New Pew Research Center Report on "How States and Cities Decimated Americans' Lowest-Cost Housing Option"

The Pew Research Center has a valuable new report on how state and local governments destroyed much of their potential low-income housing stock by banning or severely restricting "single-room occupancy" (SRO) housing. Here is the summary of the report and its findings:

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.

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.

The report notes that studies show that homelessness is in large part caused by high housing costs, and that cities where low-income housing is more widely available (because they have fewer regulatory barriers to it) have much lower rates of homelessness. Thus, exclusionary zoning is a major factor increasing homelessness. I have previously written about this here.

The report also notes that one facet of SRO restrictions is laws banning or severely restricting the ability of unrelated people to live together and share the rent and other expenses. In a post about the Pew study, economist Alex Tabarrok calls this "the war on roommates." Fortunately, some states have begun to cut back these restrictions:

Perhaps the simplest method of creating low-cost shared housing is to allow unrelated individuals to share a house in the same way that relatives are allowed to share a house. But many communities limit the number of unrelated people who can live together—in some places, to as few as two. Such laws make sharing a house for a group of roommates—which usually enables rents lower than having an individual apartment—illegal. The U.S. has a record number of unused bedrooms, but many cannot be rented because of restrictions on house sharing by unrelated roommates, even if that would be the most profitable use for the landlord and the most affordable option for the tenants. To enable this low-cost housing option, Iowa, Oregon, and Colorado all passed bipartisan legislation to strike down local codes that prohibit house-sharing (in 2017, 2021, and 2024, respectively).

In all of those cases, states have stepped in when localities did not act, authorizing lower-cost housing and limiting the ability of local governments to ban inexpensive housing. The aim of those laws is to increase the rental market for low- and moderate-income residents and make more use of existing housing stock. If these bills succeed, and a large number of micro-units reach market, their rents will likely be low, since individual rooms, when available, usually rent for far less than houses or apartments.

Many readers have probably had the experience of needing roommates - sometimes more than one roommate! - to be able to afford housing in a relatively expensive area. These kinds of laws make it very difficult to take advantage of this cost-saving effect. Such saving not only make housing more affordable, but also make it easier for lower-income people to "move to opportunity," thereby expanding their future earnings and making our economy more productive.

In a  Texas Law Review article published last year, University of Wisconsin Prof. Josh Braver and I explain why exclusionary zoning violates the Takings Clause of the Fifth Amendment, which requires government to pay "just compensation" when it takes private property. There, and in an Atlantic article, we explain how litigation should be combined with political action to break down zoning restrictions on housing construction. While we did not focus on SRO bans specifically, they certainly fall within the scope of our argument.

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