Smaller cities aggressively eject the target demographics of SROs through aggressive zoning and outright buying bus tickets to the nearest large city

Rent for a real apartment in a smaller city costs less than an SRO in a large city.

There are no jobs in the small cities, plus they typically try to keep out anyone that doesn't fit their white picket fence ideal.

Well, yes. See above about the urbanism death spiral. Large cities suck the life away from smaller cities.

This is the direct consequence of allowing dense housing, and it's made _worse_ by allowing abominations like SROs or "microapartments". And then bunk beds (already happening in Singapore).

The correct action here is to STOP doing this. Prohibit building dense housing and, more importantly, dense office space. Provide tax incentives for remote work and for offices outside of city cores. Ideally, start un-densifying cities by creating more park spaces in place of dense housing.