The SRO Housing Market

In the first half of the twentieth century, single-room occupancy (SRO) housing was a massive part of New York City’s housing market. SROs are cheap, no-frills housing, generally consisting of a single private room with communal bathroom and cooking facilities and frequently located close to jobs and public services. They were home to a diverse population of industrial workers, transient laborers, and other low-income New Yorkers.

Mid-century New York City boasted approximately two hundred thousand SROs, about 10 percent of the total housing market. Unfortunately, in the mid-1950s, city policy and economic conditions turned against SROs. City elites considered SROs to be inferior housing and offered landlords tax incentives to convert SRO buildings to other uses. Simultaneously, rising property values in neighborhoods dense with SROs drove conversion to higher-rent use such as office buildings or luxury housing.

These conversions required vacant buildings, so landlords set about evicting their tenants. Some neglected their properties, allowing them to degenerate over time so that they would be unlivable for tenants. Others hired goons to harass and intimidate residents. Once tenants had been evicted or harassed out of their homes, landlords refused to re-rent their units.

By the 1980s, New York City faced a housing crisis that in some ways parallels the current crisis. As the city recovered from the fiscal crisis of the previous decade, housing prices began to rise, and with them the rate of homelessness. Of particular significance was the SRO housing market. The SRO market had been a bulwark against homelessness, a crucial source of low-rent housing. But the number of SROs had been cut in half over the previous decades, and many of those that survived destruction were being warehoused instead of rented out. The SRO market had collapsed, and low-income New Yorkers were paying the price.

This collapse precipitated a homelessness crisis that mirrors the one we see today. Tens of thousands of New Yorkers that relied on SRO housing lost their homes and could not afford to live anywhere else. Study after study found that many New Yorkers entering the city’s shelter system previously lived in SROs, but had been displaced.

The city government, recognizing the errors of its previous SRO policy, reversed course and enacted a series of laws to protect SRO housing and stop the hemorrhaging of affordable units from the market. These laws prohibited the destruction of SROs and required landlords to rehabilitate dilapidated units and place them back on the rental market.

Landlords’ reaction to these laws was dramatic. Two days before the first of these laws was set to go into effect, one landlord tried to illegally demolish a group of SRO buildings on Manhattan’s 44th Street. In the dead of night, without securing a permit or even turning off the gas and water, the landlord brought wrecking balls and bulldozers to Midtown and began gutting buildings. As one reporter put it, “A stray spark — as they began ripping out the innards of the building, bringing bricks and steel girders and glass cascading into the street — and they could have blown up much of the block and the people on it.” Fortunately, this reckless demolition was stopped before it caused an explosion, but not before damaging two buildings and gutting two others.

The Preeminence of Private Property

One group of SRO owners took a more tactical approach: suing the city to stop enforcement of the new laws. These landlords argued that the laws violated the Constitution’s 5th Amendment prohibition against the public taking of private property without just compensation. Their legal battle lasted for several years, ending in New York State’s highest court, the Court of Appeals. In the landmark decision Seawall Associates v. City of New York, the Court of Appeals agreed with the SRO owners and declared the laws unconstitutional.

The court sought, first and foremost, to protect private property and the rights of property owners, the landlords. The judges gave particular deference to the expectations of speculative real estate investors. They reasoned that the mandatory refurbish and rental provisions, together with the prohibition against demolition, denied “owners of SRO buildings any right to use their properties as they see fit” and “impairs the ability of owners to sell their properties for any sums approaching their investment.”

The court gave no such deference to SRO tenants or to the city government. City lawmakers had found a tight correlation between the ballooning homeless population and the destruction of SROs and passed laws to prevent the collapse of the affordable housing market. The court was unconvinced, finding that the local laws failed to advance a legitimate state interest. The court ruled, bizarrely, that any benefit the local laws conferred on homeless individuals was “indirect and conjectural.” Finally, the court ruled that the laws unduly burdened SRO landlords, forcing them to bear the cost of a social problem that should be borne by the public at large.

The Court of Appeals priorities are clear: a landlord’s right to exclude someone from their investment property is more important than that person’s right to keep a roof over their head. The court protected the landlords’ speculative investments against the encroachment of laws that would have preserved vital affordable housing.

Over the following decades, with the stamp of approval of the most learned judges in the state, New York City’s SRO landlords slowly but surely destroyed the city’s most affordable housing stock. From a height of two hundred thousand, SRO units today have been reduced to an estimated thirty thousand. Many of the units that survived this massacre are still vacant because owners refuse to rent them out.

Real Estate’s Enduring Power

Today, the city’s landlords are poised to embrace a strategy similar to SRO landlords in the 1980s. Like their forebearers, owners of rent-stabilized apartments are gutting a vital section of the affordable housing market. Ever since 2019, when tenants won a decisive victory with the Housing Security and Tenant Protection Act, landlords have been threatening to withhold their supply of rent-stabilized housing. They’re now making good on that threat.

To respond, we have to clear the hurdle that is the Seawall decision. The city cannot pass legislation that would compel landlords to rent out their units without overcoming it. US history is littered with reactionary court decisions that were ultimately overturned or forgotten, and Seawall is vulnerable to legal and political challenge. But for now, it stands as a calcification of real estate’s enduring political power in New York. That power has been fractured and damaged in recent years, but it hasn’t been defeated yet.