City leaders move to update ordinance focused on co-owned housing properties like Pacaso

The Palm Springs City Council gave initial approval Wednesday evening to amendments to the city’s co-owned managed housing ordinance that would strengthen regulations on fractional ownership properties, including removing the automatic termination of a 30-home cap and adding daytime guest occupancy limits.

City Attorney Jeff Ballinger presented the proposed changes during a regular council meeting. The amendments come nearly a year after the original ordinance was adopted following a contentious 3-2 city council vote on July 25, 2024, that ended debate and negotiations with co-ownership companies like Pacaso.

The most significant change removes the automatic three-year termination provision for the 30-home limit. The amended ordinance states that “the City Council intends to review the co-owned housing unit citywide cap prior to July 25, 2027.”

During the original 2024 debate, then-Mayor and now Councilmember Jeffrey Bernstein had hoped to postpone the vote, arguing there were still unanswered questions that could leave the city open to lawsuits from Pacaso or their owners. The council at that time agreed to hear three amendments, including a provision that would force the issue to be brought back before the council within three years for review.

The amendments address several issues identified during implementation of the original ordinance. One key change clarifies that the median housing price used to determine permit eligibility refers specifically to single-family residences, not including condominiums.

Under current rules, the city will not issue a co-owned housing unit permit unless the property’s purchase price exceeds twice the median housing price. This clarification aligns with the original intent of preserving affordable housing stock in Palm Springs.

Staff identified the need to clarify this calculation after questions arose about whether the median should include condominiums, which would result in a lower threshold and potentially allow more properties to qualify for co-owned managed housing use.

The amendments also add daytime guest occupancy limits consistent with vacation rental regulations. The maximum occupancy is set at two persons per bedroom, plus minor children age 12 or under, with up to four additional daytime guests permitted between 10 a.m. and 10 p.m. This addresses concerns raised during the 2024 debate about potential party houses or excessive noise during the day.

On Wednesday, Bernstein asked staff to confirm the regulations mirror vacation rental restrictions, including the use of outdoor speakers. Ballinger confirmed the ordinances are consistent across both property types.

City staff has recommended adding specific documentation requirements to the permitting process. These include government-issued identification for each owner, documentation of corporate ownership and management, trust certificates when applicable, file-stamped grant deeds, good neighbor affidavits and operational standards affidavits.

The ordinance maintains strict operational standards for co-owned housing units. These properties cannot be used as vacation rentals or for homesharing, and no weddings or commercial events are permitted.

Violations carry significant penalties, with first-time administrative citations starting at $500 and subsequent violations increasing to $1,000. More serious violations, such as operating without a permit or using a co-owned housing unit as a vacation rental, can result in fines of $5,000 for first offenses and $10,000 for subsequent violations.

The council modified the enforcement mechanism during Wednesday’s meeting, changing it from discretionary action by the city manager to automatic permit revocation with an appeal process, mirroring the city’s vacation rental enforcement procedures. Council members also established a 30-day deadline for existing properties to complete their permit applications.

The ordinance continues to limit the total number of co-owned housing units in Palm Springs to 30, with a maximum of two units per neighborhood. Properties must be located at least 500 feet apart and cannot have had a vacation rental permit revoked in the 24 months prior to acquisition.

According to the staff report, the ordinance aligns with the city council’s goal of “focusing on items that impact quality of life, by ensuring that residential properties that are co-owned by multiple owners do not become a nuisance to neighbors or unduly impact affordability of homes within the City.”

The co-ownership model, popularized by companies like Pacaso, allows multiple parties to purchase shares in a single property. The approval of the original ordinance marked a shift in Palm Springs’ approach to co-owned properties, which have been a contentious issue in the city for years and were previously opposed by city leaders.

If approved on second reading at a later date, the amended ordinance would take effect 30 days after adoption.

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