Luxury vacation home co-ownership platform Pacaso is trying to appeal to the masses as it grows its business in an expensive and competitive phase of the housing market.
The company, which started 2020 with multi-million dollar homes listed for condominiums, is now bringing in thousands more listings with share prices starting in the $200,000s. Previously, shares were closer to half a million dollars, or higher.
Pacaso lists cottage shares, generally one-eighth but sometimes larger shares, and then facilitates the purchase, including financing if necessary. It also furnishes and manages the home, sharing the owners’ time at home through an app. A fee is required for both purchase and administration.
“You can afford a lot more home when you buy an eighth or a quarter compared to buying the whole house, and we live in an environment right now where housing affordability is a problem,” said Austin Allison, plus. founder and CEO of Pacaso. “House prices are high, interest rates are high, so it’s really hard for people to afford their dream home.”
Unlike timeshares at resorts, where consumers buy the time rather than the property, Pacaso owners can take advantage of the home’s value, which typically increases over time.
An example of Pacaso’s new cottage listings at lower prices.
CNBC
“Our resale owners have benefited from approximately 10% appreciation above and beyond what they were paying for the underlying home in the past. So Pacaso stock generally tracks the underlying properties,” said Allison.
Wealthier buyers are snapping up ski homes in Colorado and beach houses in Hawaii, paying hundreds of thousands of dollars for their shares. Pacaso receives a hefty fee—between 10% and 15% of the home’s value up front—related to assembling the group of owners, facilitating the transaction and setting up the co-ownership structure.
Pacaso reached more than $1 billion in revenue last year, the company said.
The company, however, has seen some backlash from communities likening it to one Airbnb on steroids. There is even a website dedicated to fighting the company, called “Stop Pacaso Now”.
Residents of Sonoma, California passed an ordinance banning Pacaso from doing business in that city. In St. Helena, Calif., which bans timeshares, Pacaso reached a settlement that protects his four homes already there, but the company is not allowed to expand to other properties.
“We operate in more than 40 markets nationally and only a few are misunderstood,” Allison asserted. “Our approach is to work with policymakers and educate them about the facts and the benefits. Our belief is that over time this will catch on. It hasn’t worked yet in Sonoma and the small handful of communities that have issued decrees to resist the model.”
Pacaso is also adding a new suite of services to help primary home buyers access the home sharing model. About a fifth of first-time home buyers last year bought with either a friend or relative, according to the property website Zillow.
“People are now using co-ownership as a way to be able to afford homes that they otherwise wouldn’t be able to afford. So it’s not just happening in the vacation home space,” Allison said.