In a unanimous vote at its June 11 meeting, the Palm Springs City Council approved significant amendments to the city’s co-owned managed housing ordinance. The rules were first adopted in July 2024 to regulate the burgeoning market for fractional‐ownership vacation homes like those marketed by Pacaso. Advocates argue that the changes will strengthen neighborhood protections and clarify permit requirements; critics contend, however, that the model still undermines housing affordability and community cohesion.
Indefinite Cap and New Guest Limits
The centerpiece of the June amendments is the indefinite extension of a citywide cap of 30 co-owned housing units, a limit that the original ordinance had set to expire in 2027. Under the updated text, the cap remains in place “until further action,” with the next council review scheduled before July 25, 2027. This removes uncertainty for existing fractional-ownership operators while solidifying the City’s cautious stance on the business model.
To address neighborhood concerns about daytime gatherings and noise, the Council also adopted occupancy rules mirroring those for short-term rentals:
- Maximum overnight occupancy of two people per bedroom plus minor children (age 12 and under).
- Up to four additional daytime guests permitted between 10 a.m. and 10 p.m.
Stricter Enforcement and Compliance Deadlines
Another key modification removes discretion from enforcement and replaces it with an automatic suspension or revocation of a co-owned housing permit upon the third administrative citation, aligning co-ownership penalties with the city’s vacation-rental regime. Previously, the ordinance had allowed the City Manager to decide whether to revoke a permit after three violations; now, revocation is mandatory, with an appeals process built in.
To ensure a fast transition to the new regime, the Council imposed a 30-day compliance window. All existing co-owned units must complete and submit their permit applications – including required documentation such as government-issued IDs for each owner, grant deeds, operating agreements, and “Good Neighbor” affidavits – within 30 days of the ordinance’s effective date.
Background: From Ban to Regulate
Fractional co-ownership models, popularized by start-ups like Pacaso, emerged in Palm Springs in 2021. They allow up to eight parties to purchase undivided shares of a luxury home, each gaining a proportional number of reserved weeks. Critics decry the model as a de facto timeshare—banned under the city’s zoning code—while supporters tout its ability to democratize access to high-end real estate and inject investment into the local market.
In early 2022, the City Attorney ruled that co-ownership schemes were functionally equivalent to timeshares, prompting an initial ban. But after negotiations with co-ownership companies and heated debate, the Council reversed course in July 2024. By a narrow 3–2 margin, it adopted Ordinance 2100, establishing the first regulatory framework for co-owned managed housing and capping units at 30 citywide and two per neighborhood.
Fine Structure and Permit Conditions
Under the revised Chapter 5.92 of the Palm Springs Municipal Code, co-owned properties face a tiered fine structure:
- First offense: $500 (administrative) for minor violations such as noise or parking infractions.
- Second offense (within 12 months): $1,000.
- Third offense: triggers automatic permit suspension or revocation.
More serious infractions, such as operating without a permit or marketing the property as a short-term rental, carry fines of $5,000 for first offenses and $10,000 for subsequent violations.
To qualify for a permit, properties must meet stringent prerequisites:
- Purchase Price Threshold: At least twice the median price of single-family homes in Palm Springs (specifically excluding condos).
- Neighborhood Caps: No more than two co-owned units per city-recognized neighborhood.
- Proximity Rule: Units must be at least 500 feet apart.
- Vacation‐Rental History: No permit if the property had a vacation-rental license revoked within two years before acquisition.
- Insurance: $2 million general liability and full-replacement-value fire/casualty coverage.
- Local Contact: A manager or agent who is reachable 24/7 within a 25-mile radius of the property.
- Good Neighbor Policy: Mandatory adoption of house rules covering noise, parking, trash, maintenance schedules, and occupancy limits.
Community Reaction and Next Steps
Supporters of the update, including Councilmember Grace Garner, praised the amendments for “closing loopholes and providing clarity for both homeowners and neighbors” while preserving Palm Springs as an attractive investment destination.
Opponents, notably neighborhood associations, argue that the fundamental model remains at odds with long-term housing goals. “No matter the caps and fines, fractional ownership drives up prices and erodes community character,” said a spokesperson for the Vista Las Palmas Neighborhood Association.
The amended ordinance now moves to a second reading, expected in mid-July, and would take effect 30 days after final adoption. As of June 30, 2025, existing co-owned homes are required to comply; failure to do so will result in steep fines and the loss of operational permits.
Broader Implications
Palm Springs’ evolving stance on co-owned properties highlights a nationwide tension: balancing innovation in real estate investment against community stability and housing affordability. With five co-owned homes already approved and additional listings on Pacaso’s platform in Palm Springs and neighboring cities, municipal leaders are closely watching as Indian Wells and La Quinta adopt their policies.
As the Coachella Valley continues to attract luxury-property investors, Palm Springs’ ordinance amendments offer a template for other jurisdictions grappling with the disruptive potential of co-ownership models. By codifying strict caps, fine structures and operational standards, and by eliminating automatic sunset clauses, the City aims to provide a durable regulatory framework. Whether it achieves the intended balance remains to be seen as the first compliance deadlines approach.
Bob Marra is the CEO/Publisher of GPS Business Insider. He has been studying, writing and giving presentations about business and public affairs news and issues and the local economy in the Greater Palm Springs/Coachella Valley region for more than 20 years.
