The Free Enterprise Club and The Goldwater Institute have been investigating cases around Arizona of home-based businesses (HBB) being harassed or shut down by local government.

But this isn’t a new issue.  In fact, the Maricopa Association of Governments (MAG), an organization comprised of member-cities in Maricopa County, issued a comprehensive study on the home-based business landscape.

Their conclusion?  Home-based business regulatory reform is long overdue.

According to the MAG Study issued in 2003, almost every city in Maricopa County has overly burdensome ordinances that unnecessarily restrict home-based employment. The study urged cities to reconsider their regulatory regime in order to “create a positive environment that assures their [home based businesses] future operation and place within the community.”

A major factor in MAGs conclusion in relaxing home-based business regulations was their observation of evolving work trends in the US, finding that over 3.4 million workers (and growing) worked from home, of which over half being self-employed home-based business owners.

Most notable from that figure is that only 19% of these home-based businesses were in the production, operations or fabrication sectors.  Most HBBs were in the managerial or professional (41.6%), technical, sales and admin support (24.6%), and service occupations (14.9%). In other words, most home-based businesses in today’s economy are service occupations that can operate without any disruption in a residential neighborhood.  Businesses that create a great deal of noise and exhaust are no longer the typical home-based business.

Yet the zoning ordinances governing HBBs remain stuck in the post-industrial economy of the 1950s. One area highlighted by MAG for reform was how much of a house may be used for a home-based business.  According to the report, five cities restrict the use to 25 percent of the gross space – Glendale sets a maximum of 5% of the living area.  How would a city even propose they enforce this regulation?  Considering that it is already required that a home-based business be a secondary use of the property, all logical methods of enforcement would result in a massive invasion of privacy.

Other arbitrary and unenforceable restrictions include limits on using a garage or accessory space, hours of operation, storing products or selling any goods on premises.

Unfortunately, not a lot has changed since the study was published 14 years ago.  Though some cities such as Phoenix and Maricopa County have reformed their HBB regulations, other cities have become more restrictive.

Take for instance the City of Chandler: a decade ago the city did not restrict homeowners from operating their business from their garage, or limit their hours of operation.  Now the same city that desires to be the tech hub of Arizona currently prohibits a business from working from their garage, an irony highlighted by how many antelope tech firms started their ventures from a home garage.  Tolleson went from having very few restriction to allowing no home businesses to be permitted by right.  Every home occupation requires the issuance of a special Use Permit – a process that is unpredictable and costs thousands in time and money.

Over a decade ago MAG identified HBB reform as “the next wave of necessary changes in municipal zoning” and that Arizona communities should follow the lead of other states and jurisdictions enacting reform. Instead, the situation has only grown worse. Considering only a couple cities have found the motivation to heed the advice of MAG, the time is ripe for the state to do more to create simplicity, uniformity, and flexibility for home-based businesses in Arizona.

A transforming economy, technological innovation and changes in the workplace have led to an explosion of home based businesses in Arizona. The growth in home based businesses (HBB) and telecommuting has been so pronounced that it is now estimated that 24% of workers are now doing a portion of their job at home.

However, due to an unresponsive and archaic regulatory system that has not responded to this changing work culture, many of these fledgling enterprises have been stifled or extinguished altogether.  In many jurisdictions, the patchwork of HBB regulations have created an inconsistent, arbitrary and unnecessarily restrictive home-based business environment. For many of these businesses, compliance becomes a fight against City Hall that is a losing proposition for the politically unconnected.

Over the last several months, the Free Enterprise Club and the Goldwater Institute have unearthed several home-based business regulatory disasters.  These stories have illuminated the rampant over-regulation of the practice and the need for reform.

Many of these homeowners have agreed to share their stories in the hopes that what happened to them won’t occur to another unsuspecting HBB in Arizona.

Pinal County Regulations Sink Home Swim Lessons.

For over 10 years Suzy Irwin and her husband taught swim lessons to small children in San Tan Valley.  The Irwins live in a community in unincorporated Pinal County, where the proximity to services are few and the nearest swim school is a 30-minute drive away.  One summer day in 2013 the Irwins received a knock on her front door—it was a code compliance officer from the county.

After inquiring about the swimming lessons being taught at the Irwin’s home, the county employee informed Suzy’s husband Sean that they did not have the proper “home occupation license” and would need to cease operations immediately.

Suzy believed she had always followed the County’s regulations.  After all, the County told Suzy when she moved into the neighborhood in 2003 that there was no permit for home based businesses.  Additionally, County environmental services and local fire services provider did annual routine inspections of their pool and backyard.  For the past ten years Suzy was proactive in making sure public health and safety standards were met, her business was well insured, and she had all the latest certifications.  So of course, her first inclination was to simply come into compliance by filling out some paperwork, paying the $50 fee, and acquiring the necessary license.

If only it had been so easy.

Shortly after applying for the home occupation license, the county came back proclaiming she did not qualify for this type of license because she taught more than 5 children per day, and would instead need to file for a special use permit (SUP) for $500.  This came with an additional $200 “concept review” fee which included a meeting to determine her prospects for the permit ever being granted.

In Spring of 2014, Suzy drafted a lengthy narrative, drew a site plan, and filled out the rest of the application.  They were required to notify their neighbors located within 1,200 feet of their home and host them at a neighborhood meeting.  They were even required to install a bright yellow 4X8 sign (costing $850) in their front yard to provide notice of their upcoming planning & zoning hearing.

