Zoning Regulations Need to Keep Pace

I. Introduction

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

II. Impact

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.

III. History & Future

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. 

IV. Conclusion

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.

[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.