Newport Beach residents and council members are pushing back against the growing trend of “fractional ownership” that’s taking over the city.
Locals say the practice is turning luxury homes into timeshares and party houses, potentially transforming the community into a resort town.
Fractional home ownership is the practice where ownership of a home is split among multiple parties, typically anywhere from 4 to 12 owners on average, according to Newport Beach city officials. The arrangement is most common for vacation homes.
With this arrangement, the amount of time spent at the home is based on the fraction or percentage of ownership. For example, an owner with a 1/8 share would spend around 45 days per year at the home.
“Our average home is $4 million to $5 million and we’re empowering people who would’ve otherwise been buying one million-dollar homes to buy into a $4 million or $5 million-dollar home which actually creates more opportunity,” said Austin Allision, CEO and Co-founder of Pacaso.
Pacaso is a property broker offering co-ownership of luxury second homes. The company says they’ve sold around 1,000 fractional interests since the company was founded in 2020, with many located in Newport Beach.
City officials say some residents have been complaining that fractional housing operates similarly to short‐term rental vacation homes which may result in “significant noise, traffic, and other impacts to residential neighborhoods.”
“If it acts like a timeshare, you should probably regulate like a timeshare,” said one city council member at a March 14 meeting.
“It’s destroying our community-friendly neighborhoods by trying to escape the zoning restrictions cities put in place to curtail hotel-like activities in residential neighborhoods,” said a Newport Beach resident.
Fractional homeowners, however, disagree with that notion.
“It is not a timeshare, it is not a transient thing. We own it,” said a homeowner at the meeting. “We spend upwards of a million dollars for it. It’s not a borrowed $20,000 timeshare where that is a transient thing.”
Council members have indicated efforts to pass an ordinance that would ban fractional ownership in single-family residential zones, which could result in a legal battle for companies like Pacaso.
“Cities should be regulating use,” said Allision. “How people use the properties. They should not be regulating ownership and choosing who owns properties.”
So far, a number of other Southern Californias cities are exploring a potential ban on fractional ownership as well. A modified ordinance is expected to be presented to the city for a vote within the next month or two.
