SRO Townhouses: Bargain or Booby Trap? What Buyers Need to Know
Nov 12, 2025
There’s always buzz about the “next” Brooklyn neighborhood—where the cool cafés are just starting to appear and townhouses still feel (relatively) within reach. For some buyers, that means exploring properties with SRO designations. On paper, these buildings can seem like a deal: below-market pricing, rental income potential, and a foothold in a fast-changing part of the city.
But here’s the thing about SROs: what looks like a shortcut to ownership can quickly become a long detour through NYC’s building code, rent regulation laws, and a pile of paperwork you didn’t know existed.
Let’s break it down.
What Even Is an SRO?
SRO stands for “Single Room Occupancy.” Think of a classic boarding house: tenants rent individual rooms, and share kitchens or bathrooms. The arrangement is legal—if the building has the correct Certificate of Occupancy (COO), typically a Class B designation. But in recent years, especially with the rise of Airbnb, many owners have rented out single rooms without that legal status. That makes for a murky ownership situation (and a mess if the city catches wind).
So first things first: if you’re looking at a building marketed as an SRO or being used like one, check the COO. If it’s a Class A but being rented room-by-room, that’s not a legal SRO—and you’ll likely be required to bring the building into compliance, either by ending the illegal use or converting it properly.
The Conversion Process: What You’re Really Signing Up For
If your dream townhouse is a legal SRO and you want to convert it to a multi-family or single-family home, there are three big hurdles:
- Get a Certificate of No Harassment (CONH)
This protects existing tenants and ensures they haven’t been pressured to leave. If your seller doesn’t already have one, you’ll need to apply—and wait. The city reviews the building’s history and may conduct interviews or hearings. If harassment is found (even years ago), you could be barred from altering the property for 3–5 years. - Get a new Certificate of Occupancy
Once you’ve cleared the CONH step, you’ll still need to change the building’s official use, which requires permits, architectural plans, inspections, and approvals. This alone can take a year or more—and that’s before you start renovations. - Renovate—and Not Just a Little
Most SROs weren’t built to function as fully separate apartments. That means adding kitchens, upgrading plumbing and electric, and creating units that meet NYC code. It’s a big job. Be prepared for time, cost, and unexpected surprises (hello, 19th-century plumbing).
Is It Worth It? Maybe.
The honest answer is: it depends. If you love the building, have a long-term vision, and access to funds (or renovation stamina), a legal SRO can be a diamond in the rough. But if you’re hoping for a quick flip or passive income from day one, this probably isn’t the path for you.
We always advise looking beyond the purchase price. Legal fees, architect fees, permits, and construction costs can quickly turn a “deal” into a money pit. And if you’re hoping to use the building as a co-living space (the modern take on the SRO), know that you’ll still need that CONH—and you’ll be expected to follow strict rent laws that protect existing tenants.
What About Keeping the SRO Designation?
In some cases, yes, keeping it might be smart. Co-living is gaining traction, especially in cities like New York where renters want privacy but can’t always afford a full apartment. If your building already has the legal SRO designation, and you’re willing to respect lease laws and invest in upgrades, co-living can offer steady returns and steady demand.
Bottom Line
SROs aren’t for everyone—but they can be the right fit for buyers who are flexible, financially prepared, and willing to navigate the process with patience and the right professional guidance.
If you’re considering a townhouse with SRO potential—whether you’re thinking co-living, multi-family conversion, or a single-family dream home—let’s talk. We’ll help you understand what’s realistic, what’s risky, and what’s really required.
Because sometimes a bargain is more than just a price tag—it’s about knowing exactly what you’re getting into.
Interested in learning more about the architectural process? Check out our Q&A with architecture firm, makeSHIFT here and here.
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If you’re interested in learning more about the buying process, download our free Buying Into Brooklyn Ebook. We share a ton of valuable resources to demystify the buying process and help you become a Brooklyn home-owner.