Second Home Start-up Pacaso Moves Into Malibu
The company—which has popped up in Napa, Lake Tahoe and Palm Springs, among others—has Malibu City Council members and citizens skeptical.
That swanky house next door? If it just sold, it might not be a new family moving in. Instead of one new neighbor, you could have a rotating cast of up to eight.
That’s because Pacaso is moving into Malibu. The start-up, which launched in October 2020 and is already valued at $1 billion, aims to “democratize” access to owning second homes, according to TechCrunch.
Typically, second homes are found in-demand real estate markets and only in use by the owner for five to six weeks per year, making them highly expensive investments. Pacaso purchases luxury homes and brings together up to eight people who want to own a share. The company then creates an LLC for them, does criminal and financial background checks on each party and guides them through all paperwork. Then, Pacaso manages the home while the owners are away—furnishing, cleaning, maintaining and paying the bills on time. The company makes money by charging a 12 percent fee for the sale and an ongoing fee for management afterwards.
“We didn’t invent the idea of people owning houses together; it’s been happening for decades,” Pacaso co-founder Austin Allison told The Malibu Times in a recent interview.
The co-founder emphasized that Pacaso was interested in engaging at the community level. In fact, Allison had called local Realtor and Malibu City Council Mayor Pro Tem Paul Grisanti months earlier.
When reached by The Malibu Times, Grisanti summarized his and Allison’s talk: “I came to the conclusion pretty quickly that I had no interest in having anything to do with this on a business basis.”
As a real estate agent, Grisanti said, he could not think of a single client who would be interested in Pacaso homes, which he predicted would suffer from being overused and under maintained.
“People will use [Pacaso] for a while and then they’ll either decide they want to live here full time or they don’t, and then there will be a secondary market in these interests in the property,” Grisanti wagered. He called Pacaso “one of those ideas that’s going to die of its own weight.”
As a council member, Grisanti worried Pacaso would result in fewer children permanently living in Malibu to feed the shrinking school population.
When The Malibu Times posed that concern to Allison, the co-founder said that second homeownership was already common in Malibu. According to the City of Malibu’s 2013-21 Housing Element, second homes represented around a quarter of properties in the city. Allison believes that number today to be about 62 percent; the co-founder said specifically that 28 percent of second homes in Malibu were owned via an LLC.
Malibu’s dwindling school district numbers would only be solved by outlawing second homeownership in Malibu completely, Allison argued. And, if anything, Pacaso would be helping because it would put up to eight potential buyers into a luxury home and leave mid-priced homes for full time families.
Pacaso has some locals skeptical, too. At the March 22 Malibu City Council meeting, Big Rock resident Lloyd Ahern spoke up about a house next door to his which had just been bought by the company. “[Pacaso] paid way over $1 million over value for the house,” Ahern said. “This thing is riddled with problems for neighborhood quality,” he added.
Council Member Bruce Silverstein called Pacaso “a very clever corporate strategy” and told Malibu Assistant City Attorney Trevor Rusin to “jump on” looking into the issue: “If that’s something we want to prevent, we’re going to have to look into preventing it now, not five years from now.”
Council Members Karen Farrer and Steve Uhring signalled they also wanted the issue looked into.
Rusin told The Malibu Times that he and his colleagues were looking into the different zoning rules and relevant governing documents surrounding Pacaso. Currently, he said, it was too early to tell whether Pacaso was in violation of any Malibu regulations.
Rusin emphasized that a violation of those regulations would depend on a Pacaso property’s usage, not the identities of or number of people using the home.
As of mid-April this year, Pacaso was advertising nine Malibu listings on its site (Allison would not share how many Malibu homes Pacaso had already sold). Most Malibu Pacaso home shares go for in between $500,000 to $1 million, the co-founder shared.
“We don’t think that just because someone can only afford only half-a-million dollars and not $4 million, that they should be blocked out of Malibu.”
According to Allison, 70 percent of Pacaso homeowners want to live within driving distance of their second homes. Most are in their mid-to-late 40s to late 50s and have children. One-third of Pacaso owners are part of a “minority class” or identify as LGBTQ+.
Allison stressed that Pacaso was nothing like a timeshare, a business model in which individuals own shares of a resort which they can use at specific times throughout the year. With Pacaso, owners have full ownership of the home and Pacaso has none.
Allison said nor was Pacaso similar to Airbnb. “There is a radical difference when comparing an owner mindset to a renter mindset” he said, comparing how an Airbnb guest commits only hundreds of dollars to a property while Pacaso owners actually own the property. “[Airbnb guests have] no connection or ties or accountability to the community ... our owners are no different than a normal second-home owner,” Allison said.
Pacaso prohibits both short-term rentals and parties within its homes and homeowners sign a code of conduct when purchasing. When asked whether violators face fees or loss of Pacaso shares, Allison said, “There are definitely sticks built into the agreement that empower the manager—whether that’s Pacaso or somebody else—to take action when an owner breaks a rule.” He said Malibuites with complaints can email Pacaso and the company will work to solve the issues.
Rusin was still researching what action the City of Malibu would have to take if it wanted to curtail Pacaso’s presence. Some options the attorney mentioned included zone text amendments or local coastal program amendments, which would have to be passed by city council. But Rusin also said an amendment might not even be necessary at all.
Everything was “a little too preliminary at this point” for him to make a call.