Cities Make It Ridiculously Hard To Start a Small Business. They Need To Stop.

How to start and grow companies.
Feb. 1 2013 6:30 AM

Starting a Business Is a Huge Pain

I’ve been to three offices, filed five forms, spent $200, lost a day of work—and I’m not even close to getting the simple license I need.

Voters line up to cast their vote in Boston
Voters line up to cast their vote in Boston

Photo by Timothy A. Clary/AFP/Getty Images.

Last week, having read my own writing about how it’s cheaper to buy a house than rent one in most markets, I decided to take my own advice. My wife and I bought a new place, and instead of selling our old condo, we’re going to rent it out. And thus I became a small-business man.

Or, rather, I’m becoming one. Entrepreneurship—even on the smallest and most banal scale—turns out to be a time-consuming pain in the you-know-what. My personal inconveniences aren’t a big deal, but in the aggregate, the difficulty of launching a business is a problem and it may be a more important one as time goes on.

In the District of Columbia, I need to get a simple Basic Business License to rent out a single dwelling. After puzzling over the Department of Consumer and Regulatory Affairs website for a bit, it became clear that step No. 1 was actually to file form FR-500 with the Office of Tax and Revenue, which you can do online. Then it was time to hustle down to the DCRA (which closes at 4:30 p.m.) to file the paperwork. Once there, I learned that filing the FR-500 online wasn’t good enough—I needed a hard copy. Fortunately, the Office and Tax and Revenue was right across the street, so I went there and refiled. Then it was back to the DCRA to stand in line to get a number, wait for the number to be called, do some more paperwork, wait in another line for the cashier, fork over $100 in fees, then get a slip from the cashier to finalize the paperwork.

But then it turned out I needed to go to a third office, the Rental Accommodations Division of the Department of Housing and Community Development. It closes at 3:30 in the afternoon and required a 15-minute walk through a sketchy neighborhood. So the next morning I went down to that Rental Accommodations office to file a paper claiming exemption from D.C.’s rent control law.

The striking thing about all this isn’t so much that it was annoying—which it was—but that it had basically nothing to do with what the main purpose of landlord regulation should be—making sure I’m not luring tenants into some kind of unsafe situation. The part where the unit gets inspected to see if it’s up to code is a separate step. I was instructed to await a scheduling call that ought to take place sometime in the next 10 business days.

Not that I expect your pity. I don’t even pity myself. Going through the process, I mostly felt lucky to be a fluent-English-speaking college graduate with a flexible work schedule. But the presence of a stray pamphlet offering translation into Spanish, Chinese, or Amharic seemed like it would be only marginally useful to an immigrant entrepreneur. A person who needs to be at her day job from 9 to 5 would have a huge problem even getting to these offices while they’re open.

The bureaucratic hassles of entrepreneurship turn out to vary pretty substantially from place to place. The World Bank has a fairly crude measure of how easy it is to start a business in different countries and ranks the United States 13th. North of the border in Canada (ranked third), there’s typically just one “procedure”—a paperwork filing, basically—needed to launch a business. In America, it takes more like six.

There’s also substantial variation within the United States. A survey by Thumbtack and the Kauffman Foundation found that local small-business owners give D.C. an F grade in the ease of starting a business. Unfortunately, many of our largest and most prosperous cities share poor marks on this indicator—New York is an F, Boston and Los Angeles rate Ds, San Francisco gets a D+—while more startup-friendly cities such as Dallas and Indianapolis tend to have lower average incomes and a less promising customer base. Portland, Ore., stands out among affluent coastal cities for its A rating.

Ideology aside, simply putting a little more thought into the process could make things much easier. Shifting as much form-filing as possible to the Web, where it can be accessed 24/7, wouldn’t undercut any legitimate regulatory purpose. In my case, since single-unit rentals are uniformly exempt from rent control in D.C., why should you have to go down to the rent control office to certify that fact? These convenience issues can easily slip through the political cracks. On any given day, it’s not an issue for the vast majority of people. And incumbent, already licensed businesses gain a minor advantage from making new entry difficult. But at a time when a rising tide of robots and other factors are pushing the wage share of the economy to historic lows, the ability to drop out of the workforce and go into business for yourself is more important than ever. And the option should be available to people from all walks of life, in our biggest and most prosperous markets.

Red tape, long lines, inconvenient office hours, and other logistical hassles probably won’t stop tomorrow’s super-genius from launching the next great billion-dollar company. But it’s a large and needless deterrent to the formation of the humble workaday firms that for many people are a path to autonomy and prosperity.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.