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The Utah Senate voted unanimously on Monday in favor of a bill to protect co-ownership companies like Pacaso and local competitor Ember by blocking cities across the state from restricting fractionally owned properties.
If passed into law by the Utah House as soon as this week, Senate Bill 271 would prohibit cities and counties throughout Utah from placing ordinances on fractionally owned homes, like those bought and sold by companies like San Francisco-based Pacaso, which came under fire last year from residents in markets across the U.S. who claim the company siphons valuable housing stock at a time when real estate is scarce.
Although passed unanimously, the overture in the Senate is a reversal from last year, when members of Utah’s Park City Council voted to restrict where Pacaso and other companies buy homes in the popular ski town, which boasts about 8,500 residents. The vote in the Utah Senate came less than a week after a draft of the bill was made public and four days before lawmakers cap their 45-day legislative session this week.
“This bill became necessary because Park City recently passed an ordinance that put unreasonable restrictions on co-owned properties in their city,” Sen. Mike McKell, a Republican representing Spanish Fork in Utah County, told Inman. “The right to own a home is something we have never questioned in Utah — this bill is simply to protect that right.”
In October, Pacaso applauded after Park City council members passed an ordinance regulating where the residential co-ownership company could purchase and resell homes.
Those rules limited where Pacaso could buy and resell homes in Park City, effectively relegating the company to areas that allowed timeshares and short-term rentals. But lawmakers also specifically recognized Pacaso as something different from short-term rentals and timeshares, and for that Pacaso lauded the vote.
“We also thank the Park City Council and staff who took time to understand our model and the benefits it provides to the community,” the company said at the time. “We commit to continue to work in close partnership with all of them to ensure co-ownership benefits the entire community.”
The new bill awaiting a vote in the Utah House prohibits cities and counties in Utah from passing rules for co-owned homes that are different from individually owned homes. It also prevents cities and counties from punishing co-owners. SB271 appears likely to pass as the Legislature passes a rush of bills during hours-long voting sessions in the final days before the group adjourns until next year.
Sen. Mike McKell, R-Spanish Fork, Utah
McKell presented the bill in committee on Thursday with the help of Kevin Heneghan, Pacaso’s vice president of legal and public affairs.
Shortly after the vote on Monday, a Pacaso spokesperson said in a statement to Inman that the company supports the bill.
“Pacaso strongly supports property rights and the Utah Senate Bill 271, which empowers people to co-own homes without interference from local government,” the spokesperson said. “We believe that governments should not infringe on the basic right of individuals, friends, or families to acquire, own, and use a home together.”
At just over two years old, Pacaso faces threats from its association with timeshares and short-term rentals like Airbnb.
It is distinct from timeshares, company representatives say, because Pacaso buys individual luxury homes in destination markets, creates a limited liability company for the homes and sells them to up to eight individual owners who share time and maintenance costs for the homes.
Austin Allison | Co-Founder and CEO of Pacaso
Timeshares are often at resorts with dozens or hundreds of units that are virtually the same, the company says. Timeshares are also difficult to resell, whereas Pacaso has said owners typically sell shares at a 12 percent gain.
The company’s leaders also say the model is better for communities than short-term rentals because Pacaso owners are invested in a community and homes are occupied for more of the year than short-term rentals.
A more direct and cumbersome threat to the company are the campaigns and regulatory fights it faces in multiple markets across the U.S. A group called Stop Pacaso Now is organizing residents in cities across the country.
Cities like St. Helena, in Napa Valley, California, have moved to ban fractional home ownership altogether. Just last week, Pacaso lost an appeal in coastal South Carolina to sell shares in a 4,331-square-foot home it owns there.
An attorney representing the company called the region’s regulations on fractional ownership “political.”
“It’s an attempt to shut us down. At the core of it, it’s political,” Pacaso attorney Ross Appel said at a zoning hearing, according to the news outlet the Island Eye. “The town is responding to the politics through this enforcement action. We have to defend that to the full extent of the law, which we are attempting to do this evening.”
Utah would become the first state in the nation to pass a law preempting local regulations on fractional ownership. Rather than fighting individual battles any time a vacation market put up roadblocks before the business, the entire state of Utah would now be in play for Pacaso and Ember.
Park City was working to strike a balance with the company by allowing it to operate only in certain neighborhoods.
Since its vote in October, the city was working to refine the ordinance. Meanwhile, Pacaso continued to own and sell shares in homes in the city.
Clayton Scrivner, a spokesman for Park City, called SB271 an “ambush.”
“Residents and businesses are victimized by ambush politics and shortsighted commercialization of neighborhoods,” Scrivner said in a statement given first to the Park Record.
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