Northern California Record

Wednesday, April 1, 2020

Report details burdensome regulation restricting small businesses


By Bram Berkowitz | Feb 21, 2020

Luke Wake

Discretionary review processes, complexity and high costs.

Those are just a few of the issues restricting small businesses, according to a recently released report called The Land Use Labyrinth: Problems of Land Use Regulation and the Permitting Process.

Released in January, the report identifies barriers to innovation and entrepreneurship at the state and local levels. It is one of many reports authored by The Regulatory Transparency Project, which advocates for a national dialogue about the benefits and costs of federal, state, and local regulatory policies, and explores areas for possible improvement. 

Luke Wake, one of the report’s authors and a senior staff attorney at the National Federation of Independent Business, said the report is intended to shine a light on regulatory problems, start a conversation and discuss some potential policy solutions. 

“Land-use issues from the beginning are something we had to tackle being a quintessentially local issue,” Wake, who is also the chairman of the State & Local Regulation Working Group at the Regulatory Transparency Project, told The Northern California Record. “A large part of that is attributed to over regulation and barriers that make the permitting process more costly and cumbersome than it ought to be. There are special challenges in California and so many ways local authorities can hold up the permitting process.”

Wake said the group wanted to identify burdensome regulatory issues that are offering no real benefit.

One of those issues detailed in the report is that of a discretionary review process.

“An inspector will come into a business and give them a list of things they need to get done [to get into compliance with the zoning code]. The renter will do this, but then a different inspector will come in to do a review and give a whole new list of requirements,” said Dana Berliner, senior vice president and litigation director at the Institute for Justice, an organization seeking to limit the size and scope of government power. 

“People respond well to certainty,” she said.

Another broader general issue that Berliner sees is the fact that small businesses are required to rent out a location, and potentially even make costly changes to it before receiving approval to open for business.

“This is the kiss of death for small businesses,” said Berliner. “They can’t afford six months of rent without making any income.”

Berliner thinks it would be better to have small businesses suggest potential locations and then have inspectors and local regulators assess those before the business actually goes to rent or makes a purchase.

Another issue the report raises is in regards to parking.

A lot of communities require new businesses to provide a certain amount of parking spaces before they can get their occupancy permit, which is a requirement to do business.

The problem, according to Emily Hamilton, a research fellow at the Mercatus Center at George Mason University, is that sometimes these regulations are made after an area was built, and now there is simply nowhere to put that parking. This can especially be the case in downtown historic districts, she said.

Hamilton also said the separation of uses in zones is another out-of-date regulation. For instance, there are some commercial districts that don’t allow residential uses and vice versa.

“People want to live in downtown areas that are exclusively zoned for commercial,” she said, adding that this is also a problem for strictly residential neighborhoods that would like to see cafes or corner stores. “There are apartments on top of stores that can’t be used as apartments.”

Despite the issues, Hamilton thinks there has been solid movement on both the parking and separate zoning issues, making her believe that these issues are low-hanging fruit for reform. The city of Cincinnati recently got rid of downtown parking requirements in some of its neighborhoods.

“Our mission is to look at the whole regulatory thicket,” said Wake. “Well-meaning regulations on an individual basis may be defensible but in the aggregate can become burdensome on free enterprise, innovation and entrepreneurship.”

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