A 20-minute University Lecture on the Most Unaffordable Informal Housing in the Most Unaffordable City.

Dr Edward Yiu will talk about his recent research findings with Dr Mandy Leung on the rental determinants of informal housing in Hong Kong, the Subdivided Units (SDUs).

Abstract

Hong Kong has been the most unaffordable housing city in the world for consecutive 9 years, according to Demographia (2019), which causes low-income households to live in informal or illegal sub-divided micro-units. They are also highly unaffordable when quality-adjusted housing-rent-to-household-income-ratio (RTIR) is measured. This paper is the first published ones of our research agenda on informal housing. It aims to explore the characteristics and rental determinants of the most unaffordable informal housing markets in the most unaffordable city. Due to the illegality of the sub-divided units, rental data are not available publicly. This is the first study by means of direct in-situ interviews with tenants of the sub-divided units to collect first hand data on not only the households’ income information, but also the characteristics and size of the sub-divided units. It is found that tenants have to make trade-offs of living space and housing facilities for lower rent, resulting in over-crowdedness and poor living environment. Some of them even lack basic facilities for sanitation and ventilation. As most previous housing rent studies presumed the presence of these basic facilities, sub-divided units provide a rare opportunity to examine the effects of their deficiencies on rent. The empirical results reveal a substantial increase in the market rent for the provisions of the first window (ventilation) and a non-shared toilet (sanitation). The results also confirm the hypotheses that the effects on market rent of shared facilities depend on the number of households sharing the facilities. The findings provide strong implications on building controls and the value of the basic housing facilities. Further studies on informal housing markets are now underway, with the second paper proposing a novel quality-adjusted rent-to-income ratio for the sub-divided units so as to measure more accurately the unaffordability of the micro-units for low-income households.

Acknowledgement:

This study was developed into a knowledge transfer project of The Chinese University of Hong Kong. The collaborative organizations include Platform of Concerning Sub-divided Flats and Issues in Hong Kong, The Hong Kong Council of Social Service, I. CARE Programme of The Chinese University of Hong Kong and Land Justice League. Their valuable assistance is much appreciated.

Full Paper:
Leung, K.M., Yiu, C.Y. Rent determinants of sub-divided units in Hong Kong. J Hous and the Built Environ 34, 133–151 (2019). https://doi.org/10.1007/s10901-018-9607-4