America’s housing ladder is missing a rung.
For most of America’s history, single-room rentals, also known as SROs, provided an important first/last step on the housing ladder. That is no longer the case. At the bottom of most cities’ housing markets, where workers, students, and new arrivals once found affordable shelter without public subsidy or bureaucratic intervention, there is now nothing.
This isn’t because the demand for spartan housing vanished or the underlying economics stopped making sense, but because, over the course of several decades in the 20th century, we legislated this housing type out of existence. By the 1980s, SROs were more or less a relic. Since then, urban homelessness has become more intractable, rates of domestic migration have declined, and household formation has slowed as rents for existing housing continue to climb.
Among proposals to address this problem, one approach is model state preemption legislation. The Institute for Justice has a promising model bill in this mold as part of their efforts to improve economic liberty and mitigate social injustices caused by strict zoning regulations. Called the Restoring Options in Occupancy Models (ROOM) Act, this deregulatory housing bill would not create a new program, fund a new agency, or ask taxpayers to subsidize anything. It would simply get local regulations out of the way. As state governments are better suited to fully understand the costs and benefits of housing scarcity, it makes sense to approach this problem from the state level. In fact, across the country, states are having great success legislating broad housing reforms and producing results faster than if every locality had to enact the same policies.
How we got here
Single room occupancy housing — boarding houses, rooming houses, spare bedrooms typically let out for rent for less than one month at a time — was once the entry point for urban housing markets. SROs were where young workers historically landed when they first moved to a city. It was where low-income residents could afford to live without relying on charity or public subsidy. In the language of urban economics, SROs are the market’s own solution to the affordable housing problem. Around 1950, SRO units made up around 10 percent of all rental housing units in some major American cities.
Beginning in the early 20th century, and accelerating dramatically after World War II, local governments began treating this housing type as a problem to be solved rather than a resource to be preserved or expanded. Decision makers saw SROs as magnets for public disorder and poverty, they believed that by eliminating a certain type of building they could also eliminate certain human conditions.
Facially neutral regulations like minimum room-size requirements, mandatory full-kitchen and bathroom standards, zoning codes that restricted residential uses to detached single-family homes or conventional apartments, and occupancy rules that effectively outlawed anyone who wasn’t related by blood or marriage from sharing a dwelling — each exacted a regulatory toll. New York City, for example, made it illegal to subdivide existing homes which was a common way SROs were developed from obsolete mansions and larger row houses. As the regulatory ratchet turned, SROs became legally impossible to build and financially impossible to operate in much of the country.
The consequences have been severe. The people who once filled these units didn’t disappear as SROs have dwindled. Instead, many ended up in shelters or living on the street. Others doubled and tripled up in apartments, in arrangements that are simultaneously illegal under local occupancy codes and frustrating for the occupants. The informal roommate economy that is so common in urban life today is, in large part, a kludgy workaround for a housing type we banned. For a deeper dive into SROs, read Niskanen’s earlier analysis in Single-room rentals in America’s housing ecosystem.
What the ROOM Act does
The ROOM Act would preempt local regulations that functionally ban SRO housing. This action is the most powerful tool available to state legislatures when local governments fail to act in the aggregate public interest. It establishes that SRO properties must be permitted by right in any zone where residential uses are allowed. The bill also allows SROs in commercial and mixed-use zones by right. The policy would prohibit special use permits, discretionary reviews, and onerous public hearing processes that essentially allow neighbors to veto SROs. Instead, it would establish a clean, predictable, objective path to permit this needed housing type.
The bill’s zoning provisions aim to ensure that SRO projects are calibrated based on the context of their neighborhood. Up to eight sleeping units would be allowed on single-family lots, enough to make conversion economically viable without overwhelming neighborhood character. In nonresidential zones, SROs would be governed by existing density caps where such caps exist. Crucially, each unit in a SRO project would count as only one-quarter of a dwelling unit for density-calculation purposes and to prevent municipalities from using density limits as a backdoor way to block development of SROs.
The bill’s building code provisions are equally important. One of the most effective mechanisms local governments use to block SRO development is a commercial kitchen requirement. It mandates that any property with shared cooking facilities, such as an SRO building, install professional-grade equipment equivalent to a restaurant’s. Given the expense, such a requirement makes small-scale SROs financially impractical. The ROOM Act would prohibit this unnecessary burden. It would also anchor minimum standards to the federal HUD guidelines for SRO housing quality, providing a clear national baseline to prevent municipalities from using high standards as a de facto SRO ban.
The act’s commercial conversion provision deserves mention as well. Cities across America are grappling with underused office buildings, particularly in downtown cores where remote work has raised office vacancy rates. Office-to-SRO conversions are often more viable than conventional apartment conversions. Unlike conventional apartments where each unit needs a full suite of utilities, SROs can have more centralized plumbing since bathrooms and kitchens can be concentrated in the middle of the floor plate. Meanwhile tenant rooms occupy the windowed perimeter and only receive electric service. The ROOM Act would help unlock this path at scale by allowing SRO land uses in commercial and mixed-use zones.
The bill also includes thoughtful, supplemental provisions on the landlord-tenant side. SRO operators face a distinctive management challenge: Because tenants share common spaces, one disruptive occupant can degrade the experience for everyone else. The ROOM Act acknowledges this, providing for an option for streamlined evictions, including expedited court timelines, for conduct that materially interferes with other residents’ safety or quiet enjoyment. While this provision’s intent is to protect SRO tenants, its side effect would ensure that SROs do not become havens for disorder in their neighborhoods. This reform is a recognition that SROs have their own operating needs that local landlord-tenant law may not be well-suited for.
The affordability case is strong
In cities in which SROs remain legal, monthly rents average roughly 40 percent below (see p.34) comparable studio apartment rents. This isn’t surprising, as SRO units are smaller, spread infrastructure costs among more residents, and don’t require the full suite of appliances and fixtures of a conventional unit. The affordability is inherent to the design, not subsidized.
Building more SRO spaces would also have a filtering effect further up the housing ladder. Adding any housing supply — even housing targeted at single-person households — puts downward pressure on rents across a market by reducing competition for studios and one- bed units, while at the same time allowing roommates living in larger units or even single-family homes to find their own places. Growing the supply of all housing types, including SRO rental units, can support new family formation by freeing up larger homes and pulling down prices throughout the housing market.
To make sure localities follow state policy, the bill includes a well-designed enforcement mechanism. It would give housing organizations and developers standing to sue and recover attorneys’ fees if local laws blocked their projects disincentivizing local stonewalling. State preemption bills often have teeth on paper and none in practice; the ROOM Act’s enforcement section takes seriously the need to make the preemption stick for this approach to be effective.
Conclusion
State legislators looking for housing solutions that don’t require new spending, don’t create new bureaucracies, and don’t generate the local political fights that come with rezoning specific parcels should consider the policies in this bill. The SRO legalization movement is young, but the underlying logic is old and proven. The market provided many kinds of low-cost, low-commitment housing options for generations before we banned them and deprived ourselves of a critical part of the urban housing ecosystem. The ROOM Act is a vehicle for remembering what worked and rebuilding the first rung on the housing ladder.
