Is Fractional Homeownership Any Kind of Solution for Housing Attainability?

The housing crisis is a pressing issue in which the search for solutions extends from local, state, and federal governments to trade associations, nonprofits, entrepreneurs, startups, and beyond.

Among those startups is Pacaso, a property broker that buys single-family homes and sells them to consortiums of buyers (a practice known as fractional homeownership). Pacaso is opening up a new market for buyers looking to own a fraction of a house for a fraction of the home's total price. But is that a solution for affordability?

Pacaso isn't the only fractional homeownership option out there. Other models have also cropped up allowing investors to own a share of homes much like retail investors can own shares of a company. Sites such as Arrived, which is backed by Jeff Bezos, and Fundrise, allow people to directly invest in residential real estate. And co-buying as a concept isn’t exactly new: 62% of homebuyers say they purchased and share ownership of their home with at least one other person, according to a 2023 report from real estate listing platform Zillow. But today's version of the fractional homeownership model is aimed at wealthier individuals seeking a second home rather than first-time homebuyers or buyers looking to buy a home that will be their primary residence.

Policymakers, however, are not too keen on these ventures, which they say are hurting ordinary people looking to buy and rent homes. Congressman Ro Khanna, a California Democrat, has blasted Arrived’s model.

“The last thing Americans need is a Bezos-backed investment company further consolidating single-family homes and putting homeownership out of reach for more and more people,” Khanna said on X in December. “Housing should be a right, not a speculative commodity.”

Khanna is the sponsor of a 2022 bill, known as the Stop Wall Street Landlords Act, which would impose taxes on existing and new acquisitions of single-family rentals by institutional investors.

Read more