Smart home business regulations can spur economic development

Home occupations are a key part of local economies and need regulations to support them. One of the latest trends is no regulation at all as the Internet has made home-business possiblities so easy.

Home occupations are those businesses designed to operate from a home without adverse effect on neighboring properties.

A home occupation is a minor and secondary (accessory) use of a structure for business use, where the primary use of the structure is residential and where the operator of the use lives at the property. The use is incidental in regard to the amount of floor area that it occupies and should not generate an unreasonable flow of traffic in and out of the property or through the neighborhood.

The philosophy around how to regulate home occupations is changing in the global economy, Michigan’s need for economic development, and the desire to encourage small local business activity.

Many home occupations today are “office”-type businesses which result in very little traffic because of digital technology for the workplace. The other types of home occupations tend to be craft or service establishments or provision of a personal service. Examples would be picture framing or a hair salon. These cause a greater impact in a residential area because of clientele coming to the residence.

Many communities regulate the number of employees living at the premises. They range from no outside employees to five or other number of employees. The percentage of floor space is also regulated in many communities as well as the use of accessory structures such as a garage. Hours of operation for customer-based occupations are also often regulated. Most communities treat these as a special use (requiring Planning Commission review and approval) and is allowed as such in the residential zoning districts.

Some communities regulate home occupations by the type of occupation. They are usually classified by categories that split them into occupations that do not bring customers into the home and those that would create traffic into the home by customers or suppliers.

Newer forms of regulation focus on developing performance-based standards to manage home occupations. There are a variety of these standards that can be employed to accomplish the goals of maintaining the character of these communities. These standards include regulating the size of the home occupation by floor area, regulating the number of home occupations within a dwelling unit, regulating parking, limiting employees outside of the household, limiting by trip generation to manage traffic generated, and regulating signage for the home occupation.

Numerous communities prohibit the alteration of the outside of the structure for the home occupation. These are all in addition to the typical standards regarding noise, light, odors, electronic interference or other external effects attributed to home occupations. One discretionary standard states “the home occupation and operation thereof shall not impair the residential character of the premises nor impair the character of other residential property in the neighborhood.” These standards and performance criteria vary depending on the character of the district the home occupation is located in, but flexible performance techniques allow for variation and consideration of adjoining properties.

With changing work environments and increased interest in entrepreneurism, more individuals are employed within the home operating a venture requiring no direct contact or additional traffic within the residential area. Many individuals operate a second job from their home and are not significantly different than telecommuting in terms of impact.

So the newest form of home occupation regulation is not to regulate at all. An increasing number of communities consider the home occupation to be an automatic part of any residence. So long as there is not any external evidence of the home occupation (except maybe a small sign), and it is accessory to the residential principle use of the property and occurs in the house (not an accessory building) it is automatically allowed. This approach is done (1) in recognition that it is an important entrepreneurial economic development strategy and (2) the fact that it most likely is already happening without permits and without adverse impact –like described in the above paragraph. These communities also have provisions to allow by permit a more intense form of home occupation (has some low-level external impacts). Also there are far more major types of home occupations allowed by special use permit, characterized by activity in accessory buildings and more significant exterior impacts.

The idea is to streamline the process for new business startups and make local zoning decisions happen quicker and with less red tape. Home occupations and home-based businesses allow for the formation of small businesses that are of a size unable to support a traditional business overhead. Many entrepreneurs launch their startups under the radar, out of their basement office, garage, or even kitchen. When these businesses grow beyond this point and can support an increase in production the startup moves into a traditional business space out of the home and possibly create jobs and/or tax base. Entrepreneurship and home occupations are a key part of small business startups in the new economy and a means of fostering innovation.

For more information and a sample ordinance on home occupations and regulations regarding them contact your regional Michigan State University Extension land use educator.

Related Articles