California Landlord-Tenant Laws Drive SRO and Co-Living Conversions Amid Operational Challenges

Los Angeles, California – Stringent landlord-tenant laws in California are making the operation of Single Room Occupancy (SRO) units and co-living spaces increasingly difficult, leading some property owners to convert these affordable housing options into conventional rentals. Moses Kagan, a prominent voice on social media, highlighted this trend, pointing to the high costs and lengthy processes associated with tenant evictions under current regulations.

"In SROs, tenants almost always share kitchens and bathrooms (that's why they're cheap)," Kagan stated in a recent tweet. He added, "This arrangement for housing the down-and-out works if the manager can throw a misbehaving tenant out instantly. Otherwise, one bad apple spoils the barrel."

Under California's Tenant Protection Act (AB 1482) and local ordinances like Los Angeles's Just Cause for Eviction Ordinance (JCO), evicting a tenant, even for cause, can take months and incur significant legal expenses, potentially reaching "four or five figures," according to Kagan. These laws mandate specific notice periods, just-cause requirements, and in some cases, relocation assistance, making rapid tenant removal impractical for shared living models. This legal framework requires landlords to demonstrate "at-fault" reasons like non-payment or nuisance, or "no-fault" reasons such as owner move-in or substantial remodel, each with its own set of strict conditions and potential financial obligations.

The operational difficulties are exemplified by the "troubles besetting the SRO Housing Corp. in LA," Kagan noted. While the Skid Row Housing Trust, a separate entity, recently collapsed due to insufficient rental subsidies and deteriorating building conditions, SRO Housing Corp. has also faced documented financial challenges and issues with property maintenance. A recent report on the Skid Row Housing Trust's failure indicated that low and inconsistent rental subsidies, coupled with the high needs of some tenants, made managing properties financially unviable, a situation described as a "canary in the coal mine" for other supportive housing providers.

This dynamic is not exclusive to SROs, as Kagan explained. "This same dynamic makes operating co-living very difficult, which is why we have been hired to transition at least one one large co-living asset to conventional rentals, with more possibly on the way." The trend of converting co-living and SRO properties to conventional rentals reflects a broader struggle for operators to balance the provision of affordable, shared housing with the financial realities imposed by current legal and market conditions.