Boarding and lodging houses played an important role during American industrialization.
Could they make a come-back?
Rural people and immigrants relied on them when they sought jobs in rapidly urbanizing cities and affordable housing was scarce.
Cities zoned them largely out of existence over the past roughly 75 years. Now, they’re getting fresh consideration and even some momentum as hidden-in-plain sight solutions in an all-out battle against a worsening housing affordability crisis.
Co-living cropped up as a niche trend in urban areas before the Covid-19 pandemic. The pandemic sharply disrupted that momentum by undercutting demand for dense, shared living and halting expansion plans.
However, intensifying ongoing housing affordability concerns have resurrected interest in single-room occupancy housing, as states and cities revisit long-standing bans on low-cost shared living.
Nonprofit public interest law firm Institute for Justice has created a legislation template that the firm has begun lobbying states across the country to standardize SRO zoning. The legislation is modeled on a state of Washington law passed last year, which requires cities and counties to permit single-room occupancy or co-living housing in areas zoned for multifamily housing.
Dubbed the Restoring Options in Occupancy Models Act (ROOM Act), the bill would apply statewide to legalize SRO housing and accelerate building supply. It would allow both new construction and conversion of existing buildings, while, at the same time, eliminating restrictions that could effectively ban the housing type.
Co-living development, without the measure, can happen. However, developers and landlords must face more friction as they navigate the zoning process, including having to address any opposition to the housing style.
“With this, you don’t have to beg for all those permissions,” Sam Hooper, legislative counsel with the Institute of Justice, told The Builder’s Daily.
SROs once deemed blight
In the early 20th century, Progressive-era reformers began portraying boarding and lodging houses as morally suspect, overcrowded, and incompatible with middle-class family life.
Reformers objected to unrelated adults sharing rooms or kitchens, linking low-cost rooming districts to vice, transience, disorder, and ill-repute. That made them easier to politically target for regulation and elimination.
The housing came to be synonymous with slums and blight, while single-family houses became the ideal.
Early zoning codes and related ordinances channeled this stigma into law. Single-family districts excluded boarding or rooming houses, hotels and similar group living uses altogether. Planners used minimum lot sizes, setbacks and narrow definitions of family that made traditional boarding operations nonconforming or illegal in many residential areas.
Urban renewal initiatives in the 1950s and 1960s furthered the destruction of single-occupant housing. Developers converted many buildings into higher-paying rentals.
Pre-pandemic housing affordability revived the housing
Co-living rekindled and began gaining popularity with the rise of the sharing economy, alongside ride-hailing, vacation rentals, and coworking spaces.
Both co-living and the broader sharing economy monetized underused space and promised flexibility, convenience and community, especially for young, mobile workers. For renters, co-living meant shorter, more flexible leases.
Young renters priced out of studios and one-bedrooms could still find dwellings in central locations, proximate to job centers and neighborhood amenities.
Co-living providers shrank private space and pushed residents to share kitchens, common rooms, and services. The model mimicked privately developed university dormitories. They became dorms for adults.
Zoning laws, investor caution impeded development
Many U.S. cities restricted or failed to define co-living and shared-housing formats in their zoning codes. Those gaps forced projects into legal gray areas or case-by-case approvals.
Cities often capped unrelated occupants per dwelling or deemed rooming-house layouts nonconforming. These rules limited growth and concentrated operators in a few tolerant markets. That kept co-living out of the mainstream multifamily development pipeline.
Institutional investors mostly viewed co-living as an alternative or niche asset class rather than core multifamily. Instead, private equity-fueled startups such as Common Living. Founded in 2015, Common pioneered large-scale co-living development.
It collapsed last year into liquidation bankruptcy after rapid expansion, thin margins and rising interest rates squeezed its model. However, it lasted longer than others that raised millions. Quarters, a European co-living company, raised $300 million to break into the U.S. market in 2019. It went through liquidation bankruptcy two years later.
The pandemic hurt demand in the burgeoning co-living industry as remote work, health concerns and shifting preferences weakened occupancy and revenue while costs rose. It hit heavily capitalized, master-lease “WeWork of housing” style operators the hardest.
Co-living’s new dawn
Small-scale co-living developments survived. The Tomorrow Building in Chattanooga, Tennessee, for example, proved to be a resilient operation.
Companies focused on finding homeowners willing to rent out rooms weathered the pandemic.
Atlanta-based PadSplit, founded in 2017 as a marketplace for renters looking for a room, recently announced more expansion. This time it is adding Portland, Seattle, Sacramento and Nashville.
Atticus LeBlanc, PadSplit’s founder and CEO, backs the ROOM Act.
Though New York City suffered during the pandemic and lost population, housing affordability remains a major challenge.
Roomrs, also founded in 2017, survived.
“It was hard times,” Or Goldschmidt, founder of Roomrs in 2017, said in an interview with The Builder’s Daily. “We came out of it very strong.”
The company works with landlords to provide furnished rooms, focusing on Brooklyn and Manhattan. New York City still has SROs, but the city banned new ones in the 1950s.
States and cities have been shifting
City Council member Erik Bottcher filed an ordinance just before Thanksgiving to relegalize SRO housing and permit it in new Class A apartment buildings or in buildings converted to Class A units. The city now leads the country in office-to-residential conversions.
New York City presents a unique situation with tens of thousands of rent-stabilized apartment units, sometimes entire buildings, sitting vacant. Landlords choose vacancy over substantial renovation because a 2019 state law closed a key loophole that effectively prevents them from recovering their costs through charging a market-rate rent.
The Institute for Justice also represents landlords in a federal lawsuit that argues the law is unconstitutional.
In addition to Washington, neighboring Oregon passed a law in 2023 that allowed micro-units in all residential-zoned areas in cities across the state. That includes buildings with up to six units on a lot zoned for single-family homes.
Montana’s 2023 housing reform included co-living micro-units on a menu of options to increase housing. Cities must choose at least five options.
Last year, St. Louis passed an ordinance that included lifting a 75-year ban on SROs.
The ROOM Act would give states a ready tool to legislate and move quickly on shared housing reform, Hooper said.
Goldschmidt added that his company sees firsthand the pent-up demand for flexible, high-quality, all-inclusive housing.
“By pre-empting exclusionary zoning and clarifying SRO building codes, the ROOM Act provides the regulatory certainty our industry needs to operate efficiently and scale rapidly across the country,” he said. “It is a clear and decisive signal that policymakers are ready to prioritize housing supply and consumer choice.”
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