Launch Properties’ plans to build a 98-unit apartment building in the 2200 block of South Street were dealt a setback earlier this week, when the Duluth City Council voted 8-0 to overturn a variance that would have allowed the developer to exceed a height limitation.

The property Launch aims to develop is located in a mixed use-commercial district, where buildings as tall as 75 feet typically are allowed. But since the site is located within 500 feet of land zoned for low- and medium-density (R-1 and R-2) residential use, a stricter height restriction of 45 feet kicks in.

Launch had successfully sought a variance to build a 66-foot tall building, which was approved by the Duluth Planning Commission 8-0 in July.

However, the variance was appealed by Robert and Anne La Cosse, the owners of a dental clinic at 2200 London Road, who voiced concern about the impact the apartment building would have on their view of Lake Superior.

The appeal brought to light part of the city code that previously had escaped the notice of city planning department staff.

Adam Fulton, deputy director of Duluth’s planning and development division, said a provision in city code allows for no more than a 10 percent deviation from size restrictions in a mixed-use commercial district. He said the language predates the city’s unified development chapter, which now governs most development. Fulton said his research suggests the provision “was related to the C-4 district, which was predominantly up by the mall.”

“So, we’re evaluating that history and what would be most appropriate in the future,” he said.

A 10 percent departure from the 45-foot ceiling for the site in question would provide the developer with just 4½ feet of extra wiggle room, instead of the additional 11 feet requested by Launch.

Scott Moe, Launch Properties’ senior vice president, said that removing the top floor from the building plans would dramatically change the economics of the project, likely forcing the company to seek public assistance.

Launch had sought to undertake the project without the help of any taxpayer subsidies. As proposed, Moe said Launch Properties anticipated the new apartment building would represent about a $27 million investment.

“We’re trying to do it completely on our own dime,” he said.

Moe said Launch actually would like to have designed a building two or three stories taller than it proposed, but it stuck with a height consistent with that of the neighboring 148-unit Endi apartment complex, which opened at the corner of 21st Avenue East and London Road in 2015.

Moe said Launch and city staff were blindsided by the legal obstacle to the requested variance.

“An attorney found some archaic language in the code. It was put in some time in the 1970s, and nobody knew it existed. The city staff didn’t know it was there. We didn’t know it was there. But the appellant’s attorney did a good job, and he dug up a line or two in the code that limits how much of a variance the city can approve,” Moe said.

“So they’re making this legal play, and we think that we can prevail over that issue with some legal work of our own,” he said.

Moe said Launch had not planned to begin construction of the new building until next year, providing the firm with a bit of time to sort out the situation that now confronts the project.

Launch envisions a high-end apartment building similar to Endi but without any retail component, Moe said.

While the building design contains no units that will be marketed as “affordable housing,” Moe said it does contain a number of relatively modest-priced “micro-units” with about 500 square feet of space.

“They’re extremely popular in the Twin Cities. In fact, they’re usually the first things to lease up,” Moe said.

He described the studio apartments as small but efficient, featuring fold-down Murphy beds, a well-appointed kitchen, high-quality countertops, a full bath, plus a washer and dryer. Moe noted that people renting these small units also will have access to all the building’s other amenities, including an exercise room, a pet-washing facility, a deck with gas fire pits and a hot tub.

Moe said the building also will contain larger units, including 2,000-square-foot two-bedroom lakeview corner apartments that come with a den space.