FOX Business' Ashley Webster reports on an emerging trend: younger generations are becoming more open to co-owning a home with friends.
Buying a share of a home with friends or family may not be as easy as you think.
The concept of shared home ownership is not new (think timeshares), but with a volatile and expensive real estate market, more and more young people are reportedly warming to the idea of buying a quarter or even an eighth of a property.
“This is just a natural solution to a growing problem facing many cities here in the U.S. and around the world,” Austin Allison, co-founder and CEO of Pacaso, a real estate brokerage that lists vacation home properties, told Fox News Digital.
“There are lots of examples of companies creating sharing economy solutions to old problems,” the CEO added, “and co-ownership is a sharing economy solution to the problem of housing affordability, so I think younger generations are familiar with these kinds of innovative and sustainable structures.”
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Since its founding in 2020, Pacaso has sold approximately $1 billion worth of shared ownership units across 40 markets, primarily in the U.S., and manages approximately 1,500 clients with residential LLC and operating agreements.
Pacaso CEO Austin Allison and Madison Ventures+ President and Managing Director Mitch Roschelle discuss the home co-ownership trend. (Pacaso/iStock/Photo illustration)
While Pacaso promises to handle “all of the friction and headaches that typically come with a DIY co-ownership process,” Mitch Rochelle, president and managing director of Madison Ventures+, disagrees.
“People who are promoting shared housing are essentially selling part of their home to drive up prices,” Rochelle told Digital, “so there's a financial incentive for people to support this strategy.”
“The value proposition for the buyer is, 'But think about it this way: I can own something, so why pay for the whole thing? I don't want to eat the whole pie. I know the pie is cheaper, I'm just buying a slice.' It's like a basic yin-yang between why buyers want a slice and why sellers want to sell a portion and not the whole thing.”
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Despite pessimism from market analysts, Pacaso recently launched a new suite of legal services starting at just $250 to help more interested parties enter into co-ownership agreements, and the company's CEO cited a surge in interest.
In fact, according to Zillow's 2023 housing trends report: 1 in 7 respondents Last year, 12% of people bought a property with a friend, and 12% bought a property with a relative. This data is backed up by Opendoor's First Time Home Buyers Report, released in March: More than 3 in 4 people First-time home buyers have done so with their parents, siblings, friends, or even coworkers.
“Managing a home can be difficult. Financing a home can be difficult. Coordinating repairs and maintenance between co-owners can be difficult,” Allison acknowledges, “so as a co-owner, it's something you should approach very carefully, and at Pacaso, we try to make that experience easier.”
Pacaso's co-owned properties are primarily vacation homes in the United States.
“Co-ownership is becoming more popular primarily because housing is less affordable than it used to be, and this situation hasn't gotten better over time – it's only gotten worse,” the CEO added. “Co-ownership is part of the solution to home buying, because it enables people to pool their funds with other family members to buy homes they wouldn't be able to afford otherwise.”
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Rochelle countered that the shared ownership market was actually “really small” and argued she knew there were more property investors renting out individual bedrooms in homes.
“There aren't many niches in real estate where you don't know someone, and this is one of them. I don't know anyone who wants to do this,” he says. “It's so complicated. [if] You need an LLC to buy it. Hey, don't buy it.”
But both industry leaders agree it may be a more attractive option for younger generations and first-time homebuyers.
Austin Allison, CEO and co-founder of Pacaso, talks about his company's services that expand second home ownership.
“This is aimed at younger millennials, Gen Z, who are entering the housing market for the first time. This is 100% for this generation. The closer you get to college, the less you see the challenges of cohabitation,” Rochelle said.
“But co-ownership doesn't mean that all friction is eliminated when you're the only one doing it,” Allison says. “The element of interacting with other people definitely needs to be considered and factored in.”
“Homeownership is a dream for many families,” added the Pacaso CEO. “There are many different reasons why people want to own property, and shared ownership makes it possible for many more people, because many more people can own part of a home than can own the whole thing.”
And if you do eventually decide you want to move away from shared home ownership, experts recommend not doing it alone.
“It's not just an apartment, it's your home. How complicated can that be?” Rochelle stressed. “So I think it's a bad idea in every way. And the only people making money off it are the people who are building it. They're not getting the whole pie, they're getting slices and selling them for more.”
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Mitch Rochelle, Managing Director of Madison Ventures Plus, speaks on “Varney & Co.” about the challenges young people face when buying a home.
“If you and two or three friends decide to buy a property together and one of you wants to get out of the property, it can be hard to find another co-owner to take over your share. Pacaso makes the process easy,” Allison explained.
“Anyone can sell their rights to a Pakaso home at any time, and so far, those who have sold their Pakaso shares have benefited from an increase in property values of around 10% over the entire period.”
“For us, it's about making better use of space, making better use of resources, and contributing to the community and the environment in a positive, sustainable way,” the CEO continued. “And in a world where we need solutions to housing affordability and the environmental and community challenges we face, co-ownership is a great solution.”
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