressing actual disruptions while embracing the new economy and empowering people to pursue the American Dream—whether they do so from a corporate office or their kitchen table.

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