Another category of economic policy that can hinder the opportunities of those with less income and fewer skills includes regulations that make it difficult to operate home-based and other very small businesses. These restrictions include zoning laws, limits on the kind of businesses people can operate out of their homes (and the number of customers who can visit those businesses), and limits on mobile businesses such as food cart and other street vendors. Such businesses do the kind of work that people with limited skills and not much capital could perform, but legal restrictions, normally at the municipal level, often make such options prohibitively expensive and thereby remove an important path out of poverty.
The idea behind zoning laws is to restrict certain kinds of economic activity to specific geographic locations so that they do not interfere with other forms of activity. For example, one can understand why putting an industrial plant in a residential neighborhood might create problems. By zoning areas as residential, industrial, or commercial, urban planners hope to avoid these kinds of negative externality problems. Despite these good intentions, however, zoning laws, like occupational licensure laws, are often used by those with better access to political power as a way to reduce competition from lower-cost rivals. In Chicago, for example, all businesses have to have a basic business license that costs $250 for two years, and violating that law can cost hundreds of dollars per day. Almost any attempt to renovate a building or operate a business out of one’s home requires a variety of forms—as well as an application process—that are controlled by the Department of Zoning. Even changing a sign can require dozens of hours and forms to get the necessary approval.