Second homes get a bad rap. Most sit empty for upwards of 11 months of the year; a proposition that doesn’t add value to the community. Second homes often churn transient occupants after flipping to short or long-term rentals. And in high-demand destinations, second home purchases drive up median prices, taking away workforce housing.
However, Pacaso , a real estate tech startup, addresses these challenges through a co-ownership model that consolidates second home demand into fewer homes, taking pressure off housing inventory for first-time home buyers and middle-class families. Part of its success relies on educating itself and its buyers about the area and then engaging authentically with its neighbors.
To ensure this, along with maximizing the positive impact of its houses, Pacaso formed a government advisory board comprised of bipartisan membership from current and former elected officials and regulators. Currently, members include the mayors of Austin and Denver (Steve Adler and Michael Hancock, respectively); Danny Perez, a Florida Legislature representing the state’s 116th House district; Alexis Podesta, former California secretary of business, consumer services, and housing; and Steve Benjamin, former Mayor of Columbia, S.C., and past president of the United States Conference of Mayors.
With this board, the company’s actions around housing policy, engagement, growth and expansion, and other strategic policy issues are more informed. This way, second homes under the Pacaso umbrella contribute to communities rather than take away.
“To do that as effectively as possible, we need the advice and counsel of experts who have weighed similar issues in the past, and have valuable insights to share,” says cofounder and CEO Austin Allison.
The company, which launched in October 2020 and reached unicorn status six months later, now has homes in more than 40 destinations, including recent acquisitions in London, England; Los Cabos, Mexico; and Marbella, Spain. “While co-owning property is not a new practice, we are a relatively new company, which means we have a responsibility to introduce ourselves to people who aren’t familiar with us and to educate community leaders about our business,” Allison says.
Communicating these values externally is still in its early stages, so a priority is working collaboratively and transparently with elected officials and its neighbors.
At the end of the day, Pacaso and the board want to be good neighbors, and part of that is cooperating with boots on the ground to address the unique challenges of each city. “We’re a young company, and we’re always learning,” says Colin Tooze, Pacaso vice president of public affairs, who thinks the perspectives of career public servants guide decision-making when entering a new market. “If that helps us be more thoughtful in how we approach solutions that address the needs of the company and communities where we operate, everyone wins.”
Before launching somewhere new, Pacaso team members introduce themselves and their business model to local leaders, sharing the facts about co-ownership, and discussing why its buyers want to become a part of the community for the long term. Steve Benjamin, the chair of Pacaso’s government advisory board, spent 12 years as mayor of Columbia, S.C. In that position, he uplifted entrepreneurship, employment, and local business. He joined Pacaso’s government advisory board because he believes the co-ownership model is a value-add and sustainable approach to current housing.
“Communities with many second homes don’t think about them enough, in my opinion. Traditional second homes are single-family homes that are empty for ten to eleven months of the year,” he says regarding locations like Napa, Maui, Palm Desert, and other locations where second homes are notorious. “Think about that. The housing crisis in destination communities would get a lot better if they made better use of second homes.”
During the pandemic, rising demand for second homes and an inventory shortage helped push prices to record highs. According to the Federal Reserve Bank of St. Louis , median prices increased by almost $60,000 in the past year. As a result, local workforces are being priced out. In Pacaso’s case, however, second homes are consolidated by allowing up to eight buyers to buy into one luxury home instead of eight separate homes. This moves the demand away from the median homes into luxury-priced homes.
This is a huge educational piece for the board to emphasize. Not only does it help buyers increase their purchasing power, but it’s also leveling the playing field. According to Tooze, hesitation occurs when local leaders and residents misunderstand the co-ownership design.
“The realities of our model mean that we very seldom encounter any legal or regulatory barriers. But, they mistakenly associate us with other, very different models such as timeshare or short-term rentals,” he says, referring to many fears that Pacaso properties will turn into a revolving door of new groups, parties, and lack of consistency. “That’s one reason we invest so much in our relationships with local officials and work hard to be a resource to them and their staff.”
On the opposite end of the spectrum is the other significant, but less-discussed contributor to reluctance: empty homes. When vacant, there aren’t people giving to the local economy. Restaurants, cafes, shops, and other businesses don’t benefit from an unoccupied residence and thus only add value during peak seasons. In 2021, Pacaso properties reached a utilization rate of nearly 90%.
“[The owners] want to meet the neighbors, make friends, become a regular at the local boutiques or coffee shop,” says Benjamin. When residents are actively there supporting businesses year-round, the economic cycle is healthier. “I think co-ownership is the best way to incorporate second homeowners into the community without all the downsides caused by empty homes.”
For Pacaso, it always goes back to being a good (and present) neighbor and those on the board give them insight on how to best approach that. “I know from my experience that the best public policy is created at the local level by neighbors working together to understand issues and then deciding what’s in the best interests of the community,” says Benjamin who wants to help the Pacaso team collaborate with city leaders to create public policy that makes the co-ownership model work in the best interests for everyone.
With current housing challenges, Pacaso aims to become a part of the solution. “We have to work with the local officials and make sure that we’re partnering in ways that add value in a timely and relevant way,” Allison stresses. As the new board evolves, and as Pacaso expands, they continue to reiterate the values of a neighbor: being good, active, and consistent.
This story was originally featured on Fortune.com
