SRO's/Rooming Houses

Rooming houses (also, boarding or lodging houses) once were a large part of the urban housing market. In Boston alone in the 1920s, there were 2000 in operation, with many more in adjacent suburbs. Zoning by-laws that have been handed down to the present day typically allow the "taking of boarders" (usually with a limit on the number) in single-family houses in the urban area. The traditional boarding house included an owner's quarters on a lower floor. Boarders were housed in upper-floor space formerly used as the family's bedrooms. The boarding house allowed the home owner to continue in residence, with the boarders providing a revenue source. It allowed the boarders a low-cost form of housing.

The number of boarding houses declined with the decline in the number of home owners willing to operate their homes as rentals. By 2003, the number of rooming houses had declined in Boston to 148. The reduction was not without its effects on the boarding house population. The growth in homelessness was one effect.

The SRO, or single residence occupancy building, is the modern descendant of the rooming house. Many modern SROs are operated by social service agencies that function to provide not only housing but also social services in treating residents with problems of substance abuse, mental illness, or disease. Where rooming houses often earned an undesirable reputation, today's SRO in terms of upkeep is often the "best building on the block." A renovated SRO has fire sprinklers, handicapped access, new systems, and updated finishes throughout. A trained social worker is likely in residence. Architects and SRO operators have gained sufficient experience to develop a prototype for design. The standard layout consists of the maximum number of bedrooms sharing common bathrooms on upper floors and, on the lower floors, a common kitchen, dining area, and lounge for socialization, as well as on-site offices for social service staff. The SRO has become the primary means for community-based special needs housing.

For appraisers, an important initial consideration in the valuation of an SRO is regulation. Municipalities limit the installation of new SROs. They also limit their removal. Regulation 17 of the Boston Rent Equity Board requires a removal permit before an existing SRO can be put to alternate use.

The Income Approach is a standard method of valuation for an SRO. The Sales Approach is also important. Analysis of sales may reveal that the buyers of SROs are often interested not only in rental income but in operation of social service programs as well, and the latter motivation may affect price. The Cost Approach can be relevant in the valuation of an SRO that has recently been rebuilt, at substantial cost. For these reasons, the valuation of an SRO can be more complex than the valuation of a typical apartment.



The Reenstierna Associates Report is published as a service to the clients of Eric Reenstierna Associates and other real estate professionals. The views expressed are those of the articles' authors and do not necessarily reflect those of other members of the organization. Copyright 2004. All rights reserved.

Eric Reenstierna Associates
24 Thorndike Street
Cambridge, Massachusetts 02141
(617) 577-0096

Home