California’s housing market is undergoing a transformation as affordability challenges push homebuyers toward alternative ownership models. A recent report by the Bay Area Council Economic Institute highlights a growing trend in co-ownership arrangements, signaling a shift in how buyers are adapting to rising property costs and limited inventory. The report reveals that co-ownership transactions now make up 30 percent of home sales in the United States. In addition, 14 percent of buyers in 2024 purchased homes with friends, a notable increase from just four percent in 2022.
With median home values exceeding $1 million in many parts of California, traditional homeownership has become increasingly out of reach for many individual buyers. In response, platforms such as Pacaso and CoBuy have emerged to provide alternatives that allow multiple buyers to pool their resources and share the financial responsibilities of homeownership. This approach enables more households to enter the real estate market while simultaneously optimizing the use of available housing stock and fostering long-term community investment.
Analysts note that rising home prices and higher mortgage rates have driven homebuyers to explore alternative ownership models. Companies like Pacaso specialize in facilitating the co-ownership of second homes, while CoBuy helps groups of buyers collaborate to purchase primary residences. The report highlights several key shifts in purchasing patterns, including a rise in co-applicant mortgage applications and increased public interest in shared homeownership.
Over the past decade, the number of home purchase applications in California that include a co-applicant has climbed from 37 percent to 44 percent. Meanwhile, Google searches related to co-ownership have risen by 63 percent, reflecting a growing interest in shared property investments. Additionally, data shows that Pacaso co-owned properties maintain an 89 percent utilization rate, a stark contrast to short-term rentals, which have an average occupancy of 53 percent, and traditional second homes, which see use only 39 percent of the year.
Unlike short-term rentals, co-ownership is designed for long-term investment rather than transient lodging. Owners in co-ownership arrangements hold an equity stake in their property, making them financially invested in its upkeep and the surrounding community. This model also differs from timeshares, which only grant usage rights rather than true ownership. Co-ownership allows buyers to build equity, benefit from property appreciation, and enjoy flexible usage arrangements tailored to their needs.
As the co-ownership model gains traction, it is reshaping market dynamics by consolidating demand and improving housing efficiency. The Pacaso model, for example, helps reduce competition for single-family homes by attracting high-income buyers into shared-ownership vacation properties. This redistribution of demand helps stabilize prices in the broader housing market, creating more opportunities for middle-income buyers to purchase primary residences.
Based on the report, the economic impact of co-ownership is also significant. Pacaso owners, for instance, spend an average of $42,555 per year within their local communities, a substantial increase compared to the $18,645 spent by traditional second-home owners. Co-owned properties generate an additional $1,233 in local tax revenue per home, further contributing to municipal budgets without exacerbating housing scarcity. By making single-family homes more available to middle-income buyers, the expansion of co-ownership could help alleviate affordability pressures in some of California’s most competitive housing markets.
Despite its growing popularity, co-ownership still faces regulatory uncertainty. The report recommends several policy changes to accommodate and support shared ownership models. One key recommendation is to establish a legal definition for co-ownership that distinguishes it from short-term rentals and timeshares. This distinction would provide regulatory clarity and allow for fairer treatment under existing housing laws.
Additionally, policymakers are encouraged to introduce tax incentives for co-ownership, particularly for primary residences. Such incentives could help expand the model beyond vacation homes and into high-demand urban areas. Analysts also highlight the potential for co-ownership to play a role in downtown revitalization, suggesting that underutilized office spaces could be converted into co-owned residential units to help address housing shortages while boosting local economies.
To further support innovative housing solutions, the report advocates for streamlined zoning and permitting processes. Similar to the policies that have encouraged the construction of accessory dwelling units, these reforms could facilitate the adoption of co-ownership on a broader scale, increasing housing supply and making homeownership more accessible to a wider range of buyers.
As California continues to grapple with its housing crisis, co-ownership is emerging as a practical and sustainable solution for many prospective buyers. With affordability pressures persisting, analysts underline that shared ownership models offer a way for households to navigate high costs while still achieving the financial and personal benefits of homeownership.
