LOS ANGELES -- When night falls on Skid Row, brightly colored neon lights click on, illuminating the facades of a network of small hotels that offer cheap, furnished rooms and refuge from nearby streets populated by hundreds of the city's homeless.

More than 1,000 vacant or substandard units in 11 of the dilapidated neighborhood's 58 small, old hotels have been converted into long-term housing for the cutting-edge poor. The single-room occupancy hotels (SROs) are operated by a city-backed corporation that has systematically bought and renovated Skid Row properties since 1984.

As advocates for the homeless and local governments intensify their search for permanent solutions to homelessness, SROs -- once relegated to the flophouse fringe of most cities -- are enjoying a renaissance. The older, sturdy buildings that once provided economical overnight lodging for traveling salesmen and cheap apartments for immigrant labor are being recycled into cheap, long-term housing for adults.

The SROs are gleaming exceptions to the rule in this community of concentrated despair -- clean, secure and carpeted buildings with shared kitchens and bathrooms that rent to the working poor or recipients of limited welfare and pension benefits for an average of $200 a month. Most of the hotels have waiting lists; two more are awaiting renovation.

"There are two ways of looking at what we do," said Andy Raubeson, the executive director of the SRO Housing Corp. "If you say after six years you run 13 hotels with 1,106 units, we're doing pretty well. If you look at the need in Los Angeles, we're not doing well. But it's unreasonable to expect to do nothing because you can't do everything."

In one Los Angeles storefront, the corporation operates a fitness center with donated weight training equipment. In another, a grocer leases space from the corporation with the understanding that he will sell no alcohol and limit the prices he charges for staples. And on two street corners, previously crime-ridden parks have been fenced in, landscaped and transformed into daytime lounging spots that are closed and locked at dusk.

Raubeson and SRO developers in other cities are among the first to admit that they are addressing only a portion of the problem, but their efforts have attracted steadily growing support among local and federal officials.

New York, San Francisco, San Diego, Portland, Ore., and Los Angeles are leading the way in the SRO revival, and SRO corporations also have been launched in Atlanta and Richmond. The District opened its first SRO in Northeast late last year.

"We had a massive loss of housing -- 6,000 units in five years," said Brad Paul, San Francisco's deputy mayor for housing. Landlords "were just going into buildings and kicking people out, threatening them. They were taking rooms that were renting for $100 a month to seniors and turning them into rooms that went for $30 a night to tourists."

San Francisco passed the nation's first ordinance aimed at protecting SRO stock from conversion in 1979. In Portland, officials have used federal low-income housing tax credits and subsidies from the now-defunct federal Section 8 moderate rehabilitation program to modernize 2,400 units over 10 years.

"When we started, homelessness wasn't a big issue in terms of the kinds of problems we see now," said Sam Galbreath, director of housing for the Portland Development Commission. "We were concerned about affordability and maintaining residential options central to the development of downtown. But early on, we didn't seem to have the crisis of special populations and homelessness that we have now, so it was a little simpler."

The SROs, however, provide only limited relief. They cannot serve families, and residents must have a source of income to live in them. Along Skid Row in east-central Los Angeles, dozens of homeless men and women still line the streets day and night, sleeping in boxes and on thin pallets, frequently trading in drugs and alcohol. When the neighborhood missions open their doors, the homeless line up for hot meals and shelter beds.

Special populations -- those who are alcoholics, drug abusers or mentally ill -- make up one-third of the homeless in most large cities, studies show. On Skid Row here, however, the proportion is dramatically higher.

Raubeson calls the makeshift boxes that many of the homeless use for sidewalk shelter "cardboard condominiums." A daytime walk along Fifth Street reveals a thriving crack trade, and bulletin boards in the SRO hotels are littered with meeting announcements for self-help groups such as Cocaine Anonymous.

