The city’s real estate market is so strong that a sound neighborhood can easily absorb facilities that once would have been a problem — like one housing formerly homeless people — as long as they are well run, the president of the Community Preservation Corporation, Michael Lappin, said.

Just up the block from his company’s East 28th Street headquarters is the now-beautiful Prince George Hotel. During the Koch administration, the Prince George was the largest and one of the most disreputable welfare hotels in the city, housing more than 1,600 people, including prostitutes and drug dealers. “It was one of the grimmest places I’ve ever seen,” author Jonathan Kozol, who conducted research there during the mid-1980s, said. After a series of horrific crimes, including the brutal assaults of several children, the city removed the families and closed the hotel in 1989.

Today, it looks serenely at home in the 10-block Madison Square Park Historic District, which extends northward from 23rd Street. A superb $42 million renovation overseen by architects Beyer Blinder Belle helped qualify it for inclusion on the National Register of Historic Places.

The turnaround is the work of the Prince George’s owner, Common Ground Community, which bought it from the city in 1996, during the Giuliani administration, and renovated it into supportive housing for 416 residents. (Supportive housing combines affordable apartments with services such as mental health and substance abuse counseling, medical care, and job training and placement.)

There is no visible sign that residents are low income or that their rents are subsidized. (They must pay 30% of their income in rent.) Inside, the lobby is dark but clean and pleasant.Two elderly tenants read quietly. A polite security guard questions visitors and greets tenants by name. The extraordinary 100-year-old ballroom, which a tenant says was used as a basketball court during the grim days, has been fully restored, and has a lovely tea room.

“The opulent, Edwardian designers went all out when they built hotels, especially in public spaces,” the director of technical services for the New York Landmarks Conservancy, Alex Herrera, said. “They used the same kind of elaborate ornaments here as they would put in the homes of robber barons up on Fifth Avenue. But these things are very hard to restore, and Common Ground did it using workers who were apprentices, who were just starting their new work lives. It’s inspirational.”

Founded in 1990 to renovate the even more disreputable Times Square Hotel into supportive housing, Common Ground has taken a different approach from most homeless advocacy groups. For one thing, it worries about the well-being of the neighborhood hosting its facilities.

“Advocates didn’t always think about what a facility meant for the larger community,” Common Ground’s executive director, Rosanne Haggerty, said. “Will this increase the stability and health of the neighborhood? Or not?”

The president of the Times Square Alliance, Tim Tompkins, said the hotel, which is now the largest homeless housing facility in the country, had been “a hugely problematic place. Now not only is it well-managed, but it fits into and supports the community in a larger way.”

Some of Mr. Tompkins’s employees, particularly sanitation workers, live in the building. “By undoing the blight, they’ve created an asset,” he concludes.

That’s not the usual history of homeless shelters and community leaders. During the 1970s and 1980s, bitter battles erupted, with community loyalists accusing housing advocates and city officials of destroying whole neighborhoods by inundating declining areas with homeless shelters, halfway houses, methadone clinics, and other potentially destructive uses. In a recent speech, Mayor Bloomberg broke with most past mayoral administrations, warning that “to rid our society of homelessness we must first liberate ourselves from the chains of conventional wisdom, from the fetters of political correctness, from the tyranny of the advocates.”

Common Ground is on a new path. It works at being a good neighbor by being a good landlord first. “We blend into the neighborhood, and we treat our neighbors respectfully,” Ms. Haggerty said. “We’re very strict about the behavior of our tenants. If a tenant becomes disruptive, our staff is right on it. We have clear rules, and we enforce them. Our people don’t want to lose their housing.”

Perhaps because Common Ground’s underlying idea is to reintegrate its tenants into mainstream society, it works closely rather than antagonistically with business and community groups. “They keep their property up beautifully,” the president of the 23rd Street Association, Sharon Ullman, said. The business group, founded in 1929, covers 18th to 28th streets, river to river. “They’re very community-minded. If a group needs space, for example, they’ll offer their beautiful grand ballroom. They’re great neighbors.”

And perhaps because Common Ground is regarded as a great neighbor, it is able to acquire and build facilities in new neighborhoods with very little trouble. At the end of June, it received City Council approval to build a 12-story facility to house 263 formerly homeless people on East Houston Street at Pitt Street on the Lower East Side. It asked for and received a special permit under community facility zoning to double the bulk of the building. “Because there are already so many towers around the park, our building fits in well,” Common Ground’s project manager, LoriAnn Girvan, said.

While the group has many fans, a nearby business owner questioned whether Common Ground is making the best use of the building, even while saying the city does need such facilities.