Forward
In February, the South Carolina Court of Appeals ruled 2-1 that a home on Sullivan’s Island owned through an LLC and sold in fractional shares by a company called Pacaso was not a prohibited short-term rental. The town had banned vacation rentals more than twenty years ago, and local officials argued the arrangement functioned like a timeshare. The court disagreed, finding that because only deeded owners and their guests stayed in the home, the use fit within residential ownership rather than commercial lodging.
The decision did not declare the model good or bad. It simply said the ordinance, as written, did not stop it.
The reaction, however, revealed a much deeper issue than one property dispute.
First, what Pacaso actually is
Before debating the court case, it helps to understand what Pacaso actually does, because many people assume it is simply a property manager or a vacation rental company. It is neither. Pacaso is a fractional ownership platform, and that distinction is the entire reason the legal conflict exists.
The company purchases a high-value home, typically in a resort or coastal community, through a limited liability company. Instead of renting the property, it sells ownership interests in that LLC, usually in one-eighth shares, to unrelated buyers around the country. Each buyer becomes a deeded owner and receives scheduled access to the property for several weeks each year, coordinated through a scheduling application. The company collects an ongoing management fee and handles logistics.
Legally, that difference matters. The occupants are not paying nightly rent; they hold title interests. Because of that, the arrangement falls outside many traditional short-term rental restrictions even though, from the perspective of neighbors, the practical experience can resemble rotating vacation occupancy.
That is why the Sullivan’s Island case exists at all. The court was not deciding whether people should like this model. It was deciding whether the ordinance prohibited it, and the ordinance — written long before platforms like this existed — addressed renting, not structured co-ownership.
Two things can be true at once. The court likely applied the law correctly, and residents still have legitimate reasons to feel something fundamental is changing in their community.
This case is not really about vacation rentals. It is about something larger: we have slowly turned housing into a structured financial product, and communities were never designed to absorb that change.
In my opinion, Pacaso is a parasite, even if they are operating legally.
Houses used to be places. Now they are platforms.
For most of modern American history, a home was primarily a dwelling. Even second homes had personal continuity — families returning every summer, children growing up with the same neighbors, and a predictable rhythm of occupancy. Ownership brought familiarity, and familiarity created stability.
That continuity was not nostalgia; it was the social architecture of neighborhoods. Communities form not just from property lines but from repetition, recognition, and a sense that the people around you actually belong there in some meaningful way.
Fractional ownership platforms change that dynamic. They do not change zoning directly; they change the economic meaning of the house. The property becomes divisible into scheduled access periods, and occupancy becomes allocated rather than lived. A home begins functioning less like a residence and more like a managed resource.
When that happens, the character of a neighborhood shifts even if the legal classification does not.
Why residents are reacting
The concern on Sullivan’s Island is not really about one property. It is about what happens if the model scales. A single fractional home might be tolerable, but multiple homes begin to change patterns of occupancy, parking, noise, and neighborhood familiarity.
Traditional second-home ownership still produces continuity. The same families return repeatedly, relationships form, and neighbors know who lives next door even if only seasonally. Corporate fractional ownership introduces rotating unrelated households whose only connection is a shared financial structure.
The difference is subtle but meaningful. The issue is not ownership; it is churn. When new groups arrive every week or two, the home may technically remain residential, yet functionally resemble hospitality use.
That is why many residents feel the rules were not broken but were avoided.
When financial engineering meets community life
There is an important distinction between eight friends choosing to share a beach house and a corporation assembling eight unrelated buyers into an ownership group. Both are legal, but they are not socially equivalent.
The first grows organically from relationships. The second is organized as a product offering. The buyers are not simply purchasing a home interest; they are purchasing access to a stable community environment created by others who permanently live there.
The community itself becomes part of what is being sold.
This is one of my greatest concerns about what housing is becoming. When large national investment groups move into local housing markets with enormous pools of capital, they are not joining the community — they are competing with it. Local families saving for years to buy a home are now bidding against institutions that can pay cash, absorb losses, and treat houses as line items on a balance sheet. Those companies benefit from the charm, safety, and neighborliness that residents spent decades building, yet they carry none of the long-term commitment that created it. The home stops being a place to belong and becomes a unit to optimize. Over time, the people who made the neighborhood desirable are priced out of it, and the community itself is reduced to a commodity whose value is extracted rather than shared.
That is where discomfort begins. The concern is not new people entering a neighborhood — communities evolve constantly — but a system where belonging is replaced by scheduled participation coordinated by an external business.
The real gray area
The crucial question is not whether co-ownership should exist. It always has. Families have shared vacation homes for generations without controversy. The real issue is how ownership is created and how easily it turns into a rotating access system.
If participation resembles buying temporary access with minimal investment and easy exit, then the structure effectively replicates short-term lodging. If participation requires substantial equity investment, ongoing expenses, and real ownership risk, then the buyer is a legitimate owner.
Current zoning codes do not distinguish between those situations because they were written before such models existed. They regulate rentals, not corporate-assembled ownership.
A better way forward (and a clearer line)
Many proposals suggest regulating occupancy frequency or rotation schedules. I disagree. Those approaches attempt to control behavior after the structure is already in place. The real issue is not how often the home is used but who is assembling the ownership.
There is a meaningful difference between private co-ownership and corporate-marketed co-ownership. When unrelated strangers are recruited and packaged into a shared property by a national company specifically to bypass lodging restrictions, the house begins functioning as a commercially organized enterprise even if no nightly rent is charged.
Law already recognizes similar distinctions elsewhere. Timeshares are regulated differently than homes. Condo-hotels require special disclosures. Securities offerings cannot be marketed freely without registration. The principle is consistent: once a structure aggregates unrelated participants for profit, it stops being purely private ownership.
Communities should draw a clearer line. Private partnerships among friends or families should remain allowed. Corporate-assembled fractionalization of residential housing for unrelated buyers should not.
That would not restrict property rights. It would protect neighborhoods from becoming inventory.
What this case really shows
The Sullivan’s Island ruling did not destroy property rights, and it did not validate every concern of residents. Instead, it exposed a gap between old definitions of housing and new financial uses of it. The court interpreted the law as written, but the model revealed that the law no longer describes modern housing realities.
Pacaso is not uniquely at fault, and the town is not irrational. Each is operating logically within its role. Businesses seek opportunity, and municipalities attempt to preserve community character.
In my opinion, Pacaso is very bad for housing, and I wish it didn’t exist. The challenge is finding a way to discourage or eliminate these parasites of housing without blocking true private property rights. That is where the challenge is significant.
The real issue is that housing now occupies two roles at once: shelter and asset (financial instrument). When the asset function dominates, communities feel the effects long before legal definitions catch up.
Housing should be individuals or small affiliated groups of people joining forces together to invest and/or live in their community; not large national parasites extracting the social value of the community.
The question going forward is not whether fractional ownership will exist. It will. The question is whether communities will decide that a home is simply a divisible investment or whether they will preserve a distinction between belonging to a place and temporarily accessing it.
Because a neighborhood is more than property lines.
It is continuity — and continuity is not something an app (re: parasite) can schedule.
