V2N29 : BCHA Is A Very Expensive Fail; Let's Kill It

Given Ketchum is the only city in Blaine County that supports it, let's shut it down and put the money into housing essential workers (read below for suggestions)

I spent over six hours sitting through public meetings this week, and the conclusion I came to is that Ketchum residents are being fleeced, big time, by the Blaine County Housing Authority (BCHA).

NB: I use BCHA and Ketchum Housing Department (KHD) almost interchangeably. The staff is identical. The Executive Director of BCHA is the Director of Ketchum’s Housing Department. Ketchum residents pick up almost all of the staffing costs for BCHA. The ED/Director says that expense are allocated between the two, but in the end, Ketchum reimburses BCHA, so that is meaningless. Staff doesn’t bother to keep time sheets allocating their time between the two. Ergo: BCHA = KHD.

BCHA: Shut This Expensive Mess Down

I recommend we redirect the millions of dollars we are spending on BCHA’s failure to house our essential workers (workers who perform a public service like teachers, healthcare workers, first responders and city employees) and use that money to house the essential workers that Ketchum lacks.

Below I explain why BCHA is not only a waste of time and money, it’s a failure at meeting our community housing needs. There is a better (and far cheaper) option (at the end of this).

BCHA Is A Predator, Feeding Off The People They Are Supposed to Help

Daryl Fauth, the Hailey board member on BCHA articulated the fundamental problem with BCHA at its June 18 meeting.¹ He noted that BCHA is not in the business of helping people graduate from BCHA housing into market rate housing; they exixt to provide affordable housing.

Thank you for this transparency. I have been saying this all along. BCHA (and the Ketchum Housing Department) are not in the people business. They are in the real estate business. Actually, as I will explain in a second, they are in the poverty perpetuation business. We need a people centric approach to housing, and that does not exist in Ketchum City Hall or in the BCHA office.

I have called BCHA a “self-licking ice cream cone” in previous issues: it grows its bureaucracy by creating its own demand. After June 18th’s BCHA board meeting, I think it is worse. BCHA is a predator that feeds off the people it is supposed to help. Is it intentional? I don’t know, but even if it is well-intentioned that doesn’t excuse its actions.

The bureaucracy continue to grow. The staffing/consulting budget of the Ketchum Housing Department will go from $500k to $800k in the next budget. That’s a 60% increase. For what? Are we housing 60% more people? Uh, no. I have no idea how many units they administer, but it’s less than 200.² That’s >$4k per unit per year overhead cost.

BCHA Bites the Hand that It Feeds

In the June 18th meeting, the board adopted a new set of policies that took that document from 29-40 pages. One public comment was that it is impossible for a housing applicant to understand the document. The BCHA executive director (“ED”) countered that it is an administrative document, not one for education, and that they plan to create educational materials.

Next year. After they hire more staff.

Two of the public comments were that BCHA strikes an “us versus them” tone in its communications with its residents. The ED stated that they have to be clear and and firm otherwise some residents will ignore them. She said they are going to make up for that with potlucks and Christmas cards.

But tone isn’t the real problem. It’s the entrapment that needs to end.

Remember the subprime mortgage crisis? All those people who bought homes with below market rate mortgages and then got evicted when their interest rates adjusted to market? It was bad publicly policy to have people put their resources into homes they couldn’t afford, especially given many of them had no idea about how it all worked.

BCHA is not dissimilar. Instead of mortgage rates, the issue is homeowner fees. HOA fees and the normal maintenance expenses that any homeowner knows go in only one direction—up. This is particularly true when the deed-restrictions that BCHA administers are for homes that are often 30 or 40 or more years old. Ownership costs range from 3-6% of the initial purchase price—at the time of purchase. They go up with inflation and assessments and normal wear and tear over time. BCHA noted some situation where deed-restricted tenants are paying 7% of their monthly income on these expenses—on top of the 30% of income they are paying for mortgage and insurance.

The BCHA Playbook: Make Ketchum Residents Pay More

BCHA has a solution to the HOA fee burden. Actually, several solutions.

• They want the City of Ketchum residents to cover the annual expense that are exceed 4% of the resident’s monthly income. Not Blaine County residents, just Ketchum residents.

• And they want the cities of Blaine County to force new HOA agreements to limit what the HOA fees can be on deed-restricted units. This means the other residents of those HOAs subsidize the deed-restricted units (a backhanded property tax increase).

• If a deed-restricted owner is hit with a special assessment, BCHA wants to cover that out of an emergency fund run by either BCHA or Blaine County Community Foundation (BCCF). Guess who would fund that emergency fund? Yes, Ketchum residents.

• They want to increase occupants per unit limits on deed-restricted unit owners to enable owners to take in low-income lodgers to help out with the bills, at a maximum “profit” of $500/month.

• And they want to let deed-restricted owners rent out their units for up to three months of the year. This disincentivizes deed-restricted owners from holding full-time jobs in the community.

