ISSUE #5--Housing: Whose Crisis Are We Trying to Solve?

We should figure that out before we spend the $350+ million

CLARIFICATION: In Issue #3, I stated that the City of Ketchum had remitted $768k to Blaine County Title Co. That is technically correct. However, Mr. Daryl Fauth of BCT has asked me to clarify that his firm only retained $58k of that, and the rest were disbursements from escrow. Mr. Fauth stated that I owe him and his shareholders an apology. I won’t apologize for citing information the City of Ketchum provided in a public Treasurer’s Report, but I thank him for correcting the record.

Whose Housing Crisis Are We Trying to Solve?

It is generally agreed that Ketchum has a housing crisis. Dissatisfaction with the City’s approach to housing was the #1 concern in the Comprehensive Plan survey. But who has what concerns? We don’t know in any statistical sense.

Here’s how I read it:

• People who work in Ketchum or working people who want to live in Ketchum find Ketchum housing too expensive.

• People who have worked in Ketchum and want to retire in Ketchum find housing too expensive to retire here.

• Employers struggle to fill open positions because potential employees cannot afford to live in Ketchum.

• Many business people object to the City's actions that increase parking demand while using parking lots for low-income housing projects; they feel their livelihoods are threatened.

• Advocates for the under-housed (particularly our new neighbors from Latin America) feel Ketchum is not doing enough to house them.

• Wealthier people, who do not struggle with paying for housing, object to how the City is changing the character of Ketchum with 4-story, lot-line-to-lot line boxes in the center of town.

• Free market people think the City should stay out of the housing business altogether

• What subgroup/interest am I missing?

A wide range of concerns about housing begs the question: Whose housing problem are we trying to solve?

• Is the primary objective to address our workforce shortages?

• Or is it to make housing more affordable for anyone who wants to live in Ketchum?

Currently, Ketchum's official policy, as embodied in the Housing Action Plan, is to make housing more affordable for anyone who wants to live here (I will dissect the HAP in detail in a future installment—it is, in my analysis, a recipe for the destruction of Ketchum).

Who is the Housing For?

We should have some agreed-upon criteria to prioritize how to allocate our scarce resources. The City of Ketchum does not. Given our limited resources, we should allocate them to where the community receives the highest return on investment for that money. When we make choices about housing, we implicitly prioritize who will live in that housing over other options for that money, that land, and the character of the community. My complaint about the City’s housing policy is that it does not correctly prioritize the “who” in housing. In the City’s ontology, housing is about units and income levels; in mine, it is about people.

This line of reasoning leads us to several ethical questions.

Do all people contribute equally to a community?

• I recently asked this question in a public meeting about the Lease to Locals program. I noticed this program was subsidizing the employees of some rather large corporations (I have a two-part series coming on Ketchum’s corporate welfare). The mayor justified it by saying that everyone in Ketchum contributes equally. However, eighteen months earlier, in an editorial for the IME to justify Bluebird 1, he said we should prioritize housing for Ketchum's “lifeblood”: first responders, teachers, and healthcare workers because they are essential workers. I think he was right in the IME. Why did he change his stance? Maybe he changed his narrative when we learned Bluebird 1 will not house that lifeblood.

Are some people more deserving of public subsidy than others?

• The obvious answer is yes. This is enshrined in Federal law. For example, you must be a legal permanent US resident to be a tenant in a building financed with Federal tax credits. We have housing preferences for the differently abled. The City Council legally adopted a preference at Bluebird 1 for local retirees. However, as a community, we have no criteria for prioritizing our resources for the various kinds of people who want to live in subsidized housing. Indeed, the Housing Director hides behind the Fair Housing Act to say we can’t have criteria other than low-income.

My criteria for allocating our scarce resources are:

• address the workforce shortage rather than the general housing affordability issue; we can never build enough housing to satisfy the demand to live in Ketchum affordably (ask the people of Aspen or Jackson);

• prioritize housing for teachers, first responders, health care workers, non-profit workers, and city employees over for-profit occupations and retirees.

Please reread the above. If you disagree with me on those, you will disagree with me on the rest of this essay. I am saying that for-profit businesses should deal with their employee housing without taxpayer subsidies. This is a strong opinion, lightly held, and I would love to hear the arguments against this position in the comments section.

I could be convinced that there is a spectrum on this. For example, if we are going to subsidize for-profit businesses, I would rather they be small rather than large and local rather than out-of-state. I’d rather subsidize someone who works at a locally owned store than someone who works for US Bank, Aspen Ski Co., or Sun Valley Corp.

