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What to Do When Cities Get All Up in Your Business (SB 1387)

April 26, 2018

by Christina Sandefur
April 26, 2018

In recent years, the internet, social media, and smartphones have given entrepreneurs unprecedented freedom to start businesses from their homes cheaply and with flexibility. Home-based businesses give stay-at-home parents, the handicapped, and others who find it difficult to leave the house new options to earn extra money for their families. Society benefits, too. Apple, Microsoft, and other major businesses began in peoples’ homes. In 2012, more than half the businesses the U.S. Census Bureau surveyed were operated primarily from a home.

The typical home-based business is a quiet, responsibly run operation that neighbors never even notice. Unfortunately, cities and counties throughout Arizona are using outmoded zoning, licensing, and permit requirements to stifle these home-based businesses. This deprives people of economic opportunity and punishes responsible citizens. It also diverts limited city resources away from addressing genuine issues.

Thankfully, the legislature is considering a common-sense solution that puts an end to the patchwork of bureaucracy and limits restrictions that block home-based entrepreneurship. Under the Home-Based Business Fairness Act (SB 1387), home-based businesses are not required to obtain a costly, time-consuming home occupation license or permit, unless they cause disruption to the residential area. The bill still requires that homes be used for residential purposes, so it won’t allow for shopping centers in residential neighborhoods. However, it provides that if a business isn’t bothering anyone else, it can operate without government obstruction. That means local governments can focus on mitigating nuisances through building codes; traffic, parking, and noise ordinances; and other health and safety regulations. They are better enabled to do their job and homeowners don’t have to get a bureaucrat’s permission to run a business that isn’t causing neighborhood disruption.

SB 1387 is especially important because the permitting processes can be onerous and unjust. Recall Kim O’Neil’s story of trying to comply with Chandler’s myriad regulations in an attempt to run an unobtrusive medical billing business from her home. Kim is a mom of two who loves her community. She moved her business, KMB Medical Billing, to her home when her dad got sick. Her business had no signs, or commercial equipment—she didn’t sell goods or store inventory—and she wasn’t causing any noise, or traffic, or parking issues. It didn’t change the character of the neighborhood at all. Most people wouldn’t have noticed her operation. Nevertheless, the city forced Kim through months of tedious back-and-forth, with ever-increasing demands and legal threats, until eventually, Kim gave up. The ordeal, she said, was “one of the most stressful experiences of my life.”

Unfortunately, Kim’s story isn’t unique.

Angie Hall left her lucrative 16-year corporate career to better people’s lives through yoga and meditation. She worked hard to earn her success and when she discovered yoga, it changed her life. She began teaching throughout the Valley. Wanting to share her teachings on a more personal level, she decided to start her own yoga business.

For years she offered private meditation and yoga instruction, helping her clients physically, mentally, and spiritually. Some clients expressed a desire to practice in a quiet space outside of the busy, commercial studio setting. So Angie decided to construct a quaint studio in her backyard.  Here, the sessions would be, in the words of one of her clients, “very small, intimate gathering[s] with no more people in attendance than at a small dinner party.”

Angie had owned her home for 11 years and remains there to this day, maintaining her status as a kind and tidy neighbor. She consulted with her neighbor, a contractor, who had recently finished building a home office in his own backyard. He initially expressed an interest in building her space. She knew that other residents on the street operated businesses out of their homes without a permit. They weren’t doing anything dangerous or bothering anyone, so she didn’t complain. However, Angie wanted to follow the rules.

So Angie got a building permit for her backyard studio and disclosed her intentions to offer yoga there. She applied for a permit to run her business from home. She also applied for a permit allowing increased traffic, even though she didn’t think her business would bring extra traffic to the neighborhood.

That’s when Angie’s dream became a nightmare.

After Angie chose to use a different contractor, the neighbor who originally offered to build her studio decided he didn’t want another business in the neighborhood. His parents also own a house on the street, and together they began campaigning with fear tactics instead of facts against Angie’s request for a permit.

The small coalition of neighbors began spying on Angie. They photographed cars that parked in her driveway or near her home, as well as guests that entered the house. One neighbor began listening to her conversations through the fence, stalking her social media accounts, and printing out posts regarding the studio.

Angie wrote letters to her neighbors regarding her intentions. She asked their concerns and adapted her plans to meet their needs, but the few neighbors did not budge. When Angie offered to host a neighborhood meeting to discuss her modest plans, the neighbors refused. Angie had hesitated to hire a lawyer because she believed what she was doing was well within the law. She thought, mistakenly, that the law would be on her side, since she had done her best to follow every instruction she received from the city.

Angie invested her life savings into the construction of this space, but when she finally finished, it became clear she might not be able to use it. She was forced to hire a lawyer at $500 an hour. She was unable to invest in her business or move forward with her planned marketing because suddenly the future of her business was in jeopardy.

The five angry neighbors were all at the zoning hearing. They were met with a handful of Angie’s students and supporters. Angie and her lawyer believed they understood the biggest opposition to her plans. Angie offered that, in exchange for a business permit, she would submit to additional hearings before the city’s zoning board, in one and five years, to prove her business was not having an ill effect on the neighborhood. She would only allow three cars to be at her house at any time and all would park in her driveway, mitigating any busy street concerns. Finally, though she has no plans to move, she would surrender her permit if she ever sold her house.

These good-faith efforts were made in vain. The neighbors smeared her in front of the hearing officer. They yelled, spoke out of turn, and waved her social media printouts angrily at the judge. It didn’t matter that Angie and her students offered to teach free community classes, do street clean up, and ride their bikes. Client testimonials, letters of her good character, and her lawyer’s best plea did nothing. He suggested she filed for a continuance, which she did. They tried to speak with the disgruntled neighbors after the hearing to no avail. They also intended to get a lawyer.

Frustrated, but committed to sticking by her ethics, Angie did not disclose that the very neighbors in opposition to her business also ran their own home-based businesses without legal permission from the city.  After months of harassment, filing fees, and repeated city inspections, both announced and unannounced, it became clear to that as long as the neighbors lived on her street, Angie would never get her permit. Moreover, because she had exposed her business intentions, the neighbors could file complaints with the city anytime they suspected she was conducting business from her home.

At a loss, emotionally and financially, Angie withdrew her request and gave up. She put a lease on a commercial space and has begun hosting her trainings and events there, at a great cost to her business.

Had Angie followed the examples of her neighbors and ignored the law, she would have been living her dream today. Instead, she tried to abide by the outmoded laws which put her at the mercy of busybody neighbors. She was subjected to months of humiliation and harassment, as she watched her life savings deplete. She began living in permanent fight or flight mode, afraid to walk her dog down the street or spend time in her own backyard.

City permit requirements for home-based businesses might have been created with good intentions, but they’re often hijacked by NIMBY neighbors and exploited to transform private squabbles between neighbors into public disputes, involving the government—all of which results in dictating what people may do within the confines of their own homes.

That’s why SB 1387 is so important. It allows cities to block actual disruptions such as traffic or noise problems or other nuisances—but it ensures that responsible homeowners who aren’t bothering anyone won’t be dragged through an expensive, tedious, often futile process. The Home-Based Business Fairness Act is a common-sense approach that refocuses local resources on addressing true nuisances while embracing the new economy and empowering Arizonans like Kim and Angie to pursue the American Dream.

Christina Sandefur is Executive Vice President of the Goldwater Institute



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