There are a few people who because they only need a bed use them despite having other options. I've read reports of a few people who sleep under their desk - if the company won't allow this (it is often technically illegal) such a place might be your best option.

There are a few people who because of "problems in life" need a place that is cheap. If your wife gives you a restraining order when you get home as your first notice the marriage is dead you need a place for a few nights while figuring that mess out. (sexism mostly because there are a lot more women's shelters - but otherwise this can apply to either)

There might be some people using this as a really cheap hostel.

But the article makes it clear - most of the people using the place were not what you would call "normal people". They are addicted to something and are there because they need a place to sleep so they can spend more money on their addiction. There is also mental illness - not so bad that they need to be institutionalized, but not really fully able to support themselves.

I get the impression that times have changed - 120 years ago it was much more socially acceptable to live in such a place. You get a bed, and otherwise you are using the city for everything (work, entertainment...)