Abstract Background Asylum seekers and refugees (ASR) are struggling for residential autonomy while awaiting the results of their asylum case. As housing is a known upstream determinant of and fundamental resource for health, it is important to monitor housing quality of state-provided shared refugee accommodation. We constructed, validated and field-tested a new and quick-to-apply index to measure the degree of Small-area Housing Environment Deterioration (SHED). Methods Conceptualizing housing quality as characteristics and maintenance of physical environment, we developed the SHED based on the “Broken Windows”-index (BWI). We conducted a validation study with seven raters at two time points, assessing measures of inter-/intra-rater reliability and internal consistency, complemented by cognitive interviews. Further, we field-tested the index in a random sample of 58 shared refugee accommodations and assessed its convergent validity against ASR's satisfaction with their living places (EUROHIS QOL). Results SHED assesses five domains (windows/glass, walls/roof, garbage, graffiti, outside spaces), complemented by a rating of the overall living environment. The validation study delivered an 'almost perfect' prevalence- and bias-adjusted Kappa (PABAK) of 0.87 (0.82-0.91) for intra-rater, 'substantial' to 'almost perfect' PABAK's between 0.71 (0.52-0.91) and 0.91 (0.87-0.91) depending on the rater (all p < 0.001), and a Cronbach's α of 0.80. The index's construct validity is based on the BWI and converges with the ASR's subjective satisfaction with their living places. Cognitive interviewees enjoyed the simplicity and speed of the SHED and guided the creation of a manual for future use. Conclusions The index demonstrated high measures on objectivity, reliability, and internal consistency. It proved its applicability in a field-test and showed convergent validity with ASR's satisfaction with their living place within shared refugee accommodation. Key messages We have constructed an objective, reliable, internally consistent and valid index assessing the degree of deterioration of small-area housing environment. SHED offers opportunities for monitoring the physical quality of collective accommodation centres and filling the research gap on associations between housing quality and health.