The problem is that there's a "housing crisis" (which really just means that desirable places are more expensive than people would like for the most part, because homelessness is not up significantly since that term became popular to my knowledge) largely created by a lack of new housing starts in those areas, and existing laws bar people from circumventing that with alternative arrangements.

I don't understand why local governments feel like they need to regulate every aspect of a household. Enact laws against the negative externalities that are associated with SRO occupancy if the existing residents want them, and then leave things alone.