New Study Finds Aging SRO Stock in California Faces Deep Deficits, High Vacancies

• California’s single-room occupancy housing faces severe financial and physical distress.
• Most SRO buildings operate at a deficit with many units sitting vacant.

A new statewide analysis by Enterprise Community Partners finds that California’s aging stock of single-room occupancy housing is facing severe financial and physical distress, with most buildings operating at a deficit, many units sitting vacant, and the majority of properties dating back nearly a century.

The study, which examined 39 SRO properties owned by nonprofit operators across Northern and Southern California, provides one of the clearest assessments to date of the fragility of this critical form of extremely low-income housing.

Enterprise found that the SRO sample included 3,054 units across 39 buildings, 3,016 of which were true SRO units lacking private bathrooms. The average unit count per building was 78, with a median of 62.

While SROs have long been considered a key part of the state’s low-income housing infrastructure, the study underscores the extent to which the properties themselves are nearing the end of their workable life spans.

According to the findings, the buildings are “inherently quite old,” with an average construction year of 1928 and a median construction year of 1913. Many of the buildings were not placed into service as affordable housing until the late 1990s or early 2000s.

The age of the buildings correlates directly with extensive rehabilitation needs. Owners estimated an average of $165,000 per unit for rehabilitation work, which includes both hard and soft costs.

Enterprise noted that while the figure appears high, it is “understandable” given the age of the buildings, deferred maintenance, and limited rental income that makes it difficult for property operators to fund ongoing building improvements. In some cases, per-unit rehab costs are lower for buildings that were recently renovated, but these represent only a small portion of the statewide portfolio.

The report also found that nearly a quarter of the SRO properties were identified as potential candidates for conversion to studio apartments.

While conversions may align better with modern housing program requirements, Enterprise cautioned that such work can reduce total unit counts—a challenging tradeoff in a state already facing a severe shortage of affordable housing.

Further, state and local regulations often prohibit or limit the loss of low-income units during redevelopment, raising obstacles for nonprofits seeking to modernize aging buildings while maintaining compliance with affordability mandates.

Even beyond the physical condition of the buildings, the financial picture is deeply troubling. The study found that 95 percent of SRO projects reported an operating deficit.

Only two of the 39 projects showed positive cash flow, and both were fully subsidized through federal project-based rental assistance. Enterprise reported that nonprofit owners have been forced to offset substantial operational losses through organizational funds, making what the industry refers to as “sponsor advances.”

These financial pressures have escalated sharply in recent years. Between 2020 and 2024, the participating organizations contributed more than $24 million to sustain deficit properties.

Annual sponsor advances increased every year and grew most significantly in 2023 and 2024. Owners attributed this trend to dramatic increases in insurance premiums, the expiration of pandemic-era rental assistance programs, and the depletion of project-level reserves.

Vacancy rates further complicate the financial instability of California’s SRO stock.

According to the study, the average vacancy rate across the sample was 20 percent, with only six projects reporting single-digit vacancy rates. These levels far exceed typical underwriting assumptions for affordable housing, where vacancies are generally expected to hover around 5 percent.

Enterprise found that high vacancies stem from a combination of factors, including marketing challenges, building conditions, tenant turnover, and the mismatch between available units and available subsidies.

High vacancies reduce rental revenue and heighten the financial burden on property owners already struggling to keep buildings operational.

Another core challenge is the limited availability of long-term rental subsidies. The study reported that just 57 percent of the SRO units were covered by project-based rental assistance.

For permanent supportive housing units within the sample, the coverage rate was higher at 86 percent. Still, 43 percent of all SRO units had no long-term rental subsidy tied to them.

Enterprise noted that subsidies are essential to making SRO operations viable because extremely low-income residents cannot generate enough rental income to cover operating costs. The lack of subsidies, combined with elevated vacancies, leaves property owners with few options other than drawing on internal funds to cover operational gaps.

Enterprise also examined how SRO properties align with the state’s Low-Income Housing Tax Credit guidelines.

Only 21 percent of the properties qualified as special needs housing under the state’s criteria, and 36 percent were considered at risk due to impending affordability expirations.

The report notes that tax credit alignment is critical because it determines whether owners can access competitive state financing tools needed to rehabilitate or reposition aging buildings.

Enterprise concluded that existing program guidelines do not adequately support SRO preservation and may need revisions to create viable pathways for redevelopment and long-term sustainability.

Despite widespread operational and financial issues, the study found that most properties do not face immediate affordability expiration risks.

Because they are owned by mission-driven nonprofit organizations, the SROs are expected to remain affordable housing even when covenants expire.

Instead, Enterprise warned that the greatest threat to long-term SRO preservation is “depreciation risk,” defined as the combination of physical deterioration, persistent operating deficits, and depleted reserves that collectively jeopardize the buildings’ structural and financial stability.

The report also highlights differences between regions. The study found that near-term affordability expirations were concentrated entirely in Southern California, particularly Los Angeles, where 16 properties reported expirations that have already occurred or will occur within the next 10 years.

In contrast, SRO properties in San Francisco were not projected to face any affordability expirations until at least 2050.

Enterprise concluded that without significant new policy interventions, California risks losing an essential segment of its affordable housing stock.

The report found that SROs remain one of the most important housing resources for extremely low-income individuals, including formerly homeless residents and those requiring supportive services. Yet operators face mounting obstacles in their efforts to keep buildings habitable, safe, and financially sustainable.

The findings make clear that preserving California’s SRO housing will require sustained investment, regulatory flexibility, and an expansion of long-term rental subsidies.

Without these measures, Enterprise warned that aging SRO buildings will continue to deteriorate, vacancies will remain elevated, and nonprofit housing providers will face growing financial strain that threatens the long-term existence of deeply affordable housing in the state.

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