As for retirees, I am sympathetic to the notion that people who have lived and worked here want to spend their golden years in Ketchum. The question is: should Ketchum taxpayers subsidize retirees? I say no. This challenge is not unique to Ketchum—many retirees cannot afford to stay in the community where they raised their families. That said, if Ketchum voters agree to allocate scarce resources to retirees rather than teachers, so be it.

If you disagree with my prioritization, please let me know why in the comments section (you may change my mind!).

Our Scarce Resources: Money, Land & “Character”

We also have other scarce resources we “spend” on housing: land and community “character.” There are only so many places to build in Ketchum, be it housing, retail, restaurants/bars, parking, offices, etc. These criteria don’t apply to “who” but are critical to “where.”

“Character” is complicated to define (please put your suggestions in the comments). Things that come to my mind:

• small-town feel

• ease of access to businesses (e.g., parking)

• slower pace of life than in a city

• connection to the mountains and the sky

• critical mass of economic activity

• local control of the economy

• what am I missing?

Land and character are essential considerations when allocating resources to housing. Do we have to sacrifice character to provide housing in the commercial core? Do we have to sacrifice local control? Having studied this, I don’t think we do. I think we can do more for workforce housing AND maintain our character. It depends on what we build, who we build it for, and where we build it.

The Real Driver of High Housing Prices for Workers: Tourism

One of the things that bothers me about our dialog on housing is that it is so divisive. I know I have contributed to that, but I’m trying to get people to pay attention and get involved.

The blame game is a regular feature of the City and the Mountain Express. They blame high housing prices on the following:

• second homeowners, who build mansions that stand empty, and

• remote workers who live in Ketchum but derive their compensation from outside of the community and bid up housing.

These have certainly contributed to rising prices, and the bolus of demand from Covid to live here also contributed.

The blamers ignore the fundamental driver of housing demand: tourists. Many of our housing units are dedicated to tourism. We may have as many as 1,000 short-term rentals in Ketchum, many owned by non-local real estate speculators. Tourism demand can always price a working local out of a housing unit.

Perhaps the reason they don’t want to think about this is guilt. The Mayor and the then-city council sat on their hands while almost every long-term rental in Ketchum went into the Airbnb market. This was one of the greatest failures of elected leadership in Ketchum's history. Nothing has sapped the community's character in recent years more than the loss of locals to tourists.

I ask myself: “How could they have done this?” Then, I remember: if your vision of Ketchum is that it should be the next Aspen, you want as many short-term beds in Ketchum as possible. Displacement of locals to achieve your vision is just collateral damage.

To put this in economic terms, the demand for housing has risen faster than the supply. The demand to visit/live in our paradise is infinite, while the supply is not. Can we increase the supply to meet demand? Should we? Should locals subsidize housing for tourists? We do, via our zoning code. Should locals subsidize housing for newcomers? Maybe, if they serve a need for the community, like teachers, first responders, and health care workers.

Ketchum has 120+ units of Public Housing—is it a Success?

The biggest chunk of them is in Northwood Place. Over a decade ago, when he ran the Ketchum Community Development Corporation (KCDC), the Mayor led the building of taxpayer-subsidized Northwood Place. It was sold to the community as workforce housing, so it got free land from the City. It was financed using a tax credit program that prevents restrictions on tenancy above the limited Federal ones. It cannot require tenants to work. As with Bluebird 1, the nominal owner is the KCDC (see below).

Northwood Place is a three-story multi-building complex with 32 units and 32 parking spots off of Saddle Rd next to the new firehouse (residents use the YMCA parking lot for overflow). It is reasonable in scale, has adequate parking, and is in a lovely location between the LI and residential zones. While its tenants often use the Y or church lot for their extra cars, that’s a lot better than taking up a spot at Atkinson’s. It is on the bus and bike routes and a short walk to the YMCA. From its website, it sounds pretty nice.

Was Northwood Place a good investment that mitigated Ketchum’s workforce crisis? I have no idea. I don’t know anyone who does. Who lives in Northwood Place? Are they the essential workers the Mayor advocated for in February 2022 to justify Bluebird 1? Does it make a profit? Where does that money go?

There has been no report to the community on whether Northwood Place achieved its promised goals. How can that be? We gave it millions of dollars in taxpayer resources. Don’t we have a right to know if we got a return on that investment? Doesn’t the City have an obligation to know?

According to its website, City Council Member Hamilton sits on the board of KCDC. I have never heard her report about it in the years I have attended public meetings. Why not? As a fiduciary for the taxpayers, doesn’t she have an obligation to inform the public if Northwood Place is achieving its intended purpose? It begs the question—whose interests are being represented?

