There's No Place Like Home

By Nicole Hong It's getting a lot easier to set up shop at home.Looking for an easy way to boost local economies, states and cities across the country are revamping old zoning restrictions on home-based businesses. In some cases, they're allowing more types of companies to operate out of people's houses, such as food makers or violin teachers. Other places are giving existing businesses more leeway on things like how many clients can be on the premises at any given time."Home-business rules are one of the things that have changed the most over the past decade," says James Duncan, founding partner of planning consulting firm Duncan Associates in Austin, Texas. "Almost all communities are loosening their regulations on home businesses."Old zoning codes often banned home businesses altogether or placed heavy restrictions on them, such as forbidding them from having any customers or employees on site, or requiring potential owners to go through a public hearing for approval. In many cases, the only types of home businesses allowed were professional setups like medical or legal offices.Cities have been slowly easing restrictions since the 1990s, says Mr. Duncan, whose firm has helped rewrite zoning codes for about 200 cities over the past 25 years. But the pace of deregulation has accelerated since the 2008 financial crisis, he says, as more laid-off workers launch companies out of their home, and strapped communities want the tax dollars that can come from successful enterprises.Among the new businesses being created in the U.S., 69% of them start at home, according to a study released in May by Babson and Baruch colleges. The Small Business Administration estimates that home businesses make up about half of the 28 million small businesses in the U.S.The deregulation process takes a number of forms. Sometimes the rules get tweaked to make it easier for existing businesses. In East Wenatchee, Wash., for instance, legislators are changing the zoning code to allow home-based teachers to have up to 12 students.In other cases, the changes are more sweeping. Dunwoody, Ga., an Atlanta suburb, expects to pass a law in October that will allow most home-business owners to set up shop without the hassle of a public hearing for approval. Polk County, N.C., is planning to overturn its current ban on home-based businesses—which would be the first change to its zoning code in nearly two decades."The bottom line is that in these economic times, we need to allow people to make a living," says Ted Owens, vice chairman of the county's board of commissioners.Still, even though the climate is getting more favorable for home-based businesses, a lot of the old caveats still apply. Most places still have restrictions on things like what hours a home business can operate and how often delivery trucks can arrive. What's more, lawmakers in smaller towns sometimes end up amending or retightening rules in the face of community complaints about businesses clogging up traffic, say, or making too much noise.Small towns "tend to operate on a more personal basis," says Don Elliott, a director at Denver-based planning consulting firm Clarion Associates, who has been helping cities rewrite zoning codes for nearly 30 years. "Almost all zoning is enforced by complaints."Springfield, Mass., for instance, is expanding its list of preapproved home businesses. But the city could revisit the list if problems arise with neighbors, says city councilor Kenneth Shea. "We're trying to be progressive and open to development, but as it evolves, we might have to go in and tighten the list of approved home businesses," Mr. Shea says.So, experts say, home-business owners should have a backup plan in mind. Owners should be ready to shift to a shared office space or incubator if they see a big increase in customer or delivery volume. They should also be prepared to rethink their business model if conditions change.For instance, Louisiana recently passed a "cottage food" law, which allows individuals to sell food products from their home. But the state also set a revenue cap of $20,000 to make sure businesses don't produce mass quantities of food at home without a commercial kitchen license.That put a dent in Roxane Daigle's plans for Fancy Cakes LLC, which she operates from her home in Thibodaux, La. "I depend on this income to make ends meet, and I know that I will surpass $20,000 a year," she says.Ms. Daigle, who lobbied for a cottage-food law, plans to petition the state legislature next year to raise the limit to $50,000. But she says she may also have to branch out."To save myself, the only way I can think of is to sell my cakes and possibly open up a different company" to sell inedible sugar art, she says. Ms. Hong is a staff reporter for The Wall Street Journal in New York. She can be reached at

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