The Future of San Francisco’s SRO’s

by Randy Shaw on June 11, 2012

From the 1960’s through the early 1990’s, San Francisco saw major battles over efforts to convert or demolish single-room occupancy hotels (SRO’s). Opponents saw SRO’s as rundown bastions of criminality, and even depravity, which held back the city’s progress. This perspective still has weight in many cities, but is politically untenable in San Francisco. Since the city’s anti-conversion law was strengthened in 1990 and SRO advocates won the legal and political battles that followed, the city’s political establishment has promoted SRO’s as a vital housing resource. It’s been a remarkable transformation. The city’s SRO’s have political support unprecedented in the United States, and the question has shifted from their survival to how they can best address San Francisco’s affordable housing shortage. Answering this question requires understanding the new economics of SRO’s, their current demographics, and how the city can fill vacant residential hotel rooms with tenants desperately needing such housing.

I was at a meeting at the Planning Department last week that reminded me how far San Francisco has come since I980, when I first got involved trying to preserve SRO’s. In those days, we had to fight to convince the city that stopping the conversion or demolition of SRO’s was a positive; today, city officials are completely pro-SRO and no Supervisor opposes their protection.

In the summer of 1980 I helped organize tenants at the Abigail Hotel (246 McAllister, formerly the Glenburn) to stop an illegal tourist conversion. On May 31, 2012 the Abigail changed ownership, meaning that after over thirty years in which its 42 residential rooms were either rented to tourists or largely left vacant (there were 8 permanents when escrow closed), the hotel will finally house permanent residents.

Activists of the late 1970’s and 1980’s may have lost the larger battle over the transformation of San Francisco economy and growth, but progressives won the struggle to preserve the city’s SRO’s. Today the challenge is increasing low-income people’s access to quality SRO housing, which is not easy given SRO rents and building sale prices that have risen even more than other housing.

The New Economics of SRO’s

SRO rents have skyrocketed in the past decade to the point that I am not aware of a single available non-subsidized SRO room with private bath that rents for less than $1000.00. While Care Not Cash provides rooms with private baths to formerly homeless people for under $500, these rents are subsidized by the city and not available to the broader public.

The minimum $1000 private bath rate means that SSI recipients, who get roughly $900 per month and have been a leading tenant demographic for SRO’s since the 1970’s, cannot afford this housing. Some can gain access through renting with a roommate, but finding such a room is not easy.

Most SRO rooms with private baths rent for over $1200 per month. Why would someone pay $1200-$1500 for an SRO room with bath instead of a studio apartment for that price?

First, because most SRO’s do not require first, last and security, so move-in costs much less.

Second, SRO tenants do not pay for utilities, making a similarly priced apartment more expensive overall.

Third, many SRO’s are architectural gems in good neighborhoods and are preferable to studios of less distinction in less desirable areas.

Unfortunately, the sales prices of SRO’s with all or mostly private baths are so high that owners cannot break even by renting these rooms for under $1000.00. This leads some to either illegally rent to tourists, contract with educational institutions to rent blocks of rooms for student housing, or to charge high weekly rates from October through April and then try to maximize revenue by legally renting 25% of their residential rooms in the “summer” months to tourists.

None of the above scenarios represents what most would see as the ideal use of our SRO housing stock. And while “low-income housing” in San Francisco includes single people earning $43,000 (60% of median), the perception is that SRO’s should serve a population earning much less.

The city will soon enact a six-month moratorium on educational institution rentals which some believe will open this market to low-income people by potentially reducing rents. But SRO owners will still find ways to rent rooms with private baths to students. And the entire controversy over students in SRO’s addresses a housing type—rooms with private baths— already unaffordable to SSI recipients and very low income working people.

Housing SSI Recipients

San Francisco’s hotel leasing program has done a remarkable job at improving the quality of SRO’s and raising occupancy rates to their highest levels ever. The program also went a long way toward solving the problem of SRO unaffordability for single adult county welfare recipients, which emerged almost overnight in 1995.

This would not have been possible without Care Not Cash, but the funding mechanism for that program requires that initial tenancies are limited to those on county welfare. Many of these individuals soon get on SSI and continue to enjoy subsidized housing, but people on SSI without housing—or even very low-income people needing an SRO room—are having an increasingly tough time.

These two low-income groups have a hard time getting permanent housing in an SRO room, even if they have cash up front. While many assume that owners have an economic incentive to rent vacant rooms, and that there is a large market for rooms without private bath—which go from $600 and up in non-subsidized hotels—owners are wary of ending up bearing the costs of evictions.

To avoid eviction costs, SRO’s have used the practice of “musical rooms” for over thirty years. Although local and states laws bar this practice, in which owners require tenants to move to another room every three or four weeks to avoid the 30-day mark that establishes permanent tenancy, or to leave the hotel for a day, is very difficult to stop.

This leaves prospective tenants who earn from $900-2000.00 per month unable to secure permanent SRO housing even though units are available. This helps neither tenant nor landlord, and really should be the chief focus of those concerned about SRO occupancy.

Possible Strategies

Among the ideas to increase SRO occupancy for this low-income population is for the city to fund the roving teams of case managers and psychiatric workers currently used for nonprofit hotels to also respond to calls from private hotels. Owners will know that if the SSI recipient they rent to is having a breakdown or episode that there are city services they can call upon.

Another idea is an expanded version of the Modified Payment Program that my organization, the Tenderloin Housing Clinic, has run since 1988. The key to this program’s success getting landlords to rent to permanent tenants is its use of two-party checks to guarantee rent payments and its screening of potential tenants. This would certainly increase tenant opportunities for those on SSI (particularly seniors), and we are implementing this on a pilot basis for a private SRO using existing resources.

The city may also need to look to making deals with landlords willing to sublease small blocks of rooms to those on SSI. I’m not speaking about the many existing programs that do this for various population subgroups (probationers, people with health problems), but rather a miniature version of the hotel leasing program. The landlord would get a guaranteed rent payment for those rooms, and the program would have to be limited to well-run SRO’s with quality conditions.

An SRO rewiring program, which the Tenderloin Housing Clinic has pushed for ten years and is part of the Central Market Strategic Plan, would make rooms without baths more desirable by allowing tenants to legally cook in rooms. If the details could be worked out, this program has great upside.

It’s great not to have to keep fighting to save SRO’s, and to see so many people interested in their future. The challenge now is connecting the city’s lower income residents to the vacant SRO units they need, and that SRO operators want to rent.

Randy Shaw is Editor of Beyond Chron and Director of the Tenderloin Housing Clinic

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