Don't get me wrong, I would LOVE to see modern SRO-style buildings, noise proofed, with small individual bathrooms and kitchenettes. That sort of development would be a godsend to the housing shortage, perfect for young people, supercommuters, and recent transplants, as well as for stopgap homeless prevention.
This isn't that. This is horrible.
I know. It's difficult. It would require changes to coding for square footage requirements. It might not be particularly profitable. It'd be expensive to run safely. The opportunity costs would be astronomical (considering the luxury-condo alternative).
It wouldn't be the solution, because no one thing is. However, It would be a solution to a narrow set of problems, and an asset to residents and workers if it were managed and secured properly. I think one key would be ensuring that it didn't become a shelter for the vagrant homeless population, nor a place for families, just a relatively inexpensive, clean, safe option for individuals to land for a while.