Silicon Valley billionaire Elon Musk made headlines when he packed up Tesla and brought the electric carmaker to Austin. Single mom Bianca King got less attention when she completed her own move from California to Texas after losing her project manager position in the aerospace industry as a result of the COVID-19 pandemic.
Musk announced his Texas arrival with a Tesla Gigafactory. King, who grew up in El Paso, took a quieter approach. She bought a house in Lakeway near Austin and opened a home-based babysitting service. Both entrepreneurs were following their dreams, but the parallels ended in summer 2021 when King received a violation notice from the local Zoning and Planning Commission.
Although she had state approval for her business and zero complaints about the quality of care, she lacked a city permit to operate at home. She also lacked Tesla resources to defend herself. King watches only two to four children at a time – in addition to her own son and daughter – so her profit margins are thin.
Despite her best efforts to meet regulatory demands, Lakeway voted to kill her enterprise in November and rejected her appeal in February. The case is not an isolated incident. Texas regulators routinely stifle small businesses.
Auto mechanic Azael Sepulveda learned the hard way in summer 2021 when he bought a shop in his hometown of Pasadena near Houston. Before he could repair his first car at the new location, zoning officials ordered him to close.
The city told Sepulveda that his garage needed 28 parking spaces – much more than the existing five – even though he runs a one-man operation and never would have 28 cars on his lot. Making the change would cost Sepulveda tens of thousands of dollars, which he does not have.
Regulatory demands were just as outrageous for brothers Adonai and Anubis Avalos when they tried to expand their food truck operation to South Padre Island. The city has empowered local restaurant owners to veto any food truck competition, so the brothers were out of luck.
The persecution of small-business owners is not new. Undercover officers entered a Dallas salon in 1997 and arrested Isis Brantley for doing African-style hair braiding without a cosmetology license. More recently, regulators went after eyebrow threaders like Austin salon owner Ash Patel. Big industry players often get the red carpet treatment in Texas, but small-business owners get red tape instead.
Rather than accept the abuse, King and Sepulveda fought back with recent lawsuits – and Sepulveda won the right to repair cars at his shop while his case proceeds. The Avalos brothers have an older case pending, while the braiders and threaders scored legal victories years ago. Our public interest law firm, the Institute for Justice, has represented all of these entrepreneurs.
As the Texas Supreme Court ruled in the threading case, Patel v. Texas Department of Licensing and Regulation, public agencies violate the Constitution when they stop people from earning a living without good reasons. Yet regulators continue to try.
“Barriers to Business,” a new report from the Institute for Justice, provides a glimpse at how bad things have gotten. The study looks at the startup process for five common business types in 20 U.S. cities, including San Antonio.
The process to start a San Antonio restaurant involves 59 steps. Applicants must fill out 14 forms, complete eight in-person activities, interact with seven agencies and pay 12 fees totaling $2,477. Opening a San Antonio barbershop is not much easier. The 58-step process involves 17 forms, nine in-person activities, six different agencies, and 14 fees totaling $1,813.
Regardless of the business type, the rules are confusing and difficult to navigate. Entrepreneurs want to comply, but they don’t always know how. King learned about the need for a “home occupation permit” in Lakeway only after the zoning police threatened her with fines.
Texas can do better. Musk received a warm welcome, but the real VIPs in the Lone Star State are the small-business owners who hold the economy together. They don’t need special treatment, just freedom to work.
Erica Smith Ewing is a senior attorney and Daryl James is a writer at the Institute for Justice in Arlington, Virginia.