A Daily Post reader emailed me yesterday. He’d been struck by an NPR article linked from Daily Post columnist Harvey Radin’s essay, “HMPRESENTLY: Your Neighbor, the LLC”. The NPR article, which Mr. Radin had briefly summarized, describes an incredibly fast-growing company operating in California wine country. The company, Pacasso, is based in San Francisco, and began operating in October 2020 — buying up luxury homes, converting them into LLCs, and then selling ‘shares’ in the LLC.
Reportedly, the 10-month old company is already valued at over $1 billion. They apparently plan to expand their business model into resort communities all across the county.
The company has not been welcomed with open arms, by the affected California neighbors. Quite the opposite, in fact.
From the NPR article:
If you buy a share, you’re able to stay in it 44 nights per year, in increments that can’t exceed 14 consecutive days per visit. You can also “gift” these stays to friends or family. Pacaso offers an app to handle the logistics of booking stays. It oversees management, maintenance and cleaning of the property. In exchange for all this, it charges 12% of the home’s purchase price upfront and monthly fees going forward…
Of course, this will strike some of us locals as nothing more than a slightly upscale ‘timeshare’ scheme — a vacation rental housing arrangement that Pagosa Springs has been dealing with since the 1980s, and one that generates thousands of tourist visits per year.
Except that the Wyndham timeshares — formerly, the Fairfield Pagosa timeshares — were built expressly to be just that: timeshares. And they are located in neighborhoods full of timeshares.
The business model Pacasa is using, however, relies on buying up existing residential homes, extending the ‘timeshare’ model into existing residential neighborhoods. Like the much-maligned ‘AirBNB’ vacation rental business model that has already converted hundreds of Archuleta County homes into mini-motels, the Pacasa business model could help drive the real estate market in a small resort town like Pagosa Springs further into the stratosphere.
Should we be afraid?
AirBNB also had its start in San Francisco, in 2007, and seemed like a relatively harmless idea — inviting traveling guests to crash in the living room on an air bed, for a few dollars. 14 years later, AirBNB is reportedly worth in excess of $100 billion and is ruining neighborhoods in 190 countries. Competing vacation rental company VRBO is not far behind.
The Pacasa model appears to be focused — for the time being, at least — on luxury homes in the $1 million-$5 million price range. (Yes, we have a few of those here in Archuleta County.) But such things can change, as the market changes.
As shared previously in this editorial series, the 2021 Residential Housing Survey conducted by Pagosa Housing Partners suggests that the number of individuals and families who are ‘cost burdened’ or ‘severely cost burdened’ by housing expenses has increased significantly, here in Pagosa, since 2018. (The situation was already bad in 2018.)
(Disclosure: I currently serve on the Pagosa Housing Partners board of directors.)
The Pagosa Springs Town Council has now taken a small step, by passing the first reading of Ordinance 958, to limit the number of vacation rentals that will be allowed to operate within the town limits. (Better late than never, I suppose.) Already, about 16% of the homes within the town limits have been converted into mini-motels.
The Archuleta Board of County Commissioners has thus far refused to limit vacation rentals within the residential neighborhoods out in the unincorporated county. According to the 2017 housing study performed by Denver-based Economic and Planning Services (EPS), there are about 9,000 residential homes within the unincorporated county — and the website AirDNA claims that close to 1,000 of those homes are now taking vacation rental reservations.
The vast majority of the vacation rentals, according to AirDNA, are two- or three-bedroom homes.
Somewhere in the neighborhood of 30% of the community’s homes were classified by EPS as “vacant”… not because they were for sale or for rent, but vacant because they were ‘second homes’ or vacation rentals. And about 90% of these ‘vacant’ homes are located in the unincorporated county.
Which suggests that the Town Council’s new ordinance will have only a very limited effect on our vacation rental problems.
Can we dig ourselves out of this hole?
Or are we looking at a ‘black hole’ that’s going to suck in everything within its gravitational field?
Two days ago, the Town Planning Commission took a look at an interesting housing proposal.
The Pagosa Springs Inn & Suites — one of the local motels that’s been impacted by the growth of the vacation rental industry — applied for a ‘density bonus’ as part of a plan to convert its 98 rooms into rental apartments.
From the Town Planning Department’s description of the proposal:
The property is located within the Mixed-Use Corridor zone district which allows up to 16 residential dwelling units per acre. The property is 4.19 acres which would allow up to 66 dwelling units, thus the applicant is requesting a density bonus of an additional 32 dwelling units. The Town’s Density Bonus policy adopted on April 22, 2021, requires 25% of the total units be deed restricted for income levels up to 120% of Area Median Income (AMI) determined annually by Colorado Housing Financing Authority (CHFA) for a minimum period of 7 years.
25% of the total units equates to 24.5 units, rounded up to 25 deed restricted dwelling units.
The applicant proposes a mix of dwelling units types including: 21 each studios, 62 each – 1 bedrooms; 11 each 2 bedrooms; and 4 each 3 bedrooms, with all units complying with the International Building Code regarding minimum room sizes. All units that are under 400 square feet in size will include access to a secure personal storage closet at a minimum of 200 cubic feet in size.
Bill Hudson began sharing his opinions in the Pagosa Daily Post in 2004 and can’t seem to break the habit. He claims that, in Pagosa Springs, opinions are like pickup trucks: everybody has one.