Carmel tells vacation-home sharing company to cease and desist, calling it a timeshare.

San Francisco based-company Pacaso calls what it does “co-ownership, simplified.” The company, which launched in 2020, purchases single-family homes in destinations where second homes are popular, sells shares from one-eighth to half to people who want vacation homes for less money, then manages the properties for them. Carmel and other cities around California call it something different: timeshares. They’re yanking out the welcome mat from under Pacaso or making sure it can’t get its foot in the door by beefing up existing ordinances.

In Carmel’s case, the city has sent two cease-and-desist letters over a three-bedroom, three-and-a-half-bath home with a guest house that Pacaso purchased on Dolores Street. The company is currently selling a one-eighth ownership for $866,000; the “whole home value” is $6.9 million, according to Pacaso’s website.

“Located in Carmel-by-the-Sea’s Golden Rectangle, this Pacaso is a quick walk from the beach or shopping and restaurants in town,” the website boasts.

Carmel officials argue that since co-owners are limited in the number and length of their stays it is a timeshare, not “fractionalized ownerships,” as the company has argued. “Regardless of what Pacaso wants to call its business model, the impact is the same,” Carmel City Attorney Brian Pierik wrote in an April 7 letter. That impact, he argues: creating short-term vacation rentals where they are prohibited. He also notes the city’s 1988 ordinance prohibiting timeshares was enacted to protect housing stock.

Pacaso officials declined to be interviewed but offered a statement in writing. “Pacaso is not a timeshare. We help families co-own second homes, which is common practice, and can be part of the solution to the housing crisis in Carmel, Pacific Grove and surrounding communities,” said Brian McGuigan, a Pacaso spokesperson. “Research shows that by consolidating second home demand into fewer luxury homes, we reduce competition for single-family homes and contribute more to the local economy than traditional second homes.”

The company argues that the consolidation of second-home buyers will not disrupt local housing markets and that unlike average vacation homes – which are occupied only 11 percent of the year – Pacaso homes are occupied nearly 90 percent of the year.

In neighboring Pacific Grove, where a majority of residents voted to limit vacation rentals in 2018, councilmembers have already signaled they are not interested in Pacaso doing business there. They’ve asked the Planning Commission to review city ordinances with an eye toward closing any potential loopholes. The matter could go before the commission in July.

Other cities in California are fighting against the company, including St. Helena in Napa County. The town is embroiled in a lawsuit brought by Pacaso against St. Helena in April of last year, after the city council there said it would seek to limit the company’s activity in the town of 6,000 residents. Nevertheless, the St. Helena City Council voted 5-0 in March to strengthen its ordinances to specifically prohibit Pacaso’s ownership model. The two sides are headed for a possible trial in the coming months.