Chunky Potato and Ham Soup

3 medium red potatoes, peeled, cut in small cubes
2 cups water
1/4 teaspoon salt
1/4 cup finely chopped onion
3 tablespoons butter
3 tablespoons all-purpose flour
ground black pepper
3 cups milk
1 cup shredded Cheddar cheese
1 cup cubed cooked ham
pepper to taste

Bring water and 1/4 teaspoon salt to a boil; add potatoes and cook until tender. Drain; reserve 1 cup of cooking liquid (add water to measure 1 cup if necessary). Melt butter in a medium saucepan over medium heat. Sauté chopped onion in the hot butter until tender. Add flour to butter and onion mixture; stir until smooth. Season with a little pepper; continue to cook and stir for 1 minute. Gradually add potatoes, reserved 1 cup of cooking liquid, and milk. Stir well; add cheese and ham.

Simmer potato ham soup over low heat, stirring frequently, for about 20 minutes.

Chunky potato ham soup serves 6 to 8.