> or is it only illegal to separate leases for each room

Based on personal experiences I would say that it's only individual leases that are illegal. I lived in an SRO back in college without even realizing it was an SRO, rooms were rented out individually and everyone had a separate lease.

The more common version of this is to just do it privately with your friends or other people that you meet. If that's illegal then that will be news to me and like half my friends that currently live with roommates. Doing it privately raises a number of issues around housing discrimination. A landlord cannot stop you from renting a unit/room but there's nothing stopping a roommate from refusing to sign with you if they don't like some characteristic about you, granted in reality you probably wouldn't want to have that person as a roommate anyways.

Granted there might have been laws in place where I used to rent that capped the number of un-related folks living together but in my experience the landlord never brought it up, likely cause they knew enforcement would just never happen.