yoursvirtually: I would simply state that you do not conduct meetings from your home, but then positively offer other options - such as you said - meeting at a coffee shop or otherwise. I am sure they will meet you wherever you need them to. You can also meet them at their office, if that's an option. It is your choice whether or not to do this. I wouldn't and have not ever conducted meetings from my home, either. Why? Well, simply because it's my HOME.
Sometimes we really just need to make it clear on what we will and will not do from the absolute beginning stages of the relationship. I know it can be tricky when we have local clients. I would absolutely keep my foot down on that one, though, if I were you.
Best of luck!