City officials grappling with new type of home ownership, old issue of affordability

Faced with ongoing criticism and growing concerns over the lack of available housing for working-class families in the city, members of the Palm Springs City Council agreed Thursday night to do what they could to prevent corporate takeovers of neighborhoods. They may not have much luck.

Their efforts will come in the form of two reviews of existing regulations — one that deals with short-term vacation rentals (STVRs) and the other regulating timeshares. The city’s STVR regulations are among the toughest in the nation and may only need a simple review of current data to determine if any changes are required. But a new type of homeownership that City Attorney Jeff Ballinger has likened to a timeshare has only recently been in operation here and may lead to legal challenges.

Ballinger last year asked that Pacaso, a company offering shared ownership of luxury single-family homes in Palm Springs and elsewhere, cease operations in the city on the grounds its business model qualified as a timeshare, which is not allowed in residential neighborhoods. The company refused, hired a local attorney, and set the stage for a showdown at City Hall.

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The first shots were fired on Thursday night, although they mainly consisted of Ballinger and Pacaso’s attorney, Bruce Bauer, repeating points made in letters they’ve been exchanging for three months.

At issue is not what the company does — finding a group of up to eight buyers, creating an LLC for them, then arranging for the LLC to purchase a home. Councilmember Geoff Kors said that was a “creative business model,” although it is “not a good thing in our residential neighborhoods.” Instead, city officials are concerned that different members of the newly-formed LLC will be coming and going from properties dozens of times each year, much like a short-term vacation rental.

Also at issue is the fact the ownership group, with Pacaso’s assistance, divides the time each member can use the home. That resembles a timeshare, and those are not permitted with single-family homes in Palm Springs.

“Pacaso is not a timeshare,” Bauer claimed. “The city cannot hammer a square peg into a round hole and claim it as such. …In a timeshare, a person purchases a piece of time. Our model is not the same. You are one of eight owners in the property. They are just categorically different.”

With Councilmember Christy Holstege absent and Mayor Pro Tem Grace Garner recused from the discussion, the three remaining elected officials in Council chambers asked staff to review the city’s timeshare regulations to see if they could somehow alter them to prevent the Pacaso model. They also agreed to explore whether the homes could be subject to code enforcement, similar to vacation rentals..  

For now, the company can continue to operate without interruption. It already sold one home in the city, currently lists one other for sale on its website, and is believed to be marketing three others. Pacaso refused earlier requests to suspend operations in the city pending Council review and is currently in litigation in at least one other California community.

“None of us are in favor of this business model,” said Mayor Lisa Middleton. “But we know Pacaso will be aggressive in court. Sometimes our positions we take can result in some litigation. But that can also be unlikely depending on which course we choose to go.”

Which course the Council goes with vacation rentals should be known before summer. A study session on the city’s current STVR ordinance is scheduled for March 29, followed by public input and a possible vote on amendments to the regulations.

On Thursday, Council members had a chance to direct city staff on what data they would like to review in the study session. Among the requests were:

  • Detailed maps on how many STVRs are in each neighborhood, preferably printed and not digital such as this map created by The Post last year.
  • What types of properties are being used as vacation rentals (luxury homes vs. moderately-priced homes, for example); and
  • How many homes might be second homes, taking them out of circulation for families to purchase or rent.

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