Anything goes? New state law eliminates most home-based business restrictions

Susan Istenes: New state law does not allow city to limit hours or types of home businesses.

Craig Fishel: Law was intended merely to eliminate discrimination in deeds.

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A state law that went into effect Aug. 28 renders moot several portions of Springfield city code covering home-based businesses, including restrictions on short-term rentals.

Now, four of the city’s departments  are scrambling to bring the code into compliance with the law that was passed in the final hours of the Missouri legislative session May 13 and signed into law by Gov. Mike Parson on June 30.

Susan Istenes, city director of Planning and Development, said her department is working with the Law Department, Building Development Services and Finance Department – Licensing Division to walk through the bill and locate areas where the new state law throws city code out of compliance.

At a special meeting of Springfield City Council on Aug. 30, the city’s statehouse lobbyist, Will Marrs, described some of the implications of House Bill 1662, which he characterized as a good bill harmed by bad provisions.

Originally, the bill aimed to remove discriminatory provisions from real estate covenants, an aim supported by Springfield City Council and included in its list of legislative priorities. Marrs said partly because of a bottleneck in the Missouri Senate caused by the conservative caucus, and partly because of general gridlock, many bills with unvetted language were passed at the last minute, and that was the case with the amendments to HB1662.

As amended, the new law preempts the city’s ability to license and restrict home-based businesses, according to Marrs. As two examples, the city may not restrict hours of operation or number of customers permitted for a home-based business under the new state law.

Under the law, Type 1 short-term rentals, which are owner-occupied primary residences that offer Airbnb-type accommodations, are likewise exempt from city restrictions.

In January 2019, council passed a bill legalizing and regulating short-term rentals. At the time, Mayor Ken McClure said, “We have worked on this for a long time,” and credited “a lot of people” with putting effort into the bill. The code required a 95-day rental cap, and stays were limited to 30 days. These restrictions are no longer permissible with the passage of the new state law.

Different intentions
The bill was sponsored by Missouri Rep. Craig Fishel, 136th District, which includes Springfield.

Fishel told Springfield Business Journal his bill was originally a real estate bill concerning language in deeds and he had been working on it for four years with a very different end goal: removing restrictive covenants from deeds.

Before the civil rights movement, Fishel said, deeds frequently contained covenants barring people of certain races, ethnicities and religious affiliation from buying property. For example, a deed may ban Black or Jewish people from owning a particular piece of property. Fishel’s legislation aimed to eliminate these prohibitions, which are illegal, from deeds.

“They could be very restrictive as to who could live and buy property in that area, and they were very explicit on who could and who could not,” he said.

Fishel said amendments unrelated to restrictive covenants – such as policies regarding solar panels on houses, use of biodiesel fuel, and municipalities’ authority over home-based businesses – are also now part of the law following 11th-hour maneuvering.

“Everyone in Jefferson City knows I scream, holler and jump up and down about local control,” he said. “This bill is contrary to my beliefs, and I will do everything in my power if I get reelected to fix it.”

Fallout for cities
Istenes said the bill allows a city to apply only certain health and safety regulations to home-based businesses.

The city now may not require a preapproval process or license prior to establishment of a home-based business, she said.

City codes and ordinances must be modified to be consistent with the requirements of the new state law, Istenes said.

There are three types of activities established in the state law, Istenes said: a home-based business, a no-impact home-based business, and home-based work. (Current city code defines home occupations simply as “any activity carried out for compensation in a residential dwelling unit.”)

Now, a home-based business is any business that is operated in a residential dwelling to manufacture, provide or sell goods or services. By definition, a home-based business is owned or operated by the owner or tenant of the building.

A no-impact home-based business is essentially the same, but its activity is not permitted to be visible from the street, to violate parking regulations or to substantially increase neighborhood traffic. A no-impact home-based business may not engage in manufacturing.

Home-based work is any work performed at home by a resident selling goods or services, whether the resident owns or operates the business or brings work home from a place of employment. Work must be secondary to the use of the residence as a dwelling and may not change the character of the home.

Istenes said city regulations that are in place are intended to protect residential areas from the impacts of businesses that may not be conducive to quiet residential living. Use limitations codified in city policies regulate issues like storage and amount of space dedicated to a business. They also restrict certain businesses from operating; examples are private clubs, trash haulers, medical offices, fortune tellers, escort services and portrait studios.

Istenes said the city may no longer restrict specific occupations, hours of operation, or storage or use of equipment inside the home. Nor may it prohibit or require structural modifications to a dwelling unit.

“Such businesses are only subject to narrowly tailored health and safety regulations, state and federal law and payment of taxes,” Istenes said. “So right now, as the city regulations stand, they exceed the limitations that are allowable by this code.”

What’s next
During the special meeting, Councilperson Richard Ollis called the new law a mess. He noted he used to live outside the city limits, and one of the reasons he returned was that a next-door neighbor parked trucks and equipment in the back yard and burned things every night.

“I think one of the reasons people move into the city is some sort of regulation around what can and can’t happen,” he said. “We’re already having problems with people with stuff in their yards and everything else. I think this opens Pandora’s box into other issues we’re going to be facing.”

He added that the new law doesn’t encourage much quality of place.

“I don’t know what to do about it, but I think it’s really unfortunate that this happened,” he said.

McClure said the legislature must repeal the new state law fully or at least offer clarifications.