Nobody is going to build a flop house as new construction even in, especially in, Texas. Have you been to Austin before? It isn’t much better than Seattle.
A lot of them were just old houses that were unrenovated. They’ve probably been torn down and rebuilt by now. My first place in the U district (1994ish) was a cheap $225/month basement room with shared bathroom and a small kitchenette. The land lady was desperate to keep non-students out so it wouldn’t turn into a flop house.
The kinds of subdivisions that turned large homes into multiple boarding situations is also not code compliant and would require at the very least a conditional use authorization (years and uncertainty) in SF.