New Texas law limits cities’ authority over home-based businesses

Gov. Greg Abbott signed House Bill 2464 into law Tuesday, preventing Texas cities from regulating certain home-based businesses and removing permit requirements for small residential operations.

The new law creates a category of “no-impact home-based businesses” that cities cannot prohibit or require licenses to operate. These businesses must meet specific criteria: they cannot exceed municipal occupancy limits, generate substantial street parking or traffic, remain visible from the street, or increase neighborhood noise beyond existing ordinances.

“The Texas economy is better than ever before,” Abbott said during virtual remarks to the Houston Regional Business Coalition. “This session, we took strategic steps to boost small businesses in Texas. Even the smallest of barriers can increase the cost of doing business.”

The legislation bars cities from forcing home business operators to rezone residential property for commercial use or install fire sprinkler systems in single-family homes or buildings with two or fewer units.

Cities retain authority to enforce existing health, safety and building codes. Municipalities can still require home businesses to comply with fire codes, health regulations and noise ordinances. Cities can also prohibit home businesses that sell alcohol or illegal drugs, operate as structured sober living homes, or function as sexually oriented businesses.

The law does not override homeowners association rules or private deed restrictions. It also does not affect municipal regulation of short-term rentals.

Abbott signed the measure alongside four other business-friendly bills during the 89th Regular Legislative Session. The package includes a business personal property tax exemption increase from $2,500 to $125,000 and expedited business filing processes.

The Texas House passed HB 2464 on May 14 by a vote of 128-4 with four members not voting. The Senate approved the measure on May 25 by a vote of 29-2.

The law takes effect immediately after receiving the required two-thirds vote in both legislative chambers.