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Pacaso's entrance into Napa's residential real estate market met with neighborhood protest
Housing

Pacaso's entrance into Napa's residential real estate market met with neighborhood protest

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Residents of Napa’s Bel Aire neighborhood this week continued to voice their opposition to the purchase of a single family home on Rainier Avenue by Pacaso, a real estate startup which has purchased nearly a dozen homes in Napa Valley and offers second homebuyers fractional ownership of those properties.

Pacaso, valued at $1 billion less than a year after its launch in early 2020, seeks to “democratize second home ownership,” according to a press release from the company. Pacaso purchases homes – often luxury properties, CEO Austin Allison said in an interview – and then offers the property up for resale, split into eight shares.

“We really believe in making second home ownership more accessible,” Allison, a Napa resident, said. “Co-ownership is a very common practice (among second home owners) … and Pacaso handles all (support) services to make co-ownership more hassle-free and seamless for people who wish to own this way.”

Up to eight parties can purchase shares of a single property, though on average Pacaso homes are shared by between five and six buyers, Allison said. The startup purchased its first home in Napa in June of 2020, he said.

Pacaso purchased the three-bed, two-bath home at 1627 Rainier Avenue in north Napa in early April for $1,130,000, public records show. It has since relisted the home for sale in eight shares at $184,000 each.

News of the initial sale to Pacaso came as a surprise to the property’s neighbors, according to Thom Lichtenstein, who has lived in his home on Rainier Avenue for 26 years.

“I was like – ‘you’re kidding. Come on. On this street? Why would anyone want to live on this street in that sort of format?’” Lichtenstein said of his learning who had bought the property. He is concerned, he said, about “the variables” involved with “people coming and going who aren’t really going to be part of the community.”

Lichtenstein has found company in his neighbors, he said, many of whom are similarly opposed to Pacaso’s ownership model taking root in their neighborhood.

The group, which held a rally in protest of Pacaso last weekend and voiced its concerns before Napa City Council Tuesday afternoon, has a range of concerns about the startup. Those concerns include the owners of the Pacaso property will not become part of their neighborhood community, and that they may even disrupt it by treating the home like they would a short-term occupancy rental.

Napa Mayor Scott Sedgley said city staff, including members of its economic development division and the city manager, were on a "fact finding" mission regarding Pacaso.

There is also concern among members of the neighborhood about Pacaso’s role in raising the median home price in the area and its ability to outbid local buyers, according to Bel Aire resident Paula French, who purchased her home on neighboring Shasta Avenue for $325,000 in 2010. A Napa resident looking to secure the home on Ranier as her primary residence had been outbid by Pacaso, French and Lichtenstein said.

A number of the homeowners in the Bel Aire neighborhood are “working class,” French said; among her neighbors are retirees — some of them their homes’ original owner — as well as school teachers and police officers. One of her immediate neighbors is the daughter of a homeowner who recently moved into assisted living, she said.

“Her daughter … wasn’t sure whether to sell or not, but she was, like, ‘we’re going to try (to make it work here, because) this is our only chance of ever being able to afford a house in Napa,’” French said. “Even second home ownership is a problem in itself, but the fractional ownership – this is our neighborhood. This is where we live. This is not the Napa River Inn, which has timeshares.”

Allison, who said he is well aware of neighborhood sentiment, emphasized that Pacaso homes are not timeshares. Fractional ownership means buyers purchase the property itself, not time to be spent there, he said, adding the same model could be utilized by friends purchasing a property together or siblings who had inherited a home from a parent. Pacaso is currently suing the city of St. Helena over the city's decision to extend its timeshare ban to Pacaso properties.

The highest bid on the Rainier property had been placed by a resident of Southern California looking to secure his own second home, according to Allison. Pacaso’s bid was ultimately accepted because the seller was “more confident we could close the sale quickly,” he said.

“If we had not bought this home, another second homeowner would have owned it,” he said. Even if there was a primary homeowner bidding on the same property, hers would have been outpaced by that original highest bidder, Allison argued.

Pacaso typically looks to purchase “turnkey” homes that are anywhere from 200% to 400% of the median price point in any given area, Allison said. Asked about the Rainier property, which at its original listing price of $990,000 was just 6.5% higher than Napa County’s median housing price of $929,000 in March, the month it was listed, Allison said it was important to take into account the median home price in the Bel Aire neighborhood itself and added that the property was “on the low end” of Pacaso’s portfolio.

Allison said an attempt to do neighborhood outreach following the company’s purchase of the Rainier property had been met by “hostile and intense behavior” that he found “sad and concerning.”

“They basically said, you’re not welcome here … your owners are not welcome here,” Allison said. Neighbors he spoke to “threatened to use the restroom on our property” and “indicated to us that they would stand at the front of the street and harass and intimidate every owner that comes through the property," he added. He believes the reaction to be born out of “misconceptions” about the company, including that its properties will be used as short term rentals.

“We expressly prohibit rental activities in our homes. People are assuming there will be 30 different parties that rotate through the house and throw ragers. That is not what is happening,” Allison said. “(Pacaso homes) are owned by five to six families on average, who are vested in the home and the community, and they’re here to enjoy the town just like everyone else.”

French said the Bel Aire neighborhood “would not shun” and would ultimately welcome Pacaso owners if proceedings continue. Still, some neighbors, including Pattie Dullea, who lives across the street from the property with her husband, daughter and grandson, said they hoped Allison would reconsider altogether.

“He buys properties worth a lot more money here, and he has a billion dollar company … my hope was that he would realize they’d made a big mistake,” Dullea said of the message she’d hoped to convey to Allison when he’d stopped by the neighborhood. “I’d want him to know that he should begin to use his business model in areas where it fits, and for him to do his homework – for him to know his audience.”

Buying a home is a very complicated transaction, making it easy to fall for some of the most common and costly home buying myths. PennyGem’s Johana Restrepo has more.

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You can reach Sarah Klearman at (707) 256-2213 or sklearman@napanews.com.

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Wine Industry Reporter

Wine industry reporter at the Napa Valley Register.

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