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Zoning Regulations Need to Keep Pace

By John Munro

     Many Americans take the plunge and start a small business.  The predominant form of small business in the united States is home-based business. [1]  Nearly 8,500 new home-based ventures are started each day with one in ten U.S. households conducting some type of home-based business. [2]  Although many local zoning regimes started with the same intentions they have led to varying restrictions which may not appropriately balance the concerns of neighbors against the benefits and characteristics of all current home-business.

     Government regulations have a very large impact on home-based businesses. [3]  In fact, costs to comply with regulation have been shown to be higher for businesses with less than twenty employees than for those with over five hundred. [4]  For home-based businesses, local codes and zoning ordinances often have restrictions on the use of residences as places of business. [5]  The actual restrictions can vary widely between municipalities.  For example, a quick review of two central Illinois city's zoning ordinances show one such difference.  The two cities, Decatur and Champaign, are similar in size with between seventy to eighty thousand people [6] but have a different zoning regulation regarding sales of goods.  The Decatur ordinance allows home occupations in single family residences but prohibits the sale of any commodity in the home. [7]  The Champaign ordinance does not appear to prohibit sales but restricts the number of customers or patrons allowed in the home at one time. [8]  Despite the differences in the specific restrictions on the use of the residence as shown in the example above, the regulations most likely arose from similar, if not the same public policy considerations.

     Modern zoning restrictions arose out of the rapid industrialization of the country in an effort to distance commercial activities from residential housing especially for health and safety concerns. [9]  After residential areas were created, maintenance of the residential character of the neighborhood is often stated as the purpose of the zoning regulations. [10]  Changes in the marketplace and advances in technology allow a wider range of home-businesses without infringing on the rights of neighbors or impacting the character of a neighborhood.  Many zoning regulations created before the rise in commercial internet activity are ill-equipped to deal with home based internet businesses. [11]  The broad language of many local prohibitions apply to on-line home businesses that pose no threat to neighbors or the neighborhood. [12]

     The current restrictions placed on home businesses are not likely to stop people from starting ventures nor should they.  Innovation and job growth of the U.S. economy has been shown to come from small businesses. [13]  The beginnings of 97.5 percent of the Fortune 200 companies can be traced to entrepreneurial beginnings. [14]  While all these small businesses many not be home-based, 2002 figures showed that 49.4 percent of small businesses surveyed were home-based. [15]  With the importance of encouraging new business, the traditional method of separating commercial and residential zoning may need to be reviewed in light of changes to business and technology. [16]  Of course the same tension will exist between the desire to preserve the residential character of a neighborhood and the freedom to pursue commercial enterprises; however, the playing field has changed in recent times.  With new technology and the ease of communication, many people are experiencing the trend toward mixing the boundaries of work and home.  In 2004, fifteen percent of people with employment reported completing some of their primary work at home. [17]  Between 1980 to 1990 the number of American workers who worked from home rose over fifty-six percent. [18]  The decade prior to 2000, showed an increase of over twenty-two percent. [19]  The trend is clearly toward workers spending more time working from home.   Although many local restrictions are flexible enough to provide environments for home business creation, some local zoning regulations should be reviewed to ensure that they are compatible with the changing business climate and do not create unneeded barriers for entrepreneurs.  Revised zoning in light of modern trends can promote business creation and respect the rights of neighbors.

Sources:

[1] - Henry B. R. Beale, Home-Based Business and Government Regulation ES-1 (Small Bus. Assoc. 2004).

[2] - Julie Poucher Harbin, Insurance Lesson for Home-base Biz; Trends, San Diego Business Journal, March 15, 2004, at 34.

[3] -  Beale, supra note [1]

[4] - Id.

[5] - Nicole Stelle Garnett, On Castles and Commerce: Zoning Law and the Home-Business DIlemma, William & Mary Law Review, April 2001, at 1209.

[6] - U.S. Census Bureau, State and County QuickFacts 2000 Census of Population and Housing, (2000).

[7] - Decatur, Ill., Land Development Code Section 2 (2007).

[8] - Champaign, Ill., Zoning Ordinance Section 7.1.1 (2006).

[9] - Garnett, supra note [5] at 1201.

[10] - Beale, supra note [1] at ES-6.

[11] - Garnett, supra note [5] at 1219.

[12] - Id. at 1221-22.

[13] - Paul D. Reynolds et al., The Entrepreneur Next Door, Characteristics of Individuals Starting Companies in America 6 (Ewing Marion Kauffman Foundation 2002).

[14] - Id.

[15] - U.S. Census Bureau, Characteristics of Business 2002 229 (2006).

[16] - Garnett, supra note [5] at 1196.

[17] - U.S. Dept. of Labor, Dept. of Labor Statisics, Work at Home in 2004 (2005).

[18] -  U.S. Census Bureau, Working at Home: 2000 Table 1-1 (2004).

[19] - Id.

Full post as published by The Journal of the Business Law Society on February 26, 2008 (boomark / email).