Sonoma neighbors fight controversial new homebuying model
A well-financed Bay Area startup real-estate company called Pacaso is in the process of buying its first three Sonoma houses, with plans to immediately resell the properties to groups of six to eight co-owners, using a new model of second-home ownership.
The red-hot housing market in Sonoma Valley is driven by a shortage of inventory and an abundance of demand - particularly for second homes. More families having the freedom to work remotely has also exacerbated the situation.
What effect Pacaso’s fractional home ownership real-estate model will have on Sonoma is sparking heated debate - and a group of neighbors has organized a campaign to stop such deals, which they and local housing advocates, like the the Sonoma Valley Housing Group, describe as an end-around scheme to skirt laws regulating commercial vacation rentals.
The Pacaso shared-ownership model
Pacaso CEO Austin Allison, 36, told the Index-Tribune Tuesday that Pacaso can actually help alleviate the local housing shortage.
“In Sonoma, we are only offering high-end, luxury houses that are priced three-to-four times above the median,” he said. “We are taking a group of eight people who might each remove a $730,000 house from Sonoma’s inventory and instead pooling their resources so these buyers can afford a really high-end luxury house together.”
Pacaso’s first Sonoma Valley property is 1405 Old Winery Court, which is located on the east side of town, outside of city limits. The house was listed for $4 million, purchased by Pacaso on May 17, and now appears on the company website with a price of $606,000 each for eight co-owners. The house fits the company ideal, according to Allison ‒ turnkey with two-to-four bedrooms and a pool.
Allison feel strongly that Pacaso homebuyers are not competing with the local workforce to buy property.
“We get second homeowners out of the median price here and over to the luxury price tier, which creates more opportunity for the local workforce,” said Allison. “By no means am I saying that we're solving the housing affordability problem. It is way bigger than Pacaso ‒ but we definitely help.”
Sonoma Mayor Logan Harvey disagrees.
“Pacaso is the newest addition in a long line of vulture capitalist companies here to put the final nail in the coffin of Sonoma's middle class,” he said. “The advent of Pacaso and other horrific ‘innovations’ in the housing market are more examples of the growing chasm between the wealthy and the working class.”
Would co-owners make good neighbors?
Regardless of the company’s impact on Sonoma’s housing market, Old Winery Court homeowner Brad Day says most people just don’t want to live next to a co-owned house.
Day has banded with other neighbors to form STOP (Sonomans Together Opposing Pacaso) in protest of the Pacaso purchase on Old Winery Court. They started a petition voicing their objections to Pacaso on Change.Org, which quickly garnered more than 750 signatures. Every house on the street now displays a sign protesting Pacaso’s “attempt to maneuver around regulations that apply to commercial vacation rentals,” according to Day, one of the group’s organizers.
Day says this isn’t NIMBY-ism.
“Pacaso is starting to look at homes all over town and overpaying for properties, which in no way helps our housing market,” he said. “This purchase is just the tip of the iceberg.”
Napa residents have voiced concerns about Pacaso homes there and a neighborhood group has reached out to STOP about joining to form a full wine country coalition, said Day.
“Pacaso has the potential to ruin the sense of community that makes Sonoma so special,” said Day. “And once you lose it, it is really hard to get it back.”
While Pacaso isn’t a short-term rental company, and in fact bans rentals even in areas where they are allowed, time in the house can be “gifted” to guests. STOP spokesperson Holly Kulak believes that Pacaso has simply found a way to circumvent limits on time shares and vacation rentals.
“And unlike similar commercial properties, no TOT (transient occupancy tax) will be collected,” she said.
Potential Sonoma neighbors of the co-owned houses also don’t love the idea of multiple owners coming and going.
Carl Sherill of Sonoma did the math on the typical house with eight owners.
“There’s a 14-day maximum stay so if a single owner uses all of his/her 44 days, that would mean 32 separate stays in the house – and that’s a minimum,” said Sherill. “If owners stay for shorter periods, there would be even more turnover.”