I know a lot of Gen Z and even Millennial adults who are still living at home well after finishing school. I'm sure plenty of them would love to get out of their parents' homes but can't afford current rents, but might be able to afford an SRO.
In general I don't think many homeless people are going straight from the street to their own market rate unit. However some of them might be able to move into a sibling's spare bedroom after their adult nephew moves out.
Speaking as an older gen-Z-er living in with their parents, this is very true of me and many people I know around my age (most, now that I think about it). If I could live somewhere nearby that doesn't eat up 50%+ of my income I would go there in a heartbeat. On HN there's a tendency to assume people are either well-off or destitute drug addicts who have given up on life but there's a wide range in between.
Something like 40% of the homeless nationwide are actually working, employed, but unable to build up enough savings to rent an apartment.
Here's just one source I found on: https://endhomelessness.org/blog/employed-and-experiencing-h...
I got a tour of a homeless shelter a few months ago and the folks running it mentioned that one of their jobs is to wake up specific people at 6am, 7am etc so they can make it to work in the morning.
Not saying it isn't worth a shot, all for it. I just don't know if this eats up that much demand / houses that many people these days.