The Newport Beach City Council voted unanimously March 14 to draft an ordinance to classify fractional homeownerships as timeshares, which are currently banned in the city’s residential neighborhoods.
Fractional homeownership occurs when multiple individuals purchase a property, usually as a second home, and split usage based on a percentage of ownership.
They are different from timeshares in that the buyers purchase a share of the property’s title, rather than a share of time to use the property.
“Allowing fractional homeownership, as they’re used today, is an improper use of land planning,” Councilman Joe Stapleton said at the city council meeting. “It creates a camouflage for timeshares in areas that are not zoned or do not permit [them].”
He said if there were fractional homeownerships when the ordinance restricting timeshares was drafted they would have been lumped together.
“Commercialization of our neighborhoods [is] not what I’m looking for,” Stapleton said.
Of concern to Stapleton is that such could have adverse effects on quality of life in the “already dense” District 1, which encompasses the Balboa Peninsula and west Newport Beach. He additionally said such could reduce housing stock, as many desired homes would come off the market for fractional use.
Timeshares in the city must be at least 100 units or be part of a 300-unit hotel, unlike fractional homeownerships, which are houses in residential zones.
Companies across the nation are offering such, brokering the purchases.
One such firm is San Francisco-based Pacaso, which purchases homes and resells a one-eighth share of the property—translating to about six weeks of use—then manages it. Some of its properties in Newport Beach are listed for over $1 million for fractional ownership.
A spokesperson for Pacaso disagreed with the council’s definition of such homes as timeshares, saying in a March 13 letter to the city, “Co-owned homes are not ‘timeshares,’ rather co-owned homes are residential real estate, owned and enjoyed by the individual owner-occupiers, who have complete control of their home.”
The city currently has 12 fractional homeownerships, which would not be impacted by the newly proposed rule if adopted. These would be “grandfathered in” and allowed to operate as the only ones of their kind in the city.
Last month, Newport Beach planning commissioners recommended such homes be classified as timeshares, saying they commercialize residential neighborhoods and have similar impacts to short-term rentals.
Councilwoman Lauren Kleiman said during the meeting the city has received many emails asking the council to disallow fractional homeownership.
“This is obviously a very transient use” that has the potential to be used for something other than residential use, she said.
During public comment on the issue, many spoke against them as well, while some fractional homeowners spoke in favor of the model, saying it allows them to own a second or vacation home without the responsibility of maintaining it.
But Kleiman said allowing such homes “raises too many other questions about monitoring and enforcement that lacks consequences and unfairly burdens our neighboring residents.”
Councilman Brad Avery additionally said during the meeting that Newport Beach already has its “fair share” of short-term rentals, which allow individuals to live at a residence in the city for a limited stint.
He also said fractional homeownerships impact existing homeowners.
“When you buy your home, it’s inconceivable to me that you would end up having a rehab home next door to you, which has happened to many people in our city, or in this case a timeshare,” he said.
The council will now vote on the ordinance at a later date, which has not been scheduled.
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