While the concept of group homeownership isn’t new (think: timeshares), more and more younger generations are reportedly open to the idea of buying one-fourth or even one-eighth of a property amid a volatile and pricey real estate market.
Expert Opinions
“It’s just a natural solution to a growing problem that we face here in America, and that many cities face around the world,” says Austin Allison, co-founder and CEO of Pacaso, a property broker listing shares of vacation homes. “Co-ownership is effectively a sharing economy solution to a housing affordability problem. The younger generation is just more familiar with innovative and sustainable structures like this.”
Since Pacaso’s founding in 2020, the brokerage has sold about $1 billion in co-ownership units across 40 markets, mostly in the U.S., and manages approximately 1,500 clients in housing LLCs and operating agreements.
Concerns and Considerations
Despite its promise, not everyone is convinced. Madison Ventures+ principal and managing director Mitch Roschelle cautions, “People who are promoting shared homes are basically trying to sell parts of homes for more money. There’s the economic incentive for those in favor of the strategy.”
He adds, “The value proposition for the buyer is, ‘I get to own something without paying for the whole thing.’ That’s the basic, sort of yin and yang between why the buyer wants the slice and why the seller wants to sell pieces as opposed to the whole.”
Growing Popularity and Challenges
Despite some skepticism, interest in co-ownership is growing. Zillow’s 2023 housing trends report found 1 in 7 respondents co-bought a property with a friend, and 12% with a relative. Similarly, Opendoor’s first-time homebuyer report indicated that more than 3 in 4 first-time buyers bought with their parents, siblings, friends, or even colleagues.
Austin Allison acknowledges the challenges, “Managing the home can be difficult. Financing the home can be difficult. Coordinating repairs and maintenance can be difficult between co-owners. At Pacaso, we’re trying to make that experience easy for you.”
Benefits of Co-Ownership
“We’re seeing co-ownership grow in popularity mainly because homes are less affordable today than they were in the past,” Allison notes. “Co-ownership enables people to afford homes by pooling their resources together.”
Pacaso has streamlined the process of selling a share, making it easy for co-owners to find new buyers. Allison explains, “Anybody can sell their interest in a Pacaso home at any time. Of those who have sold their shares, they’ve benefited from about 10% capital appreciation during the holding period.”
Conclusion
“In our case, it’s about making better use of space, making better use of resources, contributing to communities and to the environment in positive and sustainable ways,” Allison continues. “Co-ownership is an incredible solution to help with housing affordability and environmental and community challenges.”