Overview
Low-cost micro-units, often called single-room occupancies, or SROs, were once a reliable form of housing for the United States’ poorest residents of, and newcomers to, New York, Chicago, San Francisco, and many other major U.S. cities. Well into the 20th century, SROs were the least expensive option on the housing market, providing a small room with a shared bathroom and sometimes a shared kitchen for a price that is unimaginable today—as little as $100 to $300 a month (in 2025 dollars).
In the late 19th and early 20th centuries, landlords converted thousands of houses, hotels, apartment buildings, and commercial buildings into SROs, and by 1950, SRO units made up about 10% of all rental units in some major cities. But beginning in the mid-1950s, as some politicians and vocal members of the public turned against SROs and the people who lived in them, major cities across the country revised zoning and building codes to force or encourage landlords to eliminate SRO units and to prohibit the development of new ones. Over the next several decades, governments and developers gradually demolished thousands of SROs or converted them to other uses, including boutique hotels for tourists. And as SROs disappeared, homelessness—which had been rare from at least the end of the Great Depression to the late 1970s—exploded nationwide.
Now, as a nationwide housing shortage has pushed rents and homelessness to historic highs, some states and localities are reconsidering the value of lower-cost, small units with shared kitchens, bathrooms, and amenities. Ironically, had SROs grown since 1960 at about the same rate as the rest of the U.S. housing stock, the nation would have roughly 2.5 million more such units— enough to house every American experiencing homelessness in a recent federal count more than three times over.
The stone facade of a single-room occupancy hotel in New York City, circa 1900, includes a fire escape.
As governments throughout the United States seek to fill the gap in low-cost housing, one promising and inexpensive model is gaining traction: making shared housing legal, as it was for most of U.S. history. And one version of shared housing—converting some of the vast supply of office space left empty since the COVID-19 pandemic—looks especially promising: A single office building conversion could add hundreds of low-cost homes near jobs and transit, while a large high-rise could add more than 1,000 homes. Several states have passed laws in the last few years to remove local legal barriers to building SROs or converting certain existing buildings into SROs.
This brief explores the history of SROs and their close relationship with homelessness. It also looks at strategies for adding large quantities of inexpensive housing units to meet the needs of the nation’s most vulnerable residents as well as others seeking low-cost housing.
Housing costs drive homelessness
A wealth of research has examined the causes of homelessness over the past two decades. These studies consistently find that the cost of housing is by far the primary driver. For example, several studies have concluded that an area’s median rent correlates far more closely with its homelessness rate than factors such as weather, poverty rate, and rates of mental illness or substance use.
One study found that a $100 increase in median rent was associated with a 9% increase in homelessness.1 Another found that as rent-to-income ratios increase, homelessness increases in tandem.2 A separate study found a strong relationship between home prices and homelessness.3 Several studies have found low rental vacancy rates strongly predict high levels of homelessness.4 And when rents are high, families squeeze more people into smaller spaces, with less room to help struggling friends and relatives.5 Salim Furth, a senior research fellow at the Mercatus Center at George Mason University, explains the link: “When housing is cheap, relatives and friends tend to have more space in their homes, enabling them to keep someone at risk of homelessness off the street. … When space is tight, the people forced out are those who are hardest to live with.”6 Frequent explanations for homelessness focus on an individual’s characteristics. Certainly, people experiencing homelessness have disproportionate rates of disabilities, mental illness, and substance use compared with the general population. But cities with an abundance of low-cost homes have far less homelessness than high-cost cities, despite having similar rates of disability, mental illness, and substance abuse.7 And, as noted earlier, even in New York, San Francisco, and other expensive places, homelessness was uncommon as recently as the 1970s, when those cities still had a large stock of SROs.
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