More than almost any other factor, a community’s planning and land use laws and policies affect its success — or failure — in cultivating and supporting small, locally owned businesses.
Many civic leaders adopt land use policies and zoning regulations without carefully considering whether they might help or harm small business development. For instance, zoning codes often fail to limit how much new commercial development is permitted, flooding the market with more commercial space than the community or region can realistically support. Zoning codes that separate public-facing small businesses from residential neighborhoods and employment centers make it harder for small businesses to attract customers. Minimum parking requirements, which many zoning codes impose, can be expensive and logistically difficult for small businesses. And zoning that makes it difficult or impossible to adapt older buildings for new commercial uses limit affordable space options for small businesses. These are just a small sample of the many ways in which poorly planned land use policies and zoning regulations can disproportionately hurt small business development, tipping the playing field in favor of corporate chains.
Policies guiding land development have existed for centuries. But a 1926 Supreme Court decision, Village of Euclid, Ohio v. Ambler Realty Co., is largely responsible for legitimizing the use-based land use laws now prevalent in the United States. Ambler Realty Company planned to develop some land it owned in Euclid, Ohio for industrial use, but the village had zoned the site for residential development. Ambler Realty sued the village, claiming that the village’s zoning ordinance was limiting its profit potential by restricting the ways in which the land could be used. The Supreme Court ruled in favor of the village, finding that a zoning ordinance is a legitimate use of a community’s police powers, and Euclidean zoning (named after the village) became the norm in American towns and cities.
Before Euclidean zoning, business districts contained a broad mix of uses — retail shops, restaurants, and offices in high-visibility ground-floor spaces, with apartments, small manufacturers, wholesale businesses, and much more tucked away upstairs and on secondary streets. This mix of uses benefited everyone, providing convenient access to jobs and services for residents, a steady stream of nearby customers for small businesses, multiple sources of rental income for property owners, and stable property tax revenue for local governments.
By separating uses, though, Euclidean zoning turned this organic land use system on its head. Rather than being able to walk to a corner store, residents now had to drive or take public transportation to a shopping center or commercial strip. Rather than walking to an office or small workshop, workers now had to drive or take public transportation to an office building or industrial park. This is not only more time-consuming and expensive for residents, who might not otherwise need cars, but also requires public investments in new infrastructure and municipal services. Owners of mixed-use buildings now had to rely on just one source of rental income, making it more difficult for them to afford to maintain the building, which, in turn, reduced property value and generated less property tax revenue for the local government. The negative ripple effects go on and on.
But local governments have considerable power to control and guide land use — power that is often untapped and unexercised, sometimes because of unfamiliarity with small business-friendly land use policies and sometimes because of fear of public backlash or legal challenges. Their authority to control land use rests on a sturdy foundation, though, framed by two core principles, both of which are intended to protect the health, safety, and welfare of the community and its residents.
First, the Tenth Amendment to the US Constitution gives “police power” to state and local governments. The Constitution does not define “police power” (the term derives from “policy”), but local governments commonly use their police power not only to manage land uses but also to do things like prohibiting smoking in public places, regulating trash disposal, and requiring professional licenses for certain occupations.
Second, centuries-old common law dictates that people and businesses should not create nuisances that disrupt their neighbors or the public at large — nuisances such as noxious odors, dangerous traffic conditions, inadequately managed stormwater runoff, fire hazards, excessive noise, and similar problems.
Kennedy Smith“Local governments have considerable power to control and guide land use — power that is often untapped and unexercised”
With these powers and responsibilities, civic leaders have many options for adopting land use policies to help cultivate and support the development of small, locally owned businesses. Here are a few examples.
A community’s two most important land use planning tools are its comprehensive plan and its zoning code. The comprehensive plan describes the community’s vision for its future, and the zoning code then turns that vision into law. It is vital that, if developing and sustaining small, locally owned businesses is a priority for your community, this priority is clearly stated in both the comprehensive plan and the zoning code.
When a local government develops or updates its comprehensive plan, its planning department and civic officials solicit ideas from the entire community about their vision for the community’s future — its goals for housing, economic development, education, recreation, community services, transportation, and much more. But, once the comprehensive plan is in place, many communities fail to make sure that their zoning codes include the regulations and tools necessary to make the vision become reality. Be sure that your community’s zoning laws truly support the community’s development goals.
Small, independently owned businesses thrive in mixed-use neighborhoods and commercial districts. The close combination of shops, offices, housing, entertainment venues, small manufacturers, and other uses gives the district’s workers and residents easy access to a wide range of jobs, services, and experiences. These use-dense districts are very cost-effective for local governments, since they are usually already served by public infrastructure investments. And, because of their density, they generate more property tax revenue per acre than highway-oriented commercial development like strip shopping centers and big-box stores. But, by separating land and buildings by use, Euclidean zoning has made it more difficult for communities to create mixed-use districts and neighborhoods like these. Zoning codes that, instead, encourage a mix of housing, retail, office, small-scale industry, recreation, and other uses are much better at stimulating small business development and better for the city’s bottom line.
