The issue of subdivided units in Hong Kong: licensing as a solution?

Abstract

In response to widespread concerns over the safety and living conditions of 'subdivided units' (SDUs), the Hong Kong government has vowed to tackle the existence of illegally SDUs and to assess whether licensing is a feasible solution for regulating SDUs in residential buildings. To determine this, I examine the sources of the SDU problem as well as the licensing experience with bedspace apartments. Drawing from economic analysis, I argue that licensing is not a viable solution because: (1) there is an insufficient supply of affordable alternative housing for displaced SDU households; and (2) it fails to address the primary factor attracting flat owners to procure illegal flat subdivision, that is, the lack of enforcement action by authorities. Instead, I propose that alongside the long-term goal of increasing housing supply over a ten-year period, the government should adopt a short-term three-pronged approach. Under this proposal, the government should: (1) strengthen enforcement action against illegally subdivided flats; (2) offer incentives to owners of illegally subdivided flats to conduct proper removal and/or rectification of unauthorised building works; and (3) impose a system of rental control and housing tenure to safeguard the interests of SDU households.