At the Regal, which opened seven months ago, the hallways and small rooms are carpeted, and each room has a bed, a night table, linens and a small refrigerator. Some have kitchenettes and private bathrooms, but most tenants share these facilities. The Golden West, Leo and Ellis hotels are reserved for the mentally ill, recovering alcoholics and the elderly.

Gerard Hernandez, 55, who has lived on Skid Row for seven years, said living at the 57-room Harold represents "the difference between night and day" from the older hotels he occupied before moving there two years ago. He said the walls at the Panama Hotel, which has since been purchased and renovated, were covered with graffiti, and human feces often smeared the bathroom floors.

Hernandez, who pays his $170-a-month rent with income from veterans' and Social Security benefits, said he feels safe at the Harold. "If I didn't have this place," he said, "I don't want to think about it."

A few blocks away at the Ellis, Frances C. Lee, 68, moved into Room 211 last November from a transitional house on a nearby street. She said she would be happy to continue living here if she could get into one of the few units with a kitchenette.

"I'm not used to not having my own kitchen," she said. "The food they serve here {at the meals program downstairs} is too bland."

The bulk of the corporation's resources comes from city loans, with some help from food bank donations. Since 1984, the Community Redevelopment Agency has provided nearly $28 million in start-up funds and capital support for the acquisition, rehabilitation and management of the hotels and neighborhood parks. Through the welfare system, the county government provides social service support and vouchers for temporary tenants at the 290-unit Russ Hotel.

The federal government's contribution so far has been a $1 million McKinney Act grant for services to residents of the Golden West, the hotel designed to handle the needs of mentally ill tenants. Activists such as Raubeson say they believe the federal government should play a larger role in providing low-income housing.

"There are very few cities willing to put the money into us that the city of Los Angeles does," said Raubeson, who helped launch the Portland SRO system before moving to Los Angeles in 1984. "That's the danger of using us as a model."

Since a recent visit to San Diego, Housing and Urban Development Secretary Jack Kemp has begun to express support for the SRO concept. "I am a great believer that the lack of SRO capacity has been a big reason for homelessness in America," Kemp told a recent meeting of newspaper editors in Washington. HUD is taking steps to make SROs eligible for Federal Housing Administration insurance for the first time.

John Tuite, a former high-ranking HUD official who is now administrator for the Los Angeles Community Redevelopment Agency, said the reduction of federal low-income housing support during the 1980s drove many people to the streets.

"SRO hotel rooms are the lowest available level of housing for people who are living on fixed incomes," Tuite said. "We wanted to save that as well as contributing to the stabilizing of the neighborhood and setting a standard of excellence for management of those hotels."

In New York, where the SRO housing stock has shrunk from 150,000 units 15 years ago to 50,000 rooms today, the bulk of the city-supported hotels are reserved for the mentally ill or elderly homeless who come directly from the city's extensive shelter system. The city has committed to opening 5,000 new units by 1992.

"The commonly held notion that SROs are good, I didn't start hearing that until about a year ago," said Saralee Evans, director of the West Side SRO Law Project. New York, she said, has increased the number of options for tenants with special needs but has failed to increase the availability of cheap rooms for the working poor who cannot afford apartments.

But other cities continue to pursue the notion that SROs are the beginning of a solution to a key part of the homelessness problem. Detroit City Councilwoman Barbara-Rose Collins, who toured the Los Angeles project last summer, said she would like to divert a portion of Mayor Coleman Young's recently announced $16 million budget for demolishing vacant buildings to a rehabilitation fund for SRO housing.

"It would be a better service to the community than halfway houses for parolees or for drug addicts," she said.

In Los Angeles, Raubeson sees an expanding future for his SRO project. Driving through the Skid Row neighborhood and calling hotel residents by name, he eyes other properties, readily offering capsule histories for each of the rundown buildings that he envisions renovating.

And he eyes the people on the streets whose names he does not know and whose presence seems to mock the success of his modest efforts. "Homelessness," he said, "is a growth industry here."