The Park City Council on Thursday unanimously passed an ordinance that allows “fractional ownership” homes in zoning districts that permit timeshares and private residence clubs, except for subdivisions that have petitioned the municipality to prohibit nightly rentals in their neighborhoods.
The ordinance creates a new fractional dwelling unit use to the Park City Land Management Code and covers all dwelling types — including co-owned single-family homes, duplexes, triplexes and multi-unit residences.
Shared ownership sets the fractional properties apart from timeshares and private residence clubs.
With a timeshare, people buy the right to use a property for a certain amount of time. A private residence club is defined by the Land Management Code as a single condominium dwelling unit shared by four to 12 owners or members with property management that provides a reservation system.
Under the co-ownership model, companies sell “fractions” of dwellings in the form of one-half to one-eighth shares, including within primary residential neighborhoods. Some owners buy more than one share in a property, which is used for vacations.
The properties typically, but not always, are managed by a third party. Fractional ownership companies might create a limited liability company (LLC) for each home and then provide scheduling services, furnishings, maintenance and cleaning. These homes also might be co-owned by unrelated people without an LLC, according to a Park City Planning Department staff report.
“Fractional use of property is not new to the community,” the report says. “The City has regulated Timeshares and Private Residence Clubs for decades. However, this new model of Fractional or Co-Ownership and Use of Dwellings in primary resident neighborhoods is relatively new.”
Noting that Park City’s General Plan supports a balance between residents and visitors, planning staffers recommended amendments to protect primary residential neighborhoods for full-time residents and to direct co-ownership to the zoning districts where timeshares and private residence clubs are allowed.
Another recommendation was to consider incentives to keep primary residents located within Old Town, which is not in a zone that allows fractional ownership homes.
The zoning districts where the fractional dwelling units can be located include historic recreation commercial, historic commercial business, recreation commercial and regional commercial overlay.
Staff members will conduct further study of three other zones where fractional ownership is allowed under the ordinance — residential development, residential development-medium density and general commercial — then report back to City Council. No fractional ownership applications will be processed for those areas until completion of the evaluation, which is to take no more than six months.
A blog post by Pacaso, a San Francisco-based company that has 10 fractional ownership homes in Park City, says its model gives buyers more options to reduce the cost and hassles of owning a second residence.
The company buys luxury properties, sells the shares and acts as the property manager for a monthly fee paid by the owners. Pacaso — which had stopped acquiring homes in Park City while a City Council decision on how to manage fractional ownership was pending — does not retain ownership in a home after it is sold. Other companies might have different models.
Park City is experiencing a housing crisis as a result of unprecedented demand for second homes and has a “wasteful legacy model” of ownership of whole second residences that sit unused for about 90% of the year, Pacaso claims on its blog.
“There is a better way,” the post says. “Pacaso takes up to eight buyers and puts them in one home. Those buyers were looking for single family homes in the community. Instead, they share one luxury home.”
Park City is the first municipality to “recognize and regulate” Pacaso’s co-ownership model, the blog says.
“This is bigger than Pacaso,” the blog post says. “Co-ownership is an established practice in Park City and the rest of the country. Pacaso is modernizing the process and bringing together buyers.”
The Land Management Code changes apply only to future co-owned residences. Homes that already are fractional ownership dwellings, including Pacaso’s 10 properties in Park City, are excluded from the regulations.
The ordinance prohibits short-term rentals and requires that a plan for maintaining each property be filed with the city. Pacaso already prohibits short-term rentals and provides maintenance of the homes.
Community members, though, have expressed concerns about turnover at the vacation homes, upkeep of the properties and the possible impact on the quality of life in their neighborhoods.
On Thursday, Eric Moxham, a leader in Friends for Responsible Development for Greater Park City, said fractional ownership properties are like nightly rentals and don’t fit the character of a single-family home community.
“They’re allowing people to buy a part of Park City for a lesser price than they would if they were buying a home outright themselves for an individual family,” Moxham also said. “All that does is drive up prices.”
As the price of the most expensive homes goes up, there is a “gravitational pull upwards” on the next tier of residences and eventually the cost of housing stock has increased across the board, he said. Then, even the price of the least expensive homes will rise, making the shortage of affordable housing more acute, he said.
The staff report says code changes would not inhibit friends or family to come to relationship-based agreements to buy and share property or to employ a property management company or a shared housekeeper. Rather, it says, the amendments specifically regulate the business management model of the simplified, fractionalized sale of vacation properties and the fractionalized use.