City of Los Angeles Moves to Legalize Home-Based Businesses

It's a typical day in Los Angeles: Down the street, the piano teacher instructs a nine-year-old from her living room, a screenwriter puts the finishing touches on a script, and an architect works on drawings from her home drafting table. On television, the Ikea chain touts furniture designed for the home office and Pacific Bell’s intrepid TV “spokesman” blocks a freeway entrance while yelling through a bullhorn for Southern California residents to "go home" to work. 

Yet, according to the City of Los Angeles, all of this remains illegal. Most residents are shocked to discover that Los Angeles has been one of the few major cities in the nation whose antiquated zoning laws prohibit anyone from operating a business solely out of a residence, even when the business merely entails the use of a computer, phone and fax. 

In L.A. County alone, at least 77 cities have already successfully allowed some home occupations in their zoning codes, without negative consequences. But the City of Los Angeles, usually on the cutting edge, in this case has been struggling to join the 20th Century before the 21st Century rolls around.

Finally, after 11 years of delay, the Los Angeles City Council is just one small step away from legalizing quiet, nondisruptive home-based businesses. With the City Council's 13 to l vote on July 10 approving the Home Occupations Ordinance in concept, final passage of the ordinance is likely within the next month. 

The Long Road to Passage

The original City Council motion to create a Home Occupations Ordinance was introduced in 1985 by the late Councilman Howard Finn. When it first made its way to the City's Planning Commission in 1990, it ran into significant opposition, largely from homeowner groups fearing the disruption of quiet residential neighborhoods. As a result of this contentious debate, the Home Occupations Ordinance became like Social Security in Washington—an issue that seemed too hot to touch. It therefore languished for years, with the unspoken philosophy of City government remaining, “Let’s just ignore it.”

But it has become more difficult to ignore a trend that now sees one in four workers regularly working at home for at least part of their week. As the "information superhighway" forges new communication links every day, that number will surely skyrocket in the coming years. 

The home occupations issue moved back to the front burner after the 1994 Northridge earthquake. At that time the City was seeking to encourage its own employees and others to telecommute from home, in order to ease the burden on the region's fractured freeway system. 

Yet we found that the City's laws were sending a mixed message about working from home: the City allows and even encourages residents to work at home if they work for an employer (including the City of Los Angeles), but it forbids them from performing the very same task at home if they work for themselves. Councilmembers Rudy Svorinich and Laura Chick therefore both introduced motions reviving the home occupations issue. 

Why Change the Status Quo? 

When the Home Occupations Ordinance was first revived, critics cautioned us, "Why not just leave well enough alone? Sure, it's technically illegal, but why can't the City just keep looking the other way?" But we and many others felt there were several reasons why the status quo on home occupations was not good enough.

First, home-based business is a valuable economic incubator that the City should embrace. For example, businesses such as Apple Computer, Mrs. Fields' Cookies, Hewlett-Packard, and Microsoft all began as home-based businesses. Many home business owners told us that they have located in nearby cities largely because of these municipalities' more welcoming attitude toward home-based business. A Home Occupations Ordinance will send a strong signal that Los Angeles no longer shuns these budding entrepreneurs—it values them. 

In addition, quiet, non-disruptive home-based businesses in Los Angeles currently operate with a dark cloud over their roof: they invest money in their own businesses while remaining at risk of being turned in by a disgruntled neighbor at any time. Many home-based business owners who operated quietly and without problems for many years have told us their stories of being turned in by a neighbor, typically as the result of an unrelated neighborhood dispute. 

We also have a problem with disruptive home-based businesses today. In every area of the City one can find too many noisy and intrusive businesses—auto repair shops, sweatshops, limousine services. etc.—that do not belong in residential neighborhoods. These are all illegal today and would remain illegal under the ordinance. But the status quo, which threatens quiet, beneficial home­based business, was simultaneously not working to rid our neighborhoods of these disruptive uses.

Finally, City government has been hypocritical in allowing the City Clerk to collect business license taxes from home-business owners, while instructing our Departments of Building and Safety and Planning to tell home business owners that they are violating the zoning code.

