SRO Housing: History & Prospects
SRO Hotel Modern Floor Plan
Single Residence Occupancy (SRO) housing (also known as SRO hotels) is a real estate market accommodation for low-income workers who live alone, or sometimes those who live with small children. In the United States, before Urban Renewal, before HUD, the market attempted to provide housing for low-income workers. In small, sometimes 5'x8' rooms, and sometimes under dilapidated conditions, (perhaps prone to landlord corruption and exploitation), nevertheless they were able to perform a function meant to keep those in “poverty” with a roof over their heads, some private space, a bed, and perhaps a desk and lamp. These SROs were a mainstay to our industrial history. During the height of the United States' industrial dominance - when cities were growing in power and wealth, mostly between 1880 and 1950, the market had to provide accommodation for many transient workers. SRO hotels and their subsequent neighborhoods were seen as the solution. However, to the higher classes they were regarded as city blight. Ideas about congestion and disease were equated with moral corruption and degeneracy. These became prominent notions. As a result, many SRO districts were systematically destroyed – starting with downtown Minneapolis' Gateway District during the nation's first Urban Renewal project in 1959. SROs in dense, urban cities like San Francisco and New York continuously lost prominence after the 1950s – redevelopment that spurred gentrification and a growing homeless population. In this paper I will explore the history of SROs in the United States, looking at what they were and how they were perceived by the public, exploring their positive and negative attributes. Next I will look at why an SRO model is appropriate for today and present an example of one using a brief financial analysis and 3-D modeling graphics.
Minneapolis: Skid Row Gateway District
A Brief History
In the Midwest City of Minneapolis, there existed a large SRO housing based area in downtown called the Skid Row Gateway District. Accommodating loggers, miners, cowhands, fishermen, sailors, and construction workers, the SRO hotels were very popular and necessary. The loggers, for example, would work all autumn felling timber in the forests surrounding the city, eating at communal tables and sleeping in crowded bunk rooms (Hart, 2002). When the winter frost froze the ground they would drag their timber on sleds into the city to sell on the open-market. The workers would entrust their earnings to a saloon or SRO hotel-keeper and proceed to spend the rest of their money on the pleasures they were prohibited in the logging camps (Hart, 2002). During this time, SROs were associated with red-light districts which contained shady establishments. Businesses surrounding SROs included saloons, restaurants, cheap clothing stores, dentists, tattoo parlors, Chinese lotteries, shooting galleries, penny arcades, missions with free soup, barber schools, gambling joints, prostitution houses and employment agencies (Hart, 2002). In essence, the value of propinquity brought in establishments that would provide for all the workers other needs: employment, food, entertainment, and companionship. These kinds of districts grew in the downtown areas of many American industrial cities.
SROs in a city's downtown helped account for the transient nature of many workers' job realities. They also provided cheap housing for independent artists, writers, intellectuals, and older people with fixed-incomes. Market-based SRO housing – those without Section 8 subsidies or other public housing financing options – use communal kitchen, bathroom facilities, and community space to lessen each unit's costs. SROs are a good housing option for single, unskilled laborers, people who are in-between jobs, and those who have lost family support. Although low-income SROs are often linked with degenerate inner-city parasites: drug-abusers/addicts and alcoholics, prostitutes and pimps, lazy able-bodied males, etc. - these “undesirables” do not represent the whole story. SRO units are primarily practical housing for low-income individuals using minimum public housing benefit vouchers. If properly managed, designed, and maintained, they can be viable communities that help foster relationships in urban neighborhoods, help curb homelessness, and can become rehabilitative options for alcoholics, drug addicts, and abused women if they are linked with non-profit social welfare programs and provide peaceful and secure community spaces. San Francisco architect and scholar, John Liu, explains: “The SRO residential hotel is perhaps the most controversial, the most neglected, and the least understood of all housing types” (Groth, pp.11).
From the history books
The SRO Controversy
Groth, in his comprehensive book on this subject, Living Downtown, declares: “Many housing professionals and social workers today insist that hotel living is not only viable but essential to urban economy and urban society. Hotels, the apologists argue, are a valuable civic resource and respectable housing...people choose hotel life...for good reasons. The promoters propose...that cities should be building more SRO hotels.” Despite the fact that in 1980 America had 50 million married households and 21 million adults were living alone, housing authorities continue to focus their concern on housing needs for families and units with private housing facilities rather than in communal settings. This focus reflects a cultural bias – a history of family and community planning that is central to Anglo-Saxon values. In this circumstance the government is involved in moral-value judgment-making as a basis in providing public services. However, as HUD has begun to decentralize in the past few decades and as local planning authorities designed their own housing programs, strides have been made to research new ways to include SROs in public housing. More on that later.
