Few in NYC are jumping at the chance to live in a building with shared bathrooms, kitchens and a mere 80 sq. ft. of living space seemingly talor-made for a Lilliputian. SRO properties have been synonymous with poverty, overcrowding and substandard living conditions. Let’s face it, these properties aren’t pretty but they have played a pivotal and longstanding role in addressing—at least in small ways—the city’s affordable housing crisis.
Historical Role of SRO Properties
During the industrialization era, SROs accommodated the vast influx of workers and migrants seeking opportunities in NYC. They also provided refuge for those facing economic hardships and financial devastation during the Great Depression. They fell out of favor during the post-WWII economic boom, reemerging once again during the homelessness crisis of the 1980s.
More recently, the properties have been largely neglected by investors and owners alike who have had little use for them other than as single and two-family conversions or for housing program tenants. That may be about to change, however.
SROs Relevant Again As Short Term Rentals
In today’s “rent everything” generation, the short term rental model has exploded in popularity with Airbnb leading the pack. For a while, NYC landlords benefited but the passing of Local Law 18 in 2023 imposed severe restrictions on the practice all but killing the business for most. Officials blamed the noise, trash and danger short term rentals invited as reasons for the regulation but influential hotel groups certainly played a role.
For SRO property owners, however, Local Law 18 was a blessing as these “Class B” dwellings are exempt from its requirements. SRO owners are free to operate their properties under the Airbnb model. From a practical standpoint, transforming SROs into profitable short term rentals requires owners to vacate existing tenants—a task often fraught with legal and practical complexities.
Nonetheless, for an asset class with very limited use cases, call this is a small victory for the SRO community.
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