Responsiveness of sub-divided unit tenants’ housing consumption to income: a study of Hong Kong informal housing

Abstract

This is the first empirical study of income elasticity of housing demand of low-income households living in sub-divided units (SDUs) of Hong Kong. Housing affordability is commonly measured by either price-to-income ratio (PIR) or rent-to-income ratio (RIR), and the latter method is often found to be relatively stable over time and across countries. We contend that RIR cannot accurately reflect affordability situations because of the income elasticity of housing demand. Informal housing markets exist in Hong Kong for low-income households to pay lower and more "affordable" rent by living in units of smaller size and poorer quality, which are often with irregularities. This study found that SDU households have a relatively low income elasticity of housing demand and a relatively high RIR. They face difficulties in adjusting their housing service quality and quantity to balance their income and expenditure budget. Even so, SDU households are observed to further downsize and forgo housing facilities to make their rents affordable.

Keywords:

• Housing affordability
• income elasticity of housing demand
• sub-divided units
• informal housing
• low-income households
• ratio approach
• residual income approach

Acknowledgement

We would like to express our sincere appreciation for the assistance of the social workers from the Hong Kong Subdivided Flats Concerning Platform.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes on contributors

Dr. Ka Man Leung is Post-doctoral Fellow in Department of Real Estate and Construction at the University of Hong Kong. Her research interests include informal housing, affordability, institutional analysis and urban displacement. She is one of the recipients of the 2018-2019 Fulbright-Lee Hysan Hong Kong Research Scholar Award. Dr. Chung Yim Yiu is Associate Professor in Department of Property at the University of Auckland. He is currently one of the Faculty Research Committee members. He has written and researched widely on housing policy and housing price analysis. He has also linked his research to practice, he was the elected candidate representing the Architectural, Surveying, Planning and Landscape Functional Constituency in the Legislative Council in 2016, and a Fellow of the Royal Institution of Chartered Surveyors. Mr. Kin-kwok Lai is Programme Leader and Senior Lecturer in Felizberta Lo Padilla Tong School of Social Sciences at Caritas Institute of Higher Education, Hong Kong. He has been actively working with social workers in supporting the households living in subdivided flats in Hong Kong. He was the founding convenor of the Hong Kong Subdivided Flats Concerning Platform, and he is currently the founding chairman of ComHome Social Housing Platform Limited.

Notes

1 SDUs are not necessarily illegal but irregularities are commonly found. A recent study found that only 2% of the new SDU properties in 2016 obtained Certificates of Completion after the subdivision works. This in fact implies that 98% of the new SDU properties involve irregularities (Liber Research Community, 2018). Besides, according to a SDU survey, 52.0% of the respondents’ SDUs did not have adequate areas of windows for natural light and ventilation, which is in breach of the requirements stipulated under the Building (Planning) Regulations (Buildings Department, 2018; Caritas Development Project for Grassroots of Organizations, 2014). 14.5% of the SDU respondents’ toilet did not have window for ventilation nor mechanical ventilation which produces five air changes per hour and the change of air is with the outside of the building (Buildings Department, 2018; Caritas Development Project for Grassroots of Organizations, 2014). Moreover, the width of exit doors and exit route serving the SDUs within the original flat should not be less than 0.75 m and 1.05 m (Buildings Department, 2015). Yet, Caritas Development Project for Grassroots of Organizations (2014) found that the average width of exit door of SDU properties was 0.737 m and the average width of the exit route was 0.786m, which were both below the requirements.

2 The average residential floor space per capita in the US and in Hong Kong were reported to be about 829 square feet (77 square meters) and 161 square feet (15 square meters) respectively in the formal housing markets in 2009 (Wilson, 2014). The average residential floor space per capita in the sampled SDUs of Hong Kong is 52 square feet (4.8 square meters).

3 We thank reviewer for the comment on the inclusion of formal housing data as a control group, instead of comparing with another existing study on formal housing markets. Also, we appreciate the comment regarding the discussion of potential implications on the social, economic and political issues which happen in Hong Kong.