Historically, older buildings in downtowns and neighborhood commercial districts were built to support a cohesive blend of uses — typically a retail store or restaurant on the ground floor, with housing and/or offices upstairs. But modern zoning and building codes often make it very difficult to fully use these buildings as they were intended to be used. Modern building codes, for instance, sometimes require housing units above retail shops to have elevators, or require ground-floor restaurants to install grease traps that are incompatible with the district’s sewer system. Some local and state governments have adopted the International Existing Building Code, which provides flexibility for adaptively using older and historic buildings, and a few have created their own equivalent building codes. Several cities and states have created special financial incentives to make it easier for property owners to find new uses for their older buildings, such as income tax credits for installing elevators and sprinkler systems.
Many zoning codes require businesses to provide a certain minimum number of on-site parking requirements. This requirement usually poses no problem for car-centric suburban-style commercial centers, but it makes no sense for small businesses in compact, pedestrian-focused commercial districts with shared parking lots within easy walking distance. And requiring a minimum number of on-site parking requirements places an undue financial burden on small, independently owned businesses in walkable commercial districts.
Formula businesses — businesses that follow a corporate formula in their merchandising, interior design, signs, uniforms, menus, and most other aspects of the business presentation — look the same and offer the same products and services everywhere. This homogeneity chips away at a community’s distinctive identity and, by doing so, makes it less appealing as a place to live, work, and visit. A growing number of communities have added restrictions on the development of formula businesses to their zoning codes.
To help ensure that new development is consistent with the community’s development goals, some local governments have added provisions to their zoning codes requiring that a proposed project (such as a new shopping center, chain dollar store, or big-box store) must meet certain conditions, such as not having a detrimental impact on existing businesses, on traffic, on nearby property values, or on other characteristics important to the community. In these instances, developers must usually obtain a Conditional Use Permit (CUP) from the planning board, demonstrating that the project meets the required conditions.
More than many other national retail chains, dollar stores significantly undercut local economies by whittling away at local grocery stores’ razor-thin profits. They have a negative impact on other types of businesses, also, particularly pharmacies, hardware stores, and office supply stores. To help prevent dollar store proliferation, many communities have added provisions to their zoning codes that require a minimum distance between new and existing dollar stores (typically 1-5 miles), make dollar stores a “conditional” use (dependent on the proposed store’s likely impact on existing businesses, crime, traffic, nearby property values, stormwater runoff, and other factors.
Commercial property owners sometimes keep their buildings vacant for long periods of time, waiting for the market to improve so they can charge higher rents. But vacant commercial buildings make the neighborhood look run-down and uncared-for, dragging down property values and harming the community’s overall economic health. To discourage this, hundreds of towns and cities have added vacant property regulations to their zoning codes. Most of these require property owners to register their vacant properties with the municipality and to file a realistic plan for leasing the property. They must agree to periodic building inspections to ensure the building is safe from hazards. And, they must pay an annual fee while the building remains vacant.
Chain businesses sometimes abandon and sell or lease property that they own — but they then keep competitors out of the market by attaching a covenant to the property’s lease or deed of sale that prevents it from being used by a similar business in the future. In some instances, they buy other buildings that might be appealing to competitors, even though they have no intention to occupy the buildings themselves, and restrict their future use, also. This is a particularly common practice with chain grocery stores, big banks, and movie theater multiplex companies. Restrictive covenants like these create long-term vacancies that depress the local economy. In response, some communities have added a section to their zoning codes to prevent property owners from doing this.
Many small businesses get started at home. But some communities’ zoning codes prohibit home-based businesses or impose unrealistic and burdensome requirements for onsite parking, operating hours, or other characteristics.
Some communities place a limit on the amount by which a commercial property owner can increase rents annually. Some require that property owners and/or developers make some ground-floor space available for purchase by locally owned businesses so that, if the commercial district’s rent levels escalate, business owners who own their shops or offices will have stable mortgage payments and will be better equipped to avoid being displaced.
Eran Ben-Joseph. The Code of the City: Standards and the Hidden Language of Place Making. Cambridge, MA: The MIT Press, 2005.
Sara C. Bronin. Key to the City: How Zoning Shapes our World. New York, NY: W.W. Norton & Company, 2024.
Andres Duany, Elizabeth Plater-Zyberk, and Jeff Speck. Suburban Nation: The Rise of Sprawl and the Decline of the American Dream. Berkeley, CA: North Point Press, 2010.
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