Downtown hotel living, primarily in the late 19th century and early 20th century, was a province of two distinct classes, each with higher and lower levels - “the middle and upper” class and the “low and hobo” class. The lower class lived in rooming houses and had little choice in other housing options. In an SRO (also known as lodging house) residents' poverty, backgrounds, political beliefs, family life, speech, and education all set them apart from the “polite society” of the middle and upper classes. The cultural and social opposition of rooming houses and cheap lodging houses to middle and upper class norms did the most to bring official condemnation on hotel housing. “No matter what position one takes on hotels as homes,” explains Groth, “their rapidly dwindling inventory cannot be seen simply as an accident of supply and demand in a free market. The crisis in the residential hotel supply is a planned event – a function of local, state, and federal government policies that have encouraged housing for some types of people and reduced supplies of housing for others” (Groth, pp. 24). Rooming houses for the poor were seen as social ills, especially in a perception that they were housing anonymous, transient individuals with no family to support them and no respectable social status. Social reformers of the early 20th century viewed residential hotels and tenement life in general as causing the destruction of civic spirit and responsibilities of citizenship.* Since large proportions of the city's shiftless laborers, social misfits, thieves, and prostitutes lived in cheap hotels, reformers also assumed that hotel life must be an important part of the cause (Groth, pp.202). The progressive era lasted from 1890-1920. According to Groth, “[Downtown environmental activists of the Progressive Era]...were driven by equal parts Protestant Christian charity, veiled self-interest, genuine noblesse oblige, and fear that their gigantic cities were out of control.”
Progressive era figures saw their cities' problems as moral and cultural, rather than as economic and political. The reformers came from the skewed vantage point of the privileged upper-classes. They admired individuality as exemplified by Thomas Edison and Theodore Roosevelt, but they did not widely value pluralism, heterogeneity, and diversity as related attributes – they desired a monolithic culture (Groth, pp.204). The reformers had a shallow understanding of cause and effect, a stringent belief that wealth and position was an exact reflection of moral character and social culture. New housing standards on room size, ventilation, plumbing and aspects like density were designated in an effort to improve public health. These standards effectively made tenements and rooming houses illegal or too expensive in their reconstruction and maintenance to be economically viable. Virtually no one between 1930 and 1980 built a residential hotel like an SRO (Groth, pp.264).
* See the 1901 Tenement House Act, led by Lawrence Veiller.
The Death and Rehabilitation of SROs
Since World War II the United States has been losing affordable hotel homes at staggering rates and not replacing them. Downtown hotel owners, to improve their income or to eliminate management problems, have converted SROs to tourist rooms (like Youth Hostels) or other uses, tore the buildings down and built office towers, or simply closed the buildings (Merrifield, pp.145; Groth, pp.9). Between 1975 and 1980, San Francisco eliminated nearly one-fifth or 6,085 units of its SRO housing stock. Chicago eliminated 23,000 units between 1973 and 1984 – equivalent to a loss of about 93 housing projects. Throughout the 1970s, the country was losing SRO units quickly and the federal government was not funding or assisting any hotel-style public housing besides college dormitories and a few studio apartments (Groth, pp.276). Urban Renewal projects in the decades of after World War II, as mentioned before, designated many SRO hotels as blighted areas, demolished them, and sold the land to private developers. Around this time, SRO tenants began to organize, gaining civil rights and official support. Hotel residents were included in the 1970 Uniform Relocation Act, giving hotel residents equal rights as apartment dwellers. Because of this removed hotel dwellers were entitled to a $200 household dislocation allowance, compensation for moving costs, and up to $83 a month for four years in the new housing cost more than 25% of the individual's income – the total not exceeding $4,000 ($22,205 in 2010 dollars). SRO residents became very expensive for the urban renewal process (Groth, pp.285).
The 1970 Uniform Relocation Act affected federal urban renewal programs, but such compensation was not legally required for private landowners involved in selling and redevelopment. The extinction of SRO units continued on its way as gentrification and new international tourist economics entered the market-place. In Manhattan, for example, there were 200,000 SRO units before 1960. In 1986 there were 64,000. In 1996 there were less than 47,000. Today there are very few (Merrifield, pp.167). San Francisco is one of the only cities left with substantial SRO units – 30,000 units, accommodating 5% of the population within city borders (CCSRO, history). Many of these SRO hotels exist in the Tenderloin District, Lower Eddy Neighborhood, and Chinatown. The retention of many of these units has been due to the efforts of the Central City SRO Collaborative, a non-profit consisting of community organizers, community development planners, lawyers, and volunteers. Their programs include “code enforcement campaigns”, “community campaigns”, “training in organizing skills”, “fire safety workshops, “DOPE harm reduction workshops, “safety monitoring workshops, “annual hotel tenant conventions”, and a “tenant congress”. These programs and others have helped to keep SROs up-an- running as well as provide a substantial community support system to reach other social goals. The City of San Francisco itself (as well as Los Angeles) adopted initiatives to prevent conversion of SRO units into market-rate units or tourist hotels.
