How do the poor survive in an unaffordable city? – An empirical study of informal housing households living in Hong Kong

ABSTRACT

In urban economics, tenants are commonly assumed to substitute between accessibility and housing size and the substitution would become inelastic when the size is small. It explains how the poor survive in city centres. However, limited empirical study on this hypothesis is conducted because minimum housing size is commonly regulated in formal housing. Informal housing, in which the living area is not regulated, offers an opportunity for researchers to examine this hypothesis. Yet, differences between the two markets render them non-comparable. This paper contributes by conducting empirical tests on size elasticity on rent by studying Hong Kong’s sub-divided units (SDUs), which are mostly informally subdivided in housing flats, and the effect of proximity to public transportation on size elasticity of housing. The results suggest that size elasticity on smaller-sized housing rent is lower. Size elasticity of SDUs (with one-fourth of the average whole flat size) is about half of the whole flats. We further found that SDU tenants have to pay more for the same size increase when they live closer to the metro station. Compared with whole flat households, they are less willing to pay more for larger floor area.

KEYWORDS:

• Size elasticity
• public transportation
• informal housing
• sub-divided units
• urban poverty

Acknowledgments

We express our sincere appreciation for the assistance in data collection and organizing surveys by the social workers of the Hong Kong Subdivided Flats Concerning Platform.

Disclosure statement

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

Notes

1 According to Policy 21 Limited (2013), 49.6% SDU households had applied for PRH, among these households, 97.1% were on the waiting list. 13.9% SDU households had previous accommodation in public housing. Their major reasons for living in SDUs are (1) lack of space to live with parents/relatives (34.9%); (2) convenience in travelling to/from work or study (34.6%) (Policy 21 Limited, 2013). For households with the second reason (less than 5% of all households), they may treat SDUs as their second home as they may also have PRH as their residence but the locations may not be close to work/study.

2 To be defined in the next section.

3 Property tax is 15% of the net assessable value, which is computed by market rental income less the sum of irrecoverable rent, rates paid by owners and statutory allowance for repairs and outgoings (Government of the Hong Kong Special Administrative Region, 2021).