I tried to find out. I asked the City. They sent me to Syringa, who manages the building. Syringa sent me to KCDC. KCDC ignored my written request. I sent a FOIA request to IHFA. It looks like you have to sue someone to find out what they do with your tax money.
www.idahohousing.com

And what about the other 70+ deed-restricted units that exist in Ketchum? Are they addressing the workforce shortage? Are they in compliance with their deed restrictions?

Why does KCDC own our public housing?

Who is KCDC? They own both Northwood Place and Bluebird 1. Are they a public agency? No—they have no accountability to Ketchum residents. Does the Mayor appoint their board? No—it selects itself. The chair of KCDC is Charles Friedman. Yes, he is in the real estate industry. They haven’t posted a financial report since 2019. Indeed, they were out of filing compliance with the State of Idaho and were brought back into compliance for the Bluebird 1 approval process.

We have a self-perpetuating, non-accountable, non-transparent shell-like non-profit as the owner of the two low-income housing projects in Ketchum worth tens of millions of $$. How is this good governance? At least BCHA has public meetings.

A triumph of Narrative over Analysis

One of my objections to Ketchum’s “Bluebird” program, which includes six buildings with over 300 units, is the lack of analysis.

• It is, by both my and the City’s calculations, the most expensive approach to housing;

• it is not workforce housing (no one in Bluebird 0, Bluebird 1, or Bluebird 3 can be required to work);

• because it is done as a lifetime entitlement, it means we need to keep building more and more and more of it to meet the demand and

• it sucks up a massive amount of our scarce non-financial resources (e.g., character, location).

This approach hasn’t worked to solve the workforce housing shortage in any community that has tried it, ironically, including Aspen.

So why has City Hall adopted Aspen’s failed approach to housing?

What should we be doing?

Besides the broad questions in the community survey, has the City ever asked you for more details about your housing views? Uh…nope. The right approach would be to survey the community for their priorities on how we allocate our scarce financial, land, and character resources to the who for, what kind, and where we build it questions. I have advocated surveying employers and workers about this for years. It doesn’t seem that hard, which begs the question, why won’t the City do it?

For example, the City has a database of all its employers. Why not ask them what their workforce challenges are, how many workers of what kind (full-time, part-time, seasonal) they are short, what they are doing about it themselves, what things they would like to see the City do, what actions they could help with, etc. If I were on the Council, I would want an annual business survey¹ about not just housing but all the issues pertaining to running a business in Ketchum so that we could track the economic vitality of the community over time and help us allocate our scarce resources to where they will have the most positive impact.

The other demographic we should be surveying is employees. The City has embarked upon a ten-year, $350+mm housing action plan without asking who they want to put in this housing...anything. I have proposed asking the people we plan to house what kind of housing best serves them. For example, does building three-bedroom units in the commercial district make sense? Or would families with school kids prefer to live south of the core? If they could live in the core without parking or at the south end of town with parking, which would they prefer?

Given how much it costs to build a unit of subsidized housing in downtown Ketchum, maybe some of the beneficiaries would rather take a fraction of that in cash. Take Bluebird 1. $30mm (or more) in hard costs, $5mm (or more) in “free” land, and probably another $5mm in lost taxes to the City compared to the highest and best use. $40mm for 50 units. That’s $800k of value per unit. Given that the only criteria for tenancy is an income cap on the day they move in, that it is an entitlement for life, and the property never comes back to the City (it goes to KCDC after 40 years), this is a transfer of value from the community to the tenant of a great deal of money. Maybe they would rather have $100k for rent subsidy?

We can infer the goal: Aspenization

To me, willful ignorance is something to be feared in government. I fear that our technocrats think they know better than the people they are supposed to serve how to run things. I fear they value narrative over analysis. I fear they have no concern over the long-term implications of their decisions.

In my observation, this attitude permeates Ketchum City Hall. Why bother to listen to people when their concerns are irrelevant to what you plan to do? If your plan is Aspenization, the path is clear. You don’t need community input. It’s just time-consuming and annoying.

A simple ask of our leaders

If you, as a City leader, are hell-bent on a program of building high-density, low-income housing projects and insist they have to be on City-owned land that you can give for free to a developer, why does it have to be the City-owned land in the commercial core, where the project will consume the most valuable land, have the biggest impact on community character, and displace commercial parking?

Why can’t these boxes go on City-owned land in the Light Industrial zone or by the WTF where land is cheaper, character impact is reduced, and there might be more parking options? It would still be a sub-optimal program, as you wouldn’t be addressing the workforce aspect of housing, but it would be a lot less damaging to the community.

When our City leaders throw out economics in favor of their political agenda, it begs the question: Is this really about housing at all?

1. Why doesn’t SVED do this?