LA’s Single-Room Occupancy Buildings Face Financial Crisis

Single-room occupancy (SRO) buildings in Los Angeles, often viewed as housing of last resort for the city’s most vulnerable renters, are struggling financially. A report released in November by Enterprise Community Partners, a nonprofit focused on affordable housing, indicates that these properties are operating at a significant loss, with financial challenges worsening each year.

The report surveyed 39 buildings across California, revealing that only two in San Francisco maintain a positive cash flow. In Los Angeles, organizations managing these SRO properties are forced to supplement rental income with their own funds, as the revenue generated is insufficient to cover operating costs.

Marc Tousignant, who oversees vulnerable populations for Enterprise in Southern California, stated, “Owners that are carrying these properties are really trying to make them work. They’re at the front lines of ending homelessness.” The survey included over 3,000 SRO units, which typically consist of minimal living spaces, often just a bedroom without private bathrooms or kitchens. Many of these units are located in aging residential hotels, particularly in the Skid Row area.

Over the past five years, building owners have had to increase the financial support they provide per unit, tripling their expenditures. In 2020, losses averaged $971 per unit, which has now escalated to approximately $2,866 per unit. The report also noted that vacancy rates among the surveyed buildings average around 20%, exacerbating the financial strain.

The decline in attractiveness of these properties can be attributed to deferred maintenance and damage caused by residents with untreated mental health issues. Tousignant mentioned potential discussions around abandoning the SRO model altogether, but emphasized the critical role these buildings play in providing housing for the most disadvantaged.

In contrast to the Los Angeles situation, the two financially stable buildings in San Francisco benefit from project-based vouchers through the city’s Section 8 program. These vouchers assist tenants in affording rent, but cannot be transferred to different properties. Tousignant pointed out that Los Angeles has not allocated new project-based vouchers to existing older buildings, focusing instead on newer developments.

Rehabilitation efforts could be a solution to improve vacancy rates, with the estimated cost of refurbishing each SRO unit averaging $165,000. Some rehabilitation plans may involve converting units into complete studio apartments, including kitchen and bathroom facilities. However, this could lead to a reduction in the total number of available units, presenting a complex trade-off between maintaining affordability and improving living conditions.

Tousignant warned that without viable solutions, more SRO buildings may face court-ordered receivership, placing tenants in precarious living situations. The urgent need for reform and investment in these properties highlights the larger crisis of affordable housing in Los Angeles, where the demand for safe and stable housing continues to grow.