It's not uncommon if it's cheap housing that's only semi-legit to begin with. When I lived in Santa Cruz, I heard all sorts of this kind of shady behavior going on with sublets, which due to housing shortage was the only thing you could really get for <$1000.
You might be able to prevail, yeah, but many people are a bit scared of finding themselves on the street, unable to find another apartment, so aren't willing to play hardball. With an unofficial sublet (no signed lease, etc.), landlords don't necessarily resort to proper court-supervised eviction proceedings; "eviction" can take the form of "change the locks and dump your stuff on the curb, and deny that you ever lived there", which probably rarely happens but seems to be a common worry of people renting irregularly with no paperwork.
Then you'd have to find somewhere to live, and undertake the time/expense of suing. The best protection is probably a bit of a mutually assured destruction angle if the landlord is breaking the law through the irregular rental in the first place (in Santa Cruz many of the rentals are off the books because they aren't even legal rental units--DIY converted garages and attics and such).
Not sure how big that "informal rental" section of the economy is, though, so maybe this isn't a common situation. I'd guess it's highest in NYC.
