A company marketing second home ownership opportunities using a timeshare model in unincorporated Dry Creek Valley may be in violation of zoning code, according to a courtesy notice issued by Permit Sonoma April 26.
The property management company in question, Pacaso Inc, based in California, purchases homes in destination locations, such as Sonoma County, Napa County, Lake Tahoe, Aspen, Colorado and Fort Lauderdale, Florida using a fractional ownership model. There can be between two and eight shares per home, with guests able to stay between two to 14 days at a time for a total of 44 days per year.
According to the Pacaso webpage, “Nearly 10 million second homes sit unoccupied for 11 months a year in the U.S. Meanwhile, millions of people dream of owning and enjoying a second home. To solve this, we created Pacaso, a service to expand second home ownership.”
The property in question, located at 2252 W. Dry Creek Road, has been sold and is currently “co-owned,” according to a Pacaso representative. Pacaso’s website also lists another property at 6165 W. Dry Creek Road, valued at $677,000 per share for eight shares, bringing the total price to $5.4 million. Pacaso has one more listing in Sonoma County, outside the City of Sonoma, and two in St. Helena in Napa County.
In May, the Napa Valley Register reported that the company would stop showing a home purchased in the City of Napa following a neighborhood backlash. According to a Pacaso representative, the home in Napa was sold to a group of shareholders this spring.
Yael Bernier, president of the Dry Creek Valley Association (DCVA), a nonprofit “dedicated to cultivating valley lives and livelihoods,” according to its website, said the business model is in violation of zoning code in a recent press release. According to Bernier’s statement released on behalf of the DCVA, Pacaso operates a lodging business, which would require a permit in Land-Intensive Agriculture zones such as the Dry Creek Valley.
Bernier said that although the business operates like a vacation home, it circumvents both the permitting process and the transient occupancy tax (TOT) — a 12% tax levied on persons staying on a transient basis (under 30 days) in businesses such as Airbnbs and hotels.
Bernier said the business model disrupts neighborhoods, and the DCVA has called on the Sonoma County Board of Supervisors to enact a moratorium on “timeshare” properties operating in Sonoma County agricultural zones. The DCVA asserts the timeshare business model is in violation of the county’s General Plan Agricultural Resource Element.
“The very fabric of our valley, our agricultural roots, (and) rural and social landscape are diminished by the intrusion of Pacaso’s for-profit business,” Bernier said.
The difference between Pacaso and traditional short-term vacation rental businesses, like Airbnbs, is that the shareholders are technically owners, not guests. Permit Sonoma is currently investigating the matter to see if it’s in violation of zoning code.
James Gore, supervisor of Sonoma County’s fourth district, which includes Dry Creek Valley and the north county, said that while the timeshare model isn’t technically a vacation home, which is a prohibited use on agricultural land, it functions in a way that violates land use policy.
A crucial distinction between the Pacaso model and a hypothetical group of families who purchased a vacation home together is the ongoing commercial nature of Pacaso’s management of the property through an online marketplace. To Gore, this makes Pacaso more akin to business use of a residential property — like a vacation home — than an actual residence.
“If it walks like a duck, quacks like a duck, it’s a duck. This is not residential ownership. It looks and sounds and smells like a commercial entity. It’s a commercial property that sells shares,” Gore said.
Gore said much like how Uber, Lyft and Airbnb are new modern business activities and/or land uses that challenge the confines of ordinances on the books, the Pacaso model may too require new legislation for effective code enforcement.
Land-intensive agricultural zoning codes are strict when it comes to businesses, permitting only residential and agricultural uses without a use permit. This helps to protect the rural character of and ensure adequate land for residences in areas like Dry Creek Valley, said Gore.
“It obviously is new, and if you look at what we allow in these areas, it does not conform to that,” Gore said. “It’s not just a NIMBY thing.”
Ellen Haberle, director of government and community relations at Pacaso, defended her company’s right to operate its property against the claims leveled against it by community members, saying that the home Pacaso bought from three couples at 6165 W. Dry Creek Valley Road is no different from 21% of Sonoma County residential properties — or 26,913 properties — that she said could have similar multiple-owner arrangements.
Haberle also drew a distinction between the Pacaso model and prohibited vacation rentals. “The co-owners that Pacaso serves are not vacation renters or transients, and Pacaso strictly prohibits rental of the home for any length of time. Rather, co-owners own 100% of their home, pay property taxes and make a long-term commitment to their home and the community, just like any other primary or secondary homeowner,” she said.
According to Haberle, all Pacaso owners are vetted for criminal history, and many plan to retire in the communities in which they purchase a home share. Haberle also contends that, by grouping buyers together to purchase luxury homes, competition among median-price-point homes costing in the neighborhood of one Pacaso share ($600-700,000) is eased in impacted residential markets like Sonoma County’s.
Pacaso announced on July 19 that it will donate $2,500 for each eighth of an interest sold — $20,000 per home — to local nonprofits supporting “housing, economic and environmental sustainability.” Pacaso has selected Burbank Housing, which provides affordable housing, as its primary community partner in Napa and Sonoma counties, committing to a minimum $100,000 donation through 2022.
Pacaso also employs eight to 10 locals per home to care for the home and provide other services.
The Sonoma County Board of Supervisors is currently reviewing the Pacaso case and any potential lawsuits in closed session.
