New regulations threaten short term/long term mix at Capitol Hill’s St. John’s Apartments

A 22-unit Capitol Hill apartment building at Harvard and Pike is affordable to locals, accessible to mostly culturally conscious visitors, and — so far — sustainable as a real estate investment. Over the past 13 years, management of the St. John’s Apartments might have stumbled upon a novel solution to a small part of Seattle’s affordability crisis.

“Any building like ours in any dense urban environment should try it,” manager Bryce Montgomery tells CHS. “We are able to subsidize long term rentals with short term visitors.”

But the model might not last once Seattle’s new regulation of the short term rental market kicks in at the end of the year. Maybe there is still time to consider a St. John’s amendment.

In 2005, husband and wife Mark Chambers and Oda Egeland purchased the 1910-built apartment building for $3.2 million. In a Capitol Hill housing market much different than today, the new owners acquired a troubled building where the marketing had been about move-in specials and tenants surfing “first month free” opportunities. Their first move was to dump the shared facilities by reducing the number of units to make the living spaces large enough to add bathrooms. The next mission was to attract a more stable community of long term residents.

Montgomery said that as the building’s community started to turn around and rents in the neighborhood were beginning to climb, Chambers also decided to experiment with something he had seen while traveling. Before his death in 2015, Chambers and Egeland began renting a few units like VRBO spaces they had stayed at in other cities to see if there would be demand. They were just in front of the Airbnb wave. And the boosted revenue allowed rents, Montgomery says, to remain stable and affordable for the tenants who call St. John’s their home.

“I like to say it’s the only affordable housing without needing tax credits,” Montgomery said. “That income really helps us provide this subsidized rent.”

Today, studio and one-bedroom units in the building are priced at $850 or below. Meanwhile, seven of the units are available for short term rental for between around $80 a night to $200 for the larger two bedroom spaces.

But the peculiar mix that seems to be working at St. John’s might not last. Seattle’s so-called Airbnb tax won’t be a problem, Montgomery said. Much of the money raised by the tax is earmarked for the city’s Equitable Development Initiative to push economic development and fight displacement in the Central District, International District, and Rainier Valley, the city says. It’s a small price they’re happy to pay.

New regulations on short term rentals set to start in 2019 will be another matter. City Hall staffers who worked on the regulations tell CHS that even with an amendment added by Seattle City Council member Lisa Herbold to allow existing owners to continue in the short term business, St. John’s will have to shift to only listing two vacation units at a time. After one year, they can apply to manage a third.

But the new rules are not without loopholes — some of them quite specific. Another aspect of the successful amendment of the legislation carved out this careful wording:

An operator who offered or provided a short-term rental in any dwelling units within a multifamily building constructed after 2012 that contains no more than five dwelling units established by permit under Title 23 and is located in the First Hill/Capitol Hill Urban Center, as established in the Seattle Comprehensive Plan, prior to September 30, 2017, may obtain a short-term rental operator license allowing them to continue to operate those units and to offer or provide up to one additional dwelling units for short-term rental use, or a maximum of two dwelling units, if one of the units is the operator’s primary residence, subject to the requirements of subsection 6.600.040.B.4.

We’re told the language was written for a specific property in the neighborhood that we haven’t yet identified. But if that kind of space can be carved out for a specific building, is it possible further modifications can be made to keep a community like St. John’s intact or to allow others to develop?

As planned, the answer seems to be no. City officials have said the goal of the regulations is to “balance the economic opportunity created by short term rentals with the need to maintain supply of long term rental housing stock available at a range of prices.” We’ve asked Herbold’s office about the St. John’s situation but only received confirmation that the exceptions for operating more units would not apply.

As for the St. John’s model, Montgomery acknowledges that many aspects of the building are unique including an owner who is willing to maintain a balance of revenue. He says that the residents seems to be the biggest part of what makes the solution work. It’s a small building with long term units filled by word of mouth, not online marketing. The Twitter account is to hype the short term spaces.

Some of the long term residents also work in the building to help maintain the apartments while another who is an artist has his work featured in some of the short term units. The mix of Hill regulars and tourists also seems to work to help the newcomers enjoy their Capitol Hill stays above the Ayutthaya Thai Restaurant, Bang Salon, Other Coast Sandwiches, and the St. John’s bar and restaurant without being d-bags. The building’s long term residents give the building the presence of real people living real lives in real housing. The residents can also help show tourists a little bit about life in the Hill’s version of city living.

“They might not like drunk friends of tech bros pissing off the deck but I think they appreciate the opportunity to share what is great about Capitol Hill,” Montgomery said. The $850 a month rents probably help, too.

The St. John’s Apartments building is located at 725 E Pike. You can learn more at seattlevacationapartments.com.


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10 thoughts on “New regulations threaten short term/long term mix at Capitol Hill’s St. John’s Apartments

  1. “They might not like drunk friends of tech bros pissing off the deck but I think they appreciate the opportunity to share what is great about Capitol Hill,” Montgomery said.

    Sums up a lot, tbh

  2. Huh – seven units at $80-200 a night. Forget the rest of the building, if they run it well that alone would bring in $250k+ which would be a good return on a $3m investment. Typically real estate makes about 5%, so with just the Airbnb component they are way ahead of the game. Then again with more than 3 units they are basically running a hotel, and I doubt they are subject to all of the regs…

    Good while it lasted, but we have planning rules for a reason.

  3. Forgot – the answer to the other part of the above I believe is the Roy st commons for example.

    https://www.airbnb.com/rooms/10457451

    Not sure it has a charitable component to it, but it does have 20+ units at $60+ a night $$.

    The owner threatened a law suit against the city. It was built in 2012 which fits, but perhaps they agreed to scale it back to 5 units.

    How it ever was zoned to begin with is astonishing – build an apodment complex and turn it into a 20+ unit Airbnb dorm.. Only in Seattle…

  4. It is exemplary that these owners use the short-term rentals to keep the rents low, but I think they are the exception. Most landlords would rent out some short-term units for as much as the market will bear, AND charge market rates for the long-term tenants.

  5. Although the city then reduced the carve out zone which would in theory remove the Roy st building – good questions include :

    – is that building still exempt ? If so, how since it has more than 5 units.
    – did tim burgess sign that agreement ?
    – what other buildings are covered by the very specific clause, and how are they related to that agreement ?

    Have fun !

    • In reading the regulations from the link provided, it seems to me that only buildings with 5 or fewer units are covered…they can continue to rent the short-term units they already rented, plus two additional units. It doesn’t seem like the Roy St building, which has many more than 5 units, would be covered under this legislation. What am I missing?

  6. Hey Bob

    The agreement was drafted by the owner of the Roy st building, and states that it will *allow all units in that building to continue to operate*. That may be because of the larger suggested carve out area which would include it (which was changed at the last minute by others on the council)

    Someone at the city should answer the questions above, including what other buildings were targeted by the very specific clause.

    The bigger question which someone like J may want to dig into is how much did this type of threat / collusion influence the planning process. And did our mayor sign it ?

    • Thanks! This deal really smells of corruption at the highest levels of our city government. How can legislation get passed at the behest of one apartment owner? The new regulations on Airbnbs should apply to ALL buildings and there should be NO grandfather clause, but I guess that horse has left the barn.