The Badger State’s home-based businesses are facing a bureaucratic nightmare of red tape, according to a new report by the Wisconsin Institute for Law & Liberty.
WILL’s new policy report, “Wisconsin: A Broken Home for Home-Based Businesses,” analyzes the relative burden of regulations on the businesses in the state’s 20 most populous communities. It ranks those businesses based on least to most burdensome.
“Cities love to say that they are open to business, but if they have overly restrictive regulations that prevent our smallest of businesses from flourishing, then it’s time for a change,” said WILL writer and research analyst Cori Petersen, co-author of the report.
The pandemic sparked what has been referred to as the “Great Resignation,” or the “Big Quit,” in which 30 percent of the workforce voluntarily left their jobs in 2021, according to the U.S. Department of Labor. About 50.5 million people quit their jobs last year, topping the previous record set in 2021, according to a federal report.
Said workplace exodus led to an explosion in entrepreneurship. Nearly 5.4 million new businesses popped up in 2021, up 23 percent from 2020 and 50 percent higher than 2019, according to WILL’s report.
A lot of those businesses launched from home. According to the Small Business Administration, there are approximately 32.5 million small businesses in the U.S., with about half of those home-based. By some counts, more than two-thirds of small businesses start at home. One estimate, according to the report, estimates that home businesses generate nearly $500 billion in revenue each year.
“Even so, communities across the nation, and specifically in Wisconsin, have instituted lengthy lists of regulations that create barriers to people starting in-home businesses,” the report states.
The study’s authors created a ranking system that gauges the relative burden of regulations on home-based businesses in Wisconsin’s 20 most populous municipalities. The rankings were calculated by analyzing restrictions placed on in-home operations by each city’s complex zoning.
In compiling the ordinances and regulations, WILL created 18 factors in its ranking. The study included a point system on the different regulations — from “ordinary” to “overstep” to “egregious.” It added up to a 27-point scale The greater the number of regulatory marks a city receives, the more burdensome it is for the small businesses.
La Crosse had the least restrictive regulations for in-home businesses (with 6 points), while Sheboygan had the most restrictive regulations in the ranking (25 points). Appleton and Kenosha are among the most burdensome (24 points) cities studied, with Oshkosh, New Berlin, Green Bay, and Eau Claire all at 20 points or higher on the scale.
Wisconsin’s two largest cities, Milwaukee (11 points) and Madison (13), fared better than many of the 20 communities studied.
The two common “egregious regulations,” which counted for three points against cities, are requirements that products sold by the home business be manufactured on the premises, and a ban on keeping inventory on the home’s premises, according to the report. The rules severely restrict the ability to conduct any sort of goods-based business from the home.
In Madison, for instance, samples may be kept, but not sold, on the premises, the report notes. In Kenosha, a certificate of compliance is required to operate an in-home business. Sheboygan requires extensive zoning map requirements, a land use map, and a written description of special use “describing the type of activities, buildings, and structures proposed for the subject property and their general locations.”
In one case, WILL uncovered a formerly home-based business run by a local man in Oshkosh that had to shut down for violating the city’s home-based business regulations. Records show the proprietor had set up the first floor of his home as a Christmas store during the holiday season. In warmer months, this home-business owner made a floral shop of his home.
“According to the violation notice this home-business owner eventually received, he violated one of Oshkosh’s egregious regulations that ‘items shall not be sold or offered for sale on the premises.’ The city’s “required action” went as far as to say ‘all sales occurring on premises are not permitted . . . includ[ing] indoor and curbside sales,’” the report states.
In Madison, a resident violated zoning laws by posting a sign for their window/gutter cleaning business.
Some home-based businesses certainly have defied the good-neighbor policy. According to WILL’s report, a Wausau business was shut down for selling goods out of a garage because garage or estate sales were forbidden to exceed for days in duration and could not be held more than four times in a 12-month period, or twice in a 30-day period. Many communities have similar ordinance in the face of the never-ending garage sale.
But ultimately, the report argues that strict regulations against in-home businesses impede the state constitution’s inherent right to earn a living.
“The sorts of intrusive, overburdensome regulations promulgated by cities, detailed in this report, deny that right, which is deeply rooted in the history and traditions of our state and our country,” the study states.
WILL offers three reform proposals:
(1) A statewide preemption bill that the Wisconsin Legislature could pass to protect the individual rights of Wisconsinites
(2) A decentralized campaign by which citizens of Wisconsin’s cities petition their municipal governments to remove restrictions on home-based businesses
(3) transitioning to a mostly court-based, common law nuisance model for enforcement against home-based businesses to addressany real problems for neighborhoods.
“All three of these solutions can, and should, be pursued simultaneously,” the report states.
“If 69% of small businesses start at home, and local governments across Wisconsin want to attract business, then they ought to enable entrepreneurs to start home-businesses— not regulate them out of existence.”
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M.D. Kittle is the National Political Editor for The Star News Network.
Photo “Home Business” by Annie Spratt.
