The California coastal town of 85,000 voted unanimously to relegate co-owned homes — like those sold by Pacaso and Ember — to areas that typically don’t have luxury homes in them.

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The California town of Newport Beach voted this week to regulate Pacaso homes the same way it does timeshares, effectively branding the company’s vacation homes the same as a timeshare and significantly limiting where it can buy and resell homes.

The changes relegate the company to operate only in zoning districts that typically don’t include the types of homes Pacaso buys, including commercial, office and mixed-use districts.

The Newport Beach City Council vote is only the latest action the company has faced as it seeks to define a new segment of the real estate industry. The issue is a persistent headwind and headache for Pacaso, which buys luxury homes, converts them to an LLC and sells up to eight shares in that LLC to owners who can use the homes for up to 45 days per year.

Pacaso owned about a dozen homes in the Orange County coastal town of about 85,000. Utah-based co-ownership company Ember is also listing one home that would be affected by the change.

“This means the use of any real property in which an owner has exclusive use of said property for less than the full year would be classified as a timeshare,” the City Council staff report said.

The crowd gathered for the meeting applauded after the city council voted unanimously to approve the change.

If finalized by a final procedural vote later this month and then by a higher regional commission, it means Pacaso could no longer buy and resell homes like the four-bed, four-and-a-half-bath home at 121 Emerald Ave. in Newport’s Balboa Island.

In fact, all of the homes Pacaso is selling in Newport Beach are in zones that will no longer allow them under the change.

The homes will be considered legal non-conforming once the change is finalized, according to The Los Angeles Times. That means the homes could continue operating and the change would affect future activities.

The timeshare definition is a marketing issue the company has tried to confront as it seeks to expand, penning blog posts and sending statements about the differences between timeshares and co-owned homes.

“Pacaso is not a timeshare, it’s true real estate ownership (but without all the hassles),” the company said in a recent post.

Multiple Pacaso representatives attempted to persuade the city not to take action, with several reading letters from Pacaso co-owners during public meetings, according to a review of the meeting minutes.

Pacaso said in a statement that the company “strongly opposes” the vote, pointing out that the action could also limit co-ownership by family and friends.

“This decision goes against the property rights of homeowners in Newport Beach, where more than 30 percent of homes are owned in LLCs or trusts,” the company said. “Co-ownership of second homes makes owning real estate more accessible in a region where home values are increasing.” 

In a statement to Inman, Ember called the vote “unfortunate,” echoing Pacaso’s statement that families and friends who jointly own homes could also be affected.

“It unfairly infringes on the property rights of homeowners,” Ember said. “These are not nightly rentals or hotel/condos in some vacation club.  These are small groups of families who want to share the cost of a family heirloom second home together.”

Pacaso fought a similar battle in the small ski town of Park City, Utah, which voted to define co-ownership as distinct from timeshares but regulated both uses similarly.

Pacaso initially applauded the Park City vote, saying at the time it set an important distinction that the company’s homes were not timeshares. 

It then worked with the Utah Legislature on a bill that banned cities and counties from putting additional regulations on home co-ownership.

Email Taylor Anderson

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