The Ordinance

After much debate, the City Council has come to a consensus on what a Home Occupations Ordinance should contain. Most of its provisions have been drawn from long­standing ordinances in other cities. The home occupation would have to remain secondary to the residential use: it would remain illegal to use a home solely for a business. To maintain the integrity of residential neighborhoods, the ordinance would only allow those home occupations which meet 21 stringent conditions. The conditions prohibit businesses that create excessive noise or fumes, use commercial mechanized equipment or hazardous materials, generate on-site sales or exchange of products, or involve industrial work. They also require that the home remain residential in appearance, that there be no signs or window displays advertising a business, that the use must be conducted entirely within the dwelling unit itself, and that all required parking be retained. One outside employee and one client visit per hour are allowed.

Every imaginable intrusive business would run afoul of one or more of these 21 conditions. 

But as an added protection, the Council during its deliberations added a short list of prohibited businesses—such as auto repair, adult entertainment, and retail businesses—that would be forbidden under any circumstances. The basic philosophy of the conditions and prohibitions is that if the business does not create additional traffic, noise, or disruption beyond an ordinary residential use, then it should be permitted. If it does create external impacts, then it will be prohibited.

The Enforcement Dilemma 

Perhaps the most vexing issue raised by opponents was the claim that the City will do a poor job of enforcing the ordinance. We agree with this critique in one respect: the City of Los Angeles has been doing a poor job in enforcing its codes in many areas and needs to explore creative means of beefing up its enforcement, including the judicious use of citizen volunteers (as San Diego and Garden Grove have already done). 

However, the City is not doing a good job of enforcing its home occupation ban now, under its "don't ask, don't tell" policy. Enforcement today relies heavily on neighborhood complaints. This will obviously remain the case once the ordinance passes, as it is in other cities. The real question became: will the City be better equipped to enforce against disruptive home businesses with an ordinance or without an ordinance? 

The experiences of other cities indicate that passing an ordinance does not lead to sudden increases in home­based businesses or in complaints about illegal home occupations. Instead, adopting a Home Occupations Ordinance will allow the quiet, nondisruptive businesses to operate, finally isolate the real offenders, and make it easier for the City's Building and Safety Department to focus on shutting them down. Compliance and enforcement will never be perfect with any law—after all, not every speeding driver gets a ticket—but it will likely be better than it is today. 

In addition, to cover any increase in complaints about illegal home occupations, the ordinance creates a new Home Occupations Trust Fund that will be devoted strictly to enforcement against disruptive home­based businesses. The Trust Fund will be filled by a $25 annual fee on Home Occupations Permits and by fines on illegal operators of home­based businesses. 

Reflections on Legalization 

Zoning arose in the early 1900s in great part to separate the noxious smokestack uses of industrial America from residential areas. Today's "megatrends"—deindustrialization and the global, information-based economy—have resulted in a partial return to a home­based economy, a form of work that had marked much of pre-industrial history. The unfortunate fallout of deindustrialization—large-scale downsizings—is precisely what is once again making home-based business a lifeline for many former office-based workers. 

But adapting to these trends does not mean undercutting zoning laws. Instead, home occupations ordinances can allow zoning codes to adapt to changing realities while still protecting the quality of life in residential areas. We have learned that many other cities which long ago legalized home occupations are reviewing their codes to create "second generation" ordinances that are more up to date with current trends. 

Legalizing home-based business is good public policy in every respect. It helps take cars off the road, clean up the air, promote entrepreneurship, provide opportunities for the disabled, nurture tight-knit families, and even help to deter crime in neighborhoods by keeping "eyes on the street."

As a political issue, it is perhaps surprising that a broad-based group demanding change in Los Angeles was so slow to arise. In Chicago, a vocal coalition of women's organizations, correctly perceiving home occupations as valuable for female entrepreneurs, led the way in coalition with home-based entrepreneurs in steering a similar ordinance to passage in 1994. While some women's groups were active on this issue in Los Angeles, nearly every business organization in the city endorsed the ordinance, in part because many have found that a large proportion of their membership is home-based. 

We had anticipated that this ordinance would draw opposition from homeowner groups, fearful of how the provisions would affect single-family neighborhoods. But while some homeowner leaders have persisted in their opposition, many have begun to understand that, when properly controlled, home occupations can enhance residential neighborhoods. 

As with any product of messy legislative processes, there will undoubtedly be some fine points to work out once the ordinance passes. But we are pleased that the City of Los Angeles is about to "decriminalize” the quiet home office worker in a way that truly makes sense.