Pueblo aims to increase housing supply through auction of vacant properties

In an effort to increase the local housing supply, the city of Pueblo will launch an online auction this spring through Public Surplus that will allow Puebloans to bid on vacant properties that have liens on them.

The auction could be posted as early as May 14, said Haley Sue Robinson, director of public affairs for the city. The city is finalizing marketing and language for the auction that appropriately explains the process, she said, which some city leaders, including Mayor Nick Gradisar, feel can remove blight from some neighborhoods and put vacant properties back into use.

“For whatever reason, the current owners of (these vacant properties), I’m not saying they’ve abandoned them, but they’re not using them or fixing them up,” Gradisar said.

The city in 2021 adopted an ordinance that requires property owners to register a building or structure if it has sat “vacant,” meaning not legally occupied for 30 or more days in a calendar year. That registration comes with a $500 fee and a separate $500 fee if an owner fails to register the property.

If owners don’t register the property and pay the fee by Jan. 31 of each year, the city can then create a lien against the building or structure, according to the ordinance.

As of March 16, the city had placed liens on 260 properties in different areas of Pueblo, though it’s not expected that all of them will be auctioned immediately but rather in waves. It’s possible a property’s original owner can pay off the liens to keep it.

“If they don’t do that, it’ll be up to the private sector to start that foreclosure action and actually give title to the property,” Gradisar said. “The city does not own any of these properties that we’re selling the liens on. It’s still in private hands, but this is a way to transfer those lands to other members of the public that are interested in doing something with them.”

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Gradisar during his State of the City address and reelection announcement touted the strategy as an “affordable” housing solution for a county that, according to a housing assessment study, needs nearly 10,000 additional housing units over the next 10 years. The study also said the lack of available inventory paired with price increases have created “extremely competitive” for-sale and "undersupplied" rental housing markets in Pueblo County.

There is no clause or specific language from the city through the registry that states the lien holder must price a new structure or rehabilitated building at an “affordable” rate. Still, Gradisar said he believes this strategy will increase affordable housing supply because the amount of money “they’ll invest in it doesn’t require them to maximize their returns.”

Gradisar said some of the properties might need to be demolished to build a new one, but that each property rehabilitation will be “unique.” He expects most of those properties would turn into single-family homes.

“For the price of the lien and price of the foreclosure, their (investment) in the property is probably $10,000 or less,” Gradisar said. “If it costs them another $50,000 to rehab the property, they don’t have to charge $3,000 a month for a two-bedroom house to make it economically feasible.”

There has been some initial interest from realtors and Puebloans who have inquired about purchasing a lien, Robinson said, including the Southern Colorado Residential Rental Association. Gradisar said the city has received interest from investors inquiring about a list of properties that will be up for auction.

That initial list could include up to 15 properties and is expected to be presented on first reading during a city council meeting next week.

Gradisar said it’s possible Puebloans will start to see some of those properties being rehabbed by this time next year.

“That’s not as fast as we’d like, but it’s faster than it’s been,” Gradisar said.

It could conceivably take until then or longer to see if the strategy has an impact on Pueblo’s housing market, which somewhat cooled in January with sales down 50% compared to the same time last year and sellers having to reduce prices to generate activity, according to a Pueblo Association of Realtors spokesperson.

There also seemed to be less activity during that month among builders as nine pulled 13 permits to build new homes. That marked a 79% drop in that action compared to January 2022.

Chieftain reporter Josue Perez can be reached at JHPerez@gannett.com. Follow him on Twitter @josuepwrites.

This article originally appeared on The Pueblo Chieftain: Pueblo hopes to increase housing supply through online lien auction