Getting Out of Your Business: Cities nationwide are making it a crime to work from home.

AuthorSandefur, Christina

Kim O'Neil ran a thriving medical billing business in Chandler, AZ. 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.


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.


In a survey of local zoning ordinances published last year, M. Nolan Gray, an expert in city planning who is affiliated with Rutgers University, and Olivia Gonzalez, research associate for the Mercatus Center at George Mason University, found that the per-worker costs of complying with regulations are higher for small businesses than larger businesses. That puts many people who work from home out of work or prevents them from getting their businesses off the ground in the first place. People who want to work from home are often unaware of zoning requirements and other restrictions impeding their work until city officials impose stiff penalties or force them to cease operating. Others operate their home-based businesses underground--thereby risking serious civil and even criminal penalties--because the regulations are too confusing or severe.

According to Gray and Gonzalez, officials sometimes try to craft reasonable solutions but nevertheless end up thwarting home-based businesses. One approach is for cities to explicitly permit specified types of businesses in residential areas. But at best, this approach can only result in allowing existing types of businesses to continue. Government officials cannot possibly predict the innovations that entrepreneurs will make, so such lists quickly become obsolete.

Cities also restrict the number of employees and clients who can visit a home-based business. In Nashville, it...

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