When the Seattle City Council passed a set of regulations designed to boost affordability by reeling in short-term rentals, one Capitol Hill property owner got very lucky.

The regulations passed in December generally restricted the number of housing units a person can operate as a short-term rental to a unit in their own home, plus one more unit. There were a couple exceptions which allowed for grandfathering operators of properties to continue doing so, with some restrictions which vary by where in the city the units are. The rules will go into effect January 1st, 2019.

But there was one more exception.

A very carefully worded exemption which seems to apply only to a single building in Seattle — the Roy Street Commons at 621 12th Ave E.

The property is a microhousing building which completed construction after permitting in 2015. As far as land use regulations are concerned, it has five units. However, those units translate into 40 bedrooms, all of which are available for short-term rental for between $30 and $69 per night. The listings note that people who stay in the building are provided with coffee and muffins in the morning. The building is operated as a new-era Airbnb-managed hotel.

It’s an exceptional, one-of-a-kind venture on Capitol Hill, a loophole the owners of the St. John’s Apartments, a building CHS profiled last week where management says short-term rentals are used to keep rents low for long-term tenants, would love to discover.

How did it come about?

In May of 2017, the owners of Roy Street Commons, Eric and Amy Friedland, joined a handful of property owners on an appeal with the Seattle Hearing Examiner which claimed that the city did not do a sufficiently thorough review of the proposed short-term rental regulations under the State Environmental Protection Act.

In the appeal documents, Friedland states it cost $4 million to build the building, and that he was dependent on the income from short-term rentals to recoup his investment. He went on to note that the building is maintained to a high standard, which he can only afford because of the money short-term rentals generate. Furthermore that standard is necessary in the competitive short-term rental market. He said that if he were forced to switch to long-term rentals, the general appearance of the building would decline.

“I would regret the decline in maintenance, but it would be unavoidable,” Friedland states in the appeal.

Friedland notes that the building’s proximity to hospitals makes it useful for traveling medical professionals, such as nurses on a 13-week rotation, and to people who need to stay in town while a loved one is in a hospital.

Friedland could not be reached for inquiries about the building.

According to people familiar with the proceedings, the group appellants cut a deal suggesting they would drop the suit if some changes to the bill made it out of committee. The changes did not have to pass the full city council in order for the deal to take effect.

No one from the city signed a copy of the deal, though then-City Council member Tim Burgess’s name is on it with a place for his signature.

The agreement specified that people who operated short-term rentals in the downtown, South Lake Union, and Uptown (Lower Queen Anne) areas would be permitted to continue operating those units. The Roy Street Commons was also included, a lone island on Capitol Hill’s 12th Ave E.

The agreement was dated September 5th, right around the time that then-Mayor Ed Murray was weathering allegations of sexual misconduct. Murray resigned September 13th, and there was a bit of shuffling before Burgess was appointed mayor September 18th. A few days before the appointment, September 15th, the proposed regulations passed out of the Affordable Housing, Neighborhoods and Finance committee, which Burgess chaired. The appeal was dropped September 21st. The regulations would not have been able to take effect while the appeal was active.

The package of regulations then moved to the Planning, Land Use and Zoning committee, which continued working on the regulations.

Burgess could not be reached for comment. UPDATE: The Seattle Times apparently also reads CHS comments. And Burgess called them back: “You have to look at the outcome that we achieved,” Burgess told the paper about the agreement on Roy Street Commons. “During my 10 years at City Hall, there was a lot that happened where the phrase, ‘It’s not pretty to watch how the sausage is made,’ was really true.” Meanwhile, the property owners tell the Times the city approached them about the deal.

Council member Rob Johnson, who chairs that committee, said his problems with the exemptions was that they didn’t go far enough. He noted that short-term rentals had been permitted, and now the council was imposing new regulations upon them. He would have preferred to expand the exemptions to allow more people who were operating short-term rentals to continue to do so. He said it was unfair to grandfather some short-term rental operators but not others.

“I thought it was more appropriate to have a level playing field,” Johnson said.

Johnson’s proposal was rejected by the full council.

Johnson could not speak to the Roy Street exception, saying that the agreement was made by Burgess.

During the full council meeting in December to vote on the full short-term legislation, council member Sally Bagshaw introduced an amendment which shrunk the geographical area for the exemptions from the earlier agreement to include only the downtown core bounded by Olive and Cherry streets, I-5 and Elliot Bay, cutting out South Lake Union and Uptown. Bagshaw, who lives in Belltown, said she had heard from people in that area concerned that some buildings in that area were inundated with short-term rentals. The amendment passed and only the downtown core was left as a grandfathered short-term rental zone. Burgess, by then, was resident in the mayor’s office.

Voting for the change, along with Bagshaw were Council President Bruce Harrell, and Mike O’Brien, Teresa Mosqueda and Lisa Herbold. Opposed were council members Johnson and M. Lorena Gonzalez. Kshama Sawant and Debora Juarez were not present for the vote. Here’s how the final amendment read:

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.

No one on the council commented on or raised questions about the Roy Street exemption during the full council meeting before the final vote December 11th or at the three prior committee meetings in September, November, and December. The fact that there was a pending appeal was noted during the September 15th meeting, but without further comment.

The result is 12th Ave is now home to yet another development anomaly born of Seattle’s boomtown burst of housing investment. Roy Street Commons may not be home to a Seattle legend or designed by an architect of distinction but it is already a Capitol Hill landmark.