The Irwins received an outpouring of support from their neighbors – many of whom were customers and entrusted their own children’s safety to Suzy and her husband.  All who attended their neighborhood meeting signed a petition in support of them being allowed to continue their business.  Finally, after a lengthy process that already cost the Irwins nearly a year, their application was scheduled for a hearing at the County’s Planning and Zoning Commission.

On July 17, 2014 the Irwins went to their hearing, feeling confident that they would finally receive their approvals and be granted the Special Use Permit. That’s when it all came crashing down.

At the hearing, the County’s new in-house counsel, Mark Langlitz, blindsided county staff and the Irwin’s by informing the commissioners that he did not believe they qualified for a SUP at all. Additionally, Mr. Langlitz stated that the Irwin’s HBB activity was illegal and they were wrongfully using the SUP process as a vehicle for “spot zoning.”

The only path to compliance, according to Mr. Langlitz, would be an entirely different process – to rezone their home to commercial – which would never be allowed.  When pressed further on this opinion and why teaching swimming classes would not be allowed at the Irwin’s, the attorney defended his opinion by proclaiming that any for-profit business must be conducted at a commercially zoned property.

After hearing this dubious legal opinion from Mr. Langlitz, the commission voted 10-2 to refer the case to the Board of Supervisors with a recommendation to deny their permit.

After an unpredictable roller coaster that cost them in time and money, the Irwin’s had no choice but to accept the verdict and move on. Suzy withdrew their application with the county, sidelining 35 years of combined experience in critical water safety training for children in the community.

Arizona is Ripe for Wide-Sweeping Home-Based Business Reform

Though most home-based businesses are small enterprises; in aggregate the thousands of home-based businesses make up roughly 50 percent of all Arizona small businesses.  We should have a regulatory culture that reflects both our value for their economic contributions as well as respect for their rights to earn an honest living for themselves and their families.

The Irwin’s story is indicative of an all-too-common challenge home-based businesses face.  It also demonstrates the urgency of greater reform.

Arizona has been a trailblazer in creating a regulatory environment primed for businesses to expand in the State; and as a result, businesses from California have flocked here.  Now is the time to send the same message to our home-grown entrepreneurs.

Today, the Arizona Republic published an op-ed written by Christina Sandefur of the Goldwater Institute and Scot Mussi of the Arizona Free Enterprise Club about the recent decision by Phoenix bureaucrats to shut down a Christmas light display. It is a classic example of how the regulatory Grinch can steal Christmas, and why additional reforms are needed to protect home-based businesses and property rights in Arizona.
Phoenix Canceled Christmas Because a Guy Handed out Cocoa
By Christina Sandefur and Scot Mussi

Every year, Lee Sepanek’s Christmas display brings joy to Phoenicians, who visit to enjoy the glistening decorations and sip the hot chocolate he serves them.

But not this year. Thanks to Phoenix bureaucrats, Lee has been forced to cancel the show.

The trouble started this summer, when the city warned him he was in violation of its Mobile Food Vending Ordinance, even though he isn’t operating any kind of “mobile” facility. He doesn’t even charge for the cocoa — he just asks for donations. But the city says its rules are broad enough to prohibit even giving away cocoa — made from hot water and powdered mix — from your driveway.

Officials told Lee he “would need to find a licensed commissary kitchen as a ‘base’ to store, clean and prep any open food,” and that he would have to get a “special event/seasonal permit,” requiring fees and “inspections onsite.” They also complained that Lee was selling Christmas ornaments, arguing that violates Phoenix’s rules against having a “home occupation.”

In their two-page letter, the Goldwater Institute outlined multiple legal issues and factual inaccuracies in the approved resolution and ballot language, and asked the county to remove the proposition from the ballot to avoid a costly lawsuit if it is approved.

After local news exposed Lee’s story, the city indicated it might budge, but it’s too late. Even if city officials changed their minds, Lee couldn’t get the lights up in time for Christmas.

This is part of a larger problem.

Phoenix’s Grinch-like attitude is part of a larger problem: Across Arizona, local governments are working to shut down home-based businesses, violating private property rights and harming economic opportunity. The Legislature eased restrictions on home-based businesses slightly last year, but it’s time the state provided stronger protections for the right to work from one’s home.

Home-based businesses help make this country run. Apple and Disney were both started in garages. Lawyers, psychologists, furniture repairmen and data entry technicians all work from their homes. And it’s hard to see why it’s OK to do one’s own income taxes on the kitchen table but not for an accountant to do someone else’s in her home office.

Cities that shut down home-based businesses often complain about traffic or neighborhood parking, but there are already rules on the books addressing such concerns. Banning home-based businesses out of fear that some might lead to disruptions is like banning all backyard barbecues because some parties get loud.

And while it’s reasonable to regulate food preparation to protect against food-borne illnesses, the law already protects Arizonans’ right to sell or give away food they cook in their own kitchens.

We need broader protections.

The Goldwater Institute and the Free Enterprise Club are urging state lawmakers to broaden protections for home-based businesses.

In Charles Dickens’ “A Christmas Carol,” Ebenezer Scrooge questions the Ghost of Christmas Present about laws that forced Londoners to close their stores on holidays — which, Scrooge says, essentially deprived them of income. Why, Scrooge asks, should the Ghost “cramp these people’s opportunities of innocent enjoyment?”

Shocked, the Ghost says he did no such thing — that was done by people who act “in our name” but who don’t really get the Christmas spirit.

It’s sad to think Phoenix officials have a poorer understanding of the holidays than Scrooge.

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The Arizona Free Enterprise Club is a free market policy and advocacy group dedicated to promoting a strong and vibrant Arizona economy.