Developing housing for residents stuck on the bottom rung of the homeless ladder is not easy. Single-room occupancy housing, commonly known as SRO housing, is riddled with financial, infrastructural, and operational challenges, but SRO developers across the country say it is a necessary headache to house a population that would otherwise be lost to the streets.

“Homelessness is worsening as we speak,” says Lloyd Boggio, CEO of Miami-based Carlisle Development Group, one of the largest developers of affordable housing in Florida. “The same problems that put people on the streets—emotional and psychological problems, bad circumstances, and disabilities—aren't going to go away. At the same time, the cost of houses is skyrocketing. Every time the rent goes up, a few more people become homeless.”

Developers agree that the demand for SRO housing—also called supportive or efficiency housing—is at an all-time high. But matching the demand are myriad hurdles that make this kind of development among the most difficult in the multifamily industry. At every step of the way, from financing to design, from building supply to building management, SROs offer a twist or two—and frequently more—to the usual challenges of development.

“It is much harder to do this stuff than building a shopping mall,” says Cindy Holler, president of Mercy Housing Lakefront, an SRO developer in Chicago. “I can build a shopping mall on a greenfield any day. But it is an art to pull [an] SRO development together.”

But SRO developers and providers agree that the projects are worth the effort because they help a segment of the population that cannot help themselves. Without SROs, the larger community would end up paying even more.

“It's expensive to provide these kinds of developments and services,” says Sister Lillian Murphy, CEO of Denver-based Mercy Housing, which has developed 19,100 units of affordable units in 41 states. “But if you compare the costs of this kind of housing to the costs of a city paying for the homeless alone, [SRO housing] is less expensive.”

SRO ON DEMAND Each night almost a million people nationwide are homeless, according to the National Alliance to End Homelessness. Despite a $2 billion a year infrastructure, homelessness has become dramatically more prevalent in the last 30 years, reports the nonpartisan advocacy group.

What's more, the organization points out, 150,000 to 200,000 people—or 10 percent to 20 percent of homeless single adults—are chronically homeless. (The federal government defines chronic homelessness as people who have a disabling condition and who have been continually homeless for a year or have been homeless four or more times in the past three years. Disabling conditions include substance abuse, mental illness, developmental disability, and chronic illness.)

Developers see the demand for SROs reflected in the numbers of potential residents. “The idea of five-year waiting lists with 30,000 people on the waiting list is not uncommon,” says Don Falk, executive director of San Francisco-based Tenderloin Neighborhood Development Corp., a nonprofit business that houses almost 2,400 extremely low-income residents in 1,600 apartments and residential hotel rooms across 23 buildings. He adds that any SRO development that opens in San Francisco will be immediately filled to capacity.

So great is the demand for SROs that some managers forego waiting lists altogether. “For most of our units, the demand is so high that it is faster to not have a waiting list,” says Traci Manning, the director of housing for Central City Concern, a Portland, Ore.-based organization founded 28 years ago to help the homeless become self-sufficient. “If I don't have a waiting list, I can fill it up faster. I get enough people walking in the door without a list.”