In the first half of the 18th century, the Jewish community of the Old City lived in conditions of extreme poverty. Very few Jews owned land and most were obliged to rent their accommodation from Muslim landlords.
In 1857, an opportunity arose to purchase a large tract of land at the south-western corner of the Jewish Quarter for construction. The group behind the initiative was the "Hod" Kollel [Holland-Deutschland – an association of Jews who had come from the Netherlands and Germany] which purchased a plot on the margins of the Jewish Quarter that had hitherto lain waste, partly with the Halukah (overseas collection) donations for Talmudic colleges and families. Their aim was to build modern apartments that would help reduce the overcrowding within the city walls. For the first time in many generations, Jews had an opportunity to build their own neighborhood themselves.
The company known as the "Batei Mahaseh [Shelter] company for the impoverished and hospitality on Mt Zion and in the holy city of Jerusalem, may it be rebuilt and restored speedily in our days, Amen" was granted a licence and built one hundred apartments in Batei Mahaseh Square that were known for their beauty throughout the Old City of Jerusalem. Over the years, other philanthropists built more houses in the Batei Mahaseh neighborhood, including the Sephardi House, and the magnificent Rothschild House.
The Sephardi House in the main square served the Spanioli Jews as a place of study. The courtyard level (currently used as a patio) was designated for widows and orphans, while the upper floor housed the educational institution. Today, the Sephardi House operates in two buildings – one modern, and the other being the original early 19th century building, with an area of 5,000 sq.m., which is now a listed conservation site.
At the end of the 19th century, one of the wings of the historical building served as the official residence of the Rishon Letzion, the Chief Rabbi of Israel. The wing boasted its own courtyard, seating and hospitality areas, and hundreds of students of all ages studied there over the years, from young children to leading rabbis and dayanim (judges.)
In the course of the battles that raged in the Jewish Quarter during Israel's War of Independence in 1948, the houses and basements in Batei Mahaseh Square provided shelter for the civilian population who remained in the besieged quarter. One of the forward positions during the period of siege was located near the present guest house.
After the defenders of the Jewish Quarter surrendered to the Arab Legion, the fighters and residents of the Jewish Quarter were gathered in the square itself. The 30 fighters who were still standing after thirteen days of non-stop combat and the 50 wounded, together with 260 civilians aged from 13 to 78, were all taken captive. The 1,360 Jewish Quarter residents – women, children and elderly included – were forced to leave their homes, which were then looted and set on fire.
The historic Sephardi Heritage House building has recently undergone extensive renovations and presently serves as a luxurious guest house for visitors to Jerusalem from all over the world. Now 200 years old, this unique, beautiful building nearby Zion Gate has been listed as a site for conservation. Built in authentic Spanish style, with a patio, courtyard floor and upper gallery storey, it has high, vaulted ceilings and its windows offer breathtaking views of the Old City, the City of David, and the authentic courtyards of the Jewish Quarter.