Isn't it also the fact the almost no one wants to live like that? The expectations has changed and there's probably little demand for such type of housing.
When the choice is between $3000/mo for a proper apartment and $2000 for a flophouse room some people will take the flophouse. Right now the only choice we offer those priced out is a painfully long commute (with has its own time and car expenses that reduce the savings).
People rent bedrooms in single-family homes all the time. The only difference between that and dorm-style housing is the size of the building.