N.Y. Hopes to Help Homeless by Reviving Single Room Occupancy Hotels : Poverty: The city legislated to reduce the SROs decades ago. Now, it blames that policy for forcing people to live on the street.

Among the tens of thousands of homeless on the streets of New York are a handful who used to live in the old Sutton Hotel on the east side of Midtown Manhattan.

There, for the fraction of the cost of a studio apartment, men and women on welfare or drifting from job to job rented small, furnished rooms by the week with a tiny single bed and a bathroom down the hall.

But that was before the Sutton closed its doors in 1980, the victim of tax incentives and tough new building codes designed to promote conversion of Single Room Occupancy hotels into what city officials felt were more humanely sized and appointed apartments.

In December the Sutton reopened as a luxury hotel. Poor people do not live there anymore.

What happened to the Sutton has happened to hundreds of SRO hotels here since the early 1960s. As the city systematically upgraded its housing stock, more than 100,000 rooms that housed the poor have been renovated and converted to other uses, helping to create a homelessness problem that has become the nation’s worst.

Revival of the SRO market is now a national priority for advocates of housing the homeless. It is high on the agenda of Henry Cisneros, the new secretary of housing and urban development, and is being pursued by grass-roots organizations in virtually every major American city.

But if New York is any example, bringing back SRO hotels may be a long, arduous process, requiring reconsideration of decades of building regulations and tax codes designed with very different objectives.

The struggle to bring SROs back also raises an uncomfortable question for those looking to redesign urban-housing policies for the 1990s: Can the quality of housing for the poor be improved without leaving the very poorest homeless?

“In the city of New York there were laws passed to push the private sector out of the SRO business on the theory that SROs were inhumane,” said George McDonald, executive director of the Doe Fund, a nonprofit housing group in New York. “Consequently, people sleep on grates outside.”

“What happened in New York was a great irony,” said Dan Margolis, director of the Community Housing Improvement Program, a New York low-income housing group. “We had literally hundreds of thousands of SRO units that provided housing to large segments of the population. Then the city decided that it was inadequate and unsuitable and developed zoning provisions and incentives to put them out of business. The result is the enormous homeless mess we now have.”

SROs sprang up early in the century in New York and other major American cities as short-term housing for the working poor. By the post-war 1940s, there were almost 200,000 such rooms citywide. But they soon acquired an unsavory reputation.

Landlords began chopping up one- and two-bedroom apartments to make SROs, alarming city officials. In a few celebrated cases, chaotic conditions resulted when owners on the Upper West Side of Manhattan rented SROs to families with children, largely Latino immigrants.

The Sutton’s experience was typical. Built in 1928 as a 17-story, upscale, art deco residential hotel, it soon attracted a poorer clientele.

“It went downhill,” said Harold Weingarten, head of the New York City Hotel Owners Assn. “It was not maintained. It was a bit of an eyesore.”

In 1955 city officials first banned construction of SROs by private developers, then provided substantial tax incentives to any landlord who upgraded an SRO to a full-size apartment with its own kitchen and bathroom. Finally, zoning and building codes were changed to prevent the kind of high-density, low-quality housing that SRO hotels came to epitomize.

“The SRO should not be accepted as lawful housing for any segment of our population,” said an aide to then-mayor Robert F. Wagner in 1965. “No community should equate such housing with the acceptable living standards of the 1960s.”

The results, according to housing experts, were catastrophic.

“In the context of the time, it may have made sense,” Anne Teicher, current deputy director of SRO housing for the Mayor’s Office on Homelessness, said of the 1955 ban. “They were looking to upgrade certain neighborhoods that had a high concentration of this kind of housing. But I don’t think people thought through that policy at the time and realized what impact it would have.”

By 1980, 85% of SROs that existed in 1960 were gone. The poor were pushed onto the street. When city social workers polled homeless men entering shelters in 1980, they found that about half had lived in SROs.

“The people you see sleeping under bridges used to be valued members of the housing market,” said Mary Brosnahan, executive director of the Coalition for the Homeless in New York City. “They aren’t anymore.”

In recent years, motivated as much by economics as anything, nonprofit housing groups and city planners have begun a concerted effort to revive the SRO market in New York. Housing one homeless person in a shelter costs $40 a night, as much as people used to pay weekly for an SRO room.

Some experts have said they believe that with a small degree of government assistance, the homeless could afford to rent SROs by using their public-assistance allowance, currently $215 a month.

To this end, the city has loaned about $300 million in the last five years to nonprofit groups interested in renovating and operating old SRO hotels. But for that amount, only about 3,000 new rooms have been built, about 75,000 shy of what housing experts estimate is needed.

“I don’t think the public sector can do it all alone,” said Conrad Levenson, vice president of the Phoenix Foundation, a nonprofit group that promotes low-income housing.

Bringing private developers back into the SRO market, however, raises different problems. Many rules imposed decades ago to improve housing standards for the poor by eliminating small rooms and crowded apartment buildings make it impossible for a private developer to profit from building and running an SRO affordable to the homeless and working poor.