Study: Second home co-ownership reduces competition for homes, boosts local economies

Published Date: August 25, 2022

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To better understand the precise impact that Pacaso homes and their co-owners have on local communities, we asked the experts at EBP, a trusted economic research firm, to model and estimate the economic impact of Pacaso homes in five top second home destinations across the United States. Here’s what they found.

Economic impact: Key findings

  • Pacaso helps aggregate second home demand into fewer, top-tier luxury homes, reducing competition for middle-tier single-family homes
  • The average Pacaso home costs 6x more than the average second home and 7x more than the average primary home
  • The average second home is used just 11% of the year compared to the average Pacaso home which is occupied nearly 90% of the year
  • Year-round home use means Pacaso homes result in nearly 10x more spending at local businesses compared to the average second home
  • Pacaso owners make more tax contributions than traditional second home owners
Download the full report here.

Pacaso homes bring more revenue to local markets

“Our study found that Pacaso’s unique approach to housing co-ownership provides multiple benefits for the communities it operates in,” said Glen Weisbrod, Chair of the Board of Directors at EBP. “This includes additional household spending going to local stores and services as well as additional tax revenue, compared with other second homes. We also concluded that in all likelihood, by consolidating multiple owners into luxury homes, Pacaso is providing a new option to second homeowners without disrupting local housing markets.”Due to high demand and low inventory, many destination communities throughout the United States are struggling with high costs for single-family homes.“These results reinforce the problem with second homes today and how Pacaso’s co-ownership model can help,” said Pacaso Co-Founder and CEO Austin Allison. “The average second home sits empty for ten months out of the year, which is a wasteful use of single-family homes in destination communities. Through co-ownership, Pacaso concentrates demand into fewer, high-end homes and, because the homes are occupied eleven months out of the year, the owners spend more at local businesses.”

Consolidating demand into top-tier properties

Following the shift to work from home, there are higher levels of demand for homes in destination communities. This demand on top of short supply has driven up home prices to unprecedented levels. Instead of eight second home buyers buying eight separate median-priced homes, which drives up prices even further, Pacaso consolidates those eight buyers into just one luxury home, which alleviates pressure at the median-priced tier.At a time when housing affordability is a real concern to many families throughout the country, EBP’s research shows how Pacaso helps reduce competition for primary homes. The study describes the ‘mitigating effect’ that Pacaso has on local housing market dynamics: By offering out-of-town buyers a desirable alternative to buying a single-family home (that would sit empty for most of the year), Pacaso helps concentrate buyer demand into fewer, top-tier homes.A comparison of second home properties by EBP shows that Pacaso homes, which are typically high-end, turnkey properties in sought-after locations, on average cost six times more than the average second home and seven times more than the average year-round home. As a result, the company is unlikely to compete with middle-class or lower-income home buyers in the five markets EBP studied. In other words, Pacaso isn’t in the business of buying or competing for single-family homes or even typical second homes.

Co-ownership means year-round use, more support for local businesses

The average second home sits empty over 10 months out of the year. By comparison, the average Pacaso home is occupied nearly 90% of the year — almost 11 months. Since the average Pacaso home is occupied more months of the year than other second homes, their owners spend more money in the community.Based on an analysis of data from the Bureau of Labor Statistics on consumer expenditures, Census Bureau Data, and Pacaso home occupancy data, EBP found that Pacaso homes contribute nearly 10x as much to local economic activity than typical second homes. The average Pacaso home generates $48,390 in annual spending compared with a typical second home, benefiting local restaurants, stores and many other businesses.
Second home destinationAvg. second home economic contributionAvg. Pacaso home economic contribution
New York$4,950 $53,850
San Francisco Bay Area$6,610$72,240
Colorado Ski Areas*$4,960$54,610
Palm Springs$3,990$44,090
South Florida$3,770$41,450
* Eagle, Pitkin and Summit countiesIn Colorado, for example, the average second home contributes $4,960 in local spending per year. By contrast, a typical Pacaso home that is occupied almost all year  spends $54,610 in Colorado mountain communities like Telluride or Aspen – more than ten times as much. In practice, that means money spent at ski resorts, local ice rinks or in the local movie theater. People staying in their second homes year-round means more income for local businesses.

Pacaso owners make significant tax contributions

At Pacaso, we’re sometimes asked if Pacaso owners contribute to local taxes in the destinations in which we operate. The answer is a resounding yes.On top of paying all applicable property taxes, the study by EBP also found that Pacaso owners do more than support local businesses through consumer spending. Across the five markets analyzed, Pacaso owners contributed more local and state tax revenue than a typical second home owner, which benefits important local services such as schools, fire stations and local parks.In the San Francisco Bay Area, which includes top second home destinations like Napa and Sonoma, the average Pacaso home generates an additional $3,710 in state taxes and an additional $1,580 in local sales taxes compared to a typical second home.

Methodology

The study findings are grounded on a combination of sources including a Pacaso survey of home utilization, along with broader data sources on local real estate prices, household spending and tax rates.

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