How the Government's War on Single-Room Occupancy Fueled the Housing Crisis

Along with food and clothing, a roof over one's head has been considered one of the three fundamental needs for human survival. This remains true even for those who have next to nothing. There was a time when housing existed for those who had very little: a room, a lockable door, and typically a shared bathroom. It was not glamorous, but it was a roof over one's head. These housing units, called single-room occupancies (or SROs), were a reliable and affordable source of housing for the United States' poorest residents, seniors, and those looking to climb out of poverty. Today, SROs are all but nonexistent in the United States. Rent is higher than ever, homeless shelters are jam-packed, and many are out of luck when it comes to housing. What happened to SROs? In two words: government intervention. 

Last week, a report from Pew Research that was released in July was brought to my attention. With the title "How States and Cities Decimated Americans' Lowest-Cost Housing Option," the researchers at Pew Research detail the various policies that state and local governments used to get rid of SROs. The reason why governments went after SROs was because even as early as the early 1900s, SROs were seen as run-down, neglected, dilapidated. They were stigmatized as a public nuisance and blamed for such outbreaks as pneumonia and tuberculosis. Between the 1950s to 1980s, there were numerous local-level, piecemeal government regulations that severely curtailed SRO usage:

• Los Angeles and San Francisco rewrote zoning codes to prohibit rooming houses and share-living arrangements. 
• Chicago adopted stricter building and housing codes (e.g., imposed requirements for private bathrooms, minimum square footage) that effectively outlawed traditional SRO designs. 
• San Diego used code enforcement and licensing crackdowns to close SROs for safety or sanitation violations. 
• Seattle used redevelopment campaigns in "blighted" areas to clear out residential units where SROs were concentrated in exchange for higher-value development. Other countries similarly subsidizer to demolish these areas courtesy of the Federal Urban Renewal programs, especially Title I of the 1949 Housing Act
• Denver provided housing subsidies for traditional apartment-style housing that effectively sidelined SROs.

There could be better health inspections, rehabilitation incentives, or proper building management to make SROs more habitable, but these regulations that de facto eliminated SROs were overkill. SROs were the lowest-cost housing for individuals in need without requiring government subsidies or intervention. Primarily as a result of this crackdown, the overall SRO housing supply was reduced by 2.5 million units. This especially puts a crunch on the housing supply for those in the lowest-cost tier. This has placed undue demand on government services, subsidized housing, and homeless shelters because they cannot meet the housing demand. Just as one example, about half of the men who entered homeless shelters in 1980 were previously living in SROs. Without SROs, low-income individuals have very few alternatives of places to live, thereby contributing to homelessness, as we will see shortly.

This pushes low-income renters into larger, more expensive units when all they needed was a single room. As the Pew Research pointed out, an SRO in 1924 only cost $230 in today's dollars, which is below the $391 per month that an individual at the federal poverty line can afford in rent. Contrast that to the $1,205 that a median one-bedroom apartment costs. This should not be a mystery. Regulations requiring larger units crowds out the smaller units from the market and forces low-income individuals into more expensive units than necessary. These zoning regulations put additional strain on housing supply.

I first raised the alarm on overregulation in the housing market in 2017, citing a range of studies on how land-use restrictions reduce supply and inflate housing costs. Eight years later, the data has only grown stronger and the consequences more visible. These SRO-related land-use regulations are tantamount to a production quota, which restricts housing supply while jacking up housing costs. In the case of SROs, it is especially problematic because it constricts housing supply for the poorest of Americans, thereby squarely and concretely affecting low-income Americans. 

The Manhattan Institute found that areas with greater housing regulations also had a greater homelessness population (see below). While a compelling pattern, it stops short of showing causation. However, a peer-reviewed study from the University of Maryland fills that gap. The author found that land use regulations are responsible for increasing homelessness by 9 to 12 percent (Dawkins, 2023). In other words, restrictive land-use regulations are not merely correlated with homelessness. They are shown to cause increased homelessness.

There is a way to provide a modern-day equivalent of an SRO that is well-designed, hygienic, clean, and up to code. To do so, the government needs to get out of the way. Modifying current zoning laws to include small, shared-unit formats is a necessary first step. Second, remove the stringent codes in order to allow for smaller units and shared bathrooms and kitchens. Relax permitting regulations to allow for conversion of older building into SROs, especially since it is 25-35 percent cheaper than new construction.

Millions already live in shared housing without stigma, whether it is college dormitories, senior co-housing (aka "Golden Girls" Homes), professional households in which young professionals rent individuals in shared homes to split rent, transitional housing, monasteries, boarding schools, and military barracks. States and cities need to remove regulatory barriers and provide incentives to create low-housing options so that we can reduce homelessness, help financially vulnerable Americans, and help keep America's streets safer and cleaner.