The BCHA Playbook: Disincentivize Deed-Restricted Homeowners

BCHA also disincentivizes owners of deed-restricted units to maintain their units by limited their price appreciation on sale to 3% a year. This is not theoretical. In Jackson, the Teton County Housing Authority has acknowledged maintenance neglect and explored shared equity or maintenance fund models to address it. In Vail and Aspen, aging deed-restricted units show signs of deferred maintenance, including roof and plumbing failures. Homeowners say “why invest when I can’t recoup it?”

Appreciation caps are one way BCHA traps deed-restricted buyers in deed-restricted housing. Unless onwers have a marked increase in their income, they can almost never “graduate” into market rate housing, because market rate housing keeps appreciating at uncapped rates. Also, market rate housing in a resort town is on the market for a nano-second, while a sale of a deed-restricted unit takes months. This creates a timing mismatch when you might be carrying two mortgages. However, you aren’t allowed to “profit” off your unit by renting it in the market if you have to carry two mortgages.

Once you check into the BCHA system, you are unlikely to be able to check out. It is our Hotel California.

But wait, there’s more…

BCHA Misinforms

The June 16th Ketchum City Council was interesting. I think the BCHA/KHD staff thought it was a slam dunk to get the Council to take the next step on the Y parking lot development. As one would expect, Council Member Hamilton was all for it. Interestingly, she admitted that the community is upset that Bluebird is not housing the essential workers like the Mayor promised, and neither will this project, but that’s not a priority for her.

Council Members Cordovano and Hutchinson, for different reasons, were against moving forward. Issues with the lack of units available to essential workers, the construction burden on the town, the spread of parking from the Y lot onto Saddle Road were mentioned. Their arguments seemed to sway Ms. Breen, who came in planning to vote for it, but then admitted that this is not a project that she thinks the community will support, particularly the “loud voices.” If she meant me, she is correct.

Faced with the prospect of defeat, the City Administrator jumped to the rescue by proposing the Council defer the vote to their budget workshop at 9am on the 24th of June. The Mayor picked up on that idea, pushed it repeatedly and convinced the Council to do that. He said that he really wants this project. He said he wants to condition the community to seeing a constant flow of low-income housing developments. The Housing Director told the Council if they don’t approve this that developers are unlikely to want to work with the City on future projects like this. As the hand that holds the self-licking ice cream cone, her job could be on the line if this project doesn’t get built.

This is yet another project that won’t house more than a couple of essential workers. Which is where BCHA’s misinformation comes in. To get the Council to approve going out to developers with the request for proposals, the BCHA ED told them that they were targeting 25% market rate units in this project (at least six). Not caring that the other 75% would preclude essential workers due to income caps, the Council agreed.

But then the truth came out in this meeting that only 10% of the units were going to be market rate (e.g., two units). This was, in my opinion, a blatant bait and switch and another example of how the Council gets manipulated into pushing things down the road until they are too far to stop. Did Ms. Connelly lie to everyone about the 25%? That tactic looks like it backfired with at least two of the Council members.

There is A Better Way

First, let’s forget about fulfilling the demand for affordable housing. It is infinite and will never be sated. We have limited, money, land and community character. Let’s get the best return on resident resources that we can. We should determine our need for housing for essential workers. As I have previously posted, that is a manageable number, and one we can actually achieve.

Then let’s build housing that they can actually live in, without the income caps from low-income housing tax credits that keep them out of projects like Bluebird and what BCHA wants to do at the Y. We can put this housing in places that work for our essential workers and the community. We can distribute some of it throughout the community with developer incentives and create great projects on places like near the hospital.

We don’t need the BCHA or KHD to do this. We don’t need them at all. Local non-profits like ARCH and the WRCHT stand at the ready to accomplish this. We can save millions of dollars that are, in my analysis, wasted in staffing BCHA/KHD, and get a much better return on our limited resources with non-profit housing partners.

It’s not that hard, but the Council wants you to think that it is. Because they way they want to do is hard. It doesn’t meet our needs and is full of false choices like parking versus people. We need a new crew in City Hall that will make this happen.

1. Why does Hailey get a rep on the BCHA board? They contribute nothing to its budget. We have a Hailey resident in the position of allocating Ketchum resident money to benefit people who don’t live or work in Ketchum. This is terrible governance. But, this particular individual does make money off of low-income housing projects in Blaine County, so I can see why he would want to be on the board and express a development over resident point of view.

2. Ketchum used to provide an inventory but has taken that off its website. I don’t know that BCHA has ever shared that. I know from the 6/18 meeting they have 88 deed-restricted ownership units. There are the 51 Bluebird units. What else? Silver Creek and Lift Tower Lodge are about 40 units but those are transitional housing units.

I think the right metrics for spend efficiency would be how much did they administratively spend to bring how many units into the pool a year and how much did they spend administratively to get a family into a unit. And then what did they spend the rest on.