In 1987 HUD created the “The Section 8 Moderate Rehabilitation Single Room Occupancy Program for Homeless Individuals.” This program primarily provides rental assistance for homeless persons. Each Section 8 recipient under the program get rental assistance for up to 10 years at the standard rate of the difference between 30% of the tenant's income and the unit rent. The program also works with PHAs to provide assistance for “moderate rehabilitation for residential properties” in places such as former hotels, YMCA buildings, schools, and abandoned homes. The program is aimed at helping to build more SRO units and provide property management with tax-payer money, primarily being used to assist homeless persons. Rent in these establishments must be 75% or lower than the area's Fair Market Rent.
SRO Housing in Context
What I am concerned with, though, is in the possibility of SRO hotels being built to accommodate low-income workers and others - not necessarily the “homeless.” SRO units can exist as a market mechanism; a low-income housing option. Let's take, as an example, a person in Downtown Milwaukee who makes minimum wage. She works 30 hours a week and hopes to receive full-time employment within the next six months. She is lucky to have the job since she is only 20 years old and has only a high school education and no funding for college. Her parents can't afford to accommodate her. In Milwaukee she is classified as a Non-Opportunity Worker and earns the federal minimum wage of $7.25 per hour (Department of Workforce Development). Thus, she earns $870 per month before taxes. When she receives full time status she will be earning $1,160 per month. For now, if she were to invest 30% of her income in housing she could afford a unit for $261/month. She works at the US Cellular Arena in Kilbourn Town, where the average rent is over $1,200/month. She cannot afford a car. The closest neighborhood with cheaper rent is the Hillside neighborhood. There the average rent is $650/month, but she can find units for $350/month. The neighborhood, however, is not pedestrian-oriented. She must cross a six-lane avenue and traverse a large brown-field and parking lots to get to work. The walk is around 15 minutes, but to take care of her other needs like food and supplies she needs to own a car or pay for food to be delivered. Maintenance for the unit and payment for utilities is also a burden.
SRO units work well when they are in high density areas which have high walkability and good public transit. Unfortunately for low-income workers, the higher the walkability and the better the transit, the higher property values become and thus the higher rents become. Is it possible to have SRO units in such areas?
Going east across the river from Kilbourn Town is Juneau Town. In Juneau Town walkability is much higher, amongst the highest in the City's neighborhoods. The average rent, though, is $1,024, with the cheapest census tract being $674/month. Rental prices change significantly based on the size of the building, location, and quality of the unit. The question here is whether a property owner can make a similar amount of profit with an SRO style building compared to a studio, single bedroom, two-bedroom or three-bedroom apartment building, while providing rents at around $300 per SRO unit.
 Census Tract 113
Modern SRO Hotel
Modern SRO Hotel Floor Plan
A Room in a Modern SRO Hotel
Bathroom in a Modern SRO Hotel
Kitchen in a Modern SRO Hotel
Creating a Market Rate SRO Hotel
The following is a model the author designed for an SRO hotel. The building is 50' x 100' and five stories tall. It has 110 units, 22 on each floor, each floor having one communal kitchen, two female and two male washrooms with showers, and 4 small multi-purpose rooms. Two stairways are located in the middle and there is one elevator. Each unit has at least one window and is around 10' x 10'. At $300 per month per unit the building would have a capital intake of $33,000 per month, and $396,000 per year, at full occupancy.
Let's assume that this building costs around $1,500,000 to build. A 20% down payment would be $300,000. At a 5% interest rate and 1.25% property tax, with a 10 year self-amortizing loan, the total payment is $1,714,843.42 at $14,290.36 per month.
After less than three years the down payment investment is returned and from then on that capital can be reinvested, and with every subsequent year more capital can be refinanced.
$33,000 - $14,290.60 = $18,709.4; $18,709.4 is available each month to pay for maintenance, cleaning, a security system, electric and water utilities, and other expenditures. Let's assume that all of the above costs come down to $100 per resident per month, which is $11,000. This means that $8,709.4 each month is available for the landowner as profit. If these estimates are correct, this model becomes viable. $104,512.8 per year for the ownership of a building – one could make that a full time job, if he/she had $300,000 on hand to invest.
To make this establishment a better option would be to take out some of the risk factors. The building owner could work with HUD or a local PHA to create a networking system with low income wage earners who pay the Federal Insurance Contribution tax – making use of employment data and then recommending single workers and workers with a small child to live in the SRO hotel. This way the housing authority can help make sure that the SRO hotel stays at full or near full capacity, thus reducing the risk of having a shortage of tenants.