When Cities Shut Down Home-Based Businesses

by Christina Sandefur
January 4, 2019

Kim O’Neil ran a thriving medical billing business in Chandler, Ariz. But that business became a nightmare when local officials discovered she was operating it out of her home.

Her firm, KMB Medical Billing, originally had its own office. But when O’Neil’s father became ill, she moved it into her house so she could care for him and keep an eye on her two children. Her business had no signs, no commercial equipment, and she did not sell goods or store inventory. No customers came to her home, so she was not causing any noise, traffic, or parking issues. And though she did employ workers, they did not work out of her house.

Most observers would have never noticed that a business was operating in her home. Nevertheless, when city officials learned about the arrangement, they initiated months of tedious back-and- forth with O’Neil, with ever-increasing demands and legal threats. First, they told her she had seven days to apply for a special-use permit or face legal action, even though no one had previously told her she needed the city’s permission to work from home. Then they said she needed to construct a commercial parking lot on her property, even though no clients or employees would ever use it. They even demanded she attend monthly meetings with the city.

Eventually, she gave up and rented some office space. The ordeal, she said, was “one of the most stressful experiences of my life.”

O’Neil’s business helped doctors and patients and provided flexible employment for her and her employees. Rather than praising her for such entrepreneurship, city officials punished her—not because she was causing problems, but simply because she ran a business from her home instead of an office.

THE GROWTH OF HOME-BASED BUSINESSES
In recent years, the internet, social media, and smartphones have given entrepreneurs unprecedented freedom to run businesses from their homes cheaply and easily. The home-based option gives stay-at-home parents, the handicapped, and others who find it difficult to leave the house new options to earn money for their families. Lawyers, psychologists, furniture repairmen, and data entry technicians are just some of the professionals who can work from their homes. Others make money selling items online. In fact, according to the U.S. Census Bureau, more than half of the businesses surveyed in 2012 were operated primarily from a home.

Home-based businesses also grow into larger enterprises, including some of the biggest companies in America today. Amazon, Apple, Disney, Harley–Davidson, Hewlett–Packard, Google, Mattel, Microsoft, and many other major corporations began in peoples’ homes and garages. But they might never have come into existence if they had faced today’s growing local restrictions on home-based businesses.

This article is excerpted from “Getting Out of Your Business,” which appeared in the Winter 2018-2019 edition of Cato’s Regulation. Read more about how government is stifling entrepreneurship here.

Christina Sandefur is Executive Vice President of the Goldwater Institute.