Proptech startup Pacaso has made a few enemies in its efforts to help its customers realize their dream of second home ownership.
Now comes the blowback, as legal and legislative actions in its home state of California cause problems for the young company.
This month in Napa Valley, the City of St. Helena’s planning commission recommended expanding its rule banning timeshares to include Pacaso’s condo model. The proposal will soon go before the city council.
To the south, Palm Springs voted to extend its timeshare ban to Pacaso operations. He also issued a cease and desist letter to the company, which sponsored four properties in the area.
Those actions could set off further hurdles for Pacaso, which caused a stir last year when it hit a $1 billion valuation less than 12 months after launching – the fastest of any proptech to have. achieved “unicorn” status. The company operates in at least six other markets in California.
San Francisco-based Pacaso, founded in 2020 by former Zillow executives Spencer Rascoff and Austin Allison, says it generated nearly $300 million in revenue in 2021 by selling one-eighth of vacation property shares across the United States to future owners of second homes – often over the protests of locals who saw his arrival as an invasion of their communities.
Demonstrations have attended its recent beginnings in Maui, but the uproar has been particularly strong in its home state, where a loose association of anti-Pacaso civil groups have banded together to fight the company on the grounds that it s This is a commercial enterprise operating in residences, or rural areas.
The groups also say Pacaso is hurting neighborhoods by removing already limited housing stock from strained markets – a claim the company disputes, citing its focus on a small group of luxury properties that sit empty for much of the year.
Pacaso preemptively sued Saint Helena last April after the town of 6,000 people signaled it would seek to freeze the company’s activity there. Pacaso argues it’s not timeshare but condominium — a new type of asset since last summer, after Pacaso pushed for it to be recognized by the Real Estate Standards Organization.
This crucial distinction is what St. Helena and Palm Springs now seek to eliminate or render moot.
If the St. Helena Planning Commission asks the city council to include fractional ownership in the city’s timeshare ordinance, it would be the first change to the law since 1982.
Colin Tooze, a Pacaso spokesman, said that would represent selective enforcement. Nearly 10% of residential lots on St. Helena are owned by LLCs and more than 40% are owned by a trust, he said, citing Napa County tax assessor records. His argument is that these ownership models are similar to Pacaso’s, but no one is proposing to ban them.
Pacaso “attempted to resolve our differences through genuine compromise and dialogue,” Tooze said in an email. “We certainly didn’t always agree with the local authorities in Saint Helena.”
Tooze attributed the Palm Springs setback to city employees who have “an unfortunately one-sided and inaccurate view of Pacaso’s business.” The company tried to resolve the issue with the Palm Springs City Council, he said.
“We are confident that council members understand that it is not the role of local government to decide who is allowed to own property,” he said.
The actions in St. Helena and Palm Springs could set a precedent for other localities challenging Pacaso. The company plans to launch in 30 new markets this year, nearly doubling its footprint.
Tooze said the company will continue to “invest in building relationships with partners at all levels of government.”
“We are committed to engaging and working collaboratively with local leaders to ensure we understand their priorities,” he said.