Rents for Hong Kong's cage homes rising

HONG KONG: The redevelopment of old buildings in Hong Kong is cutting down the supply of "cage homes" in centrally located areas and forcing up rents for the unemployed and underemployed who can least afford to meet higher living costs.

On a per square foot basis, those who occupy "cages" of no more than 15 sq ft created by subdividing old apartments into up to 50 separate living compartments now pay landlords from several hundred dollars to up to HK$1,500 (RM619.5) in rent each. That translates into a rental charge of HK$100 psf, which is at least 25% higher than the per square foot cost of renting a luxury house on The Peak, where effective rents for a 3,000 sq ft house range between HK$70 and HK$80 psf.

"It used to be easy to find a cage home in West Kowloon at a monthly rent of less than HK$1,000 two years ago. But now, you have to pay more than HK$1,000 for a cage home," said Sze Lai-shan, community organiser at the Society for Community Organisation (SCO).

Rents for a cage home have risen to between HK$50 and HK$60 per square foot from HK$30 to HK$40 in 2008, said Sze, and in prime locations such as Yau Tsim Mong, rents could reach HK$1,500 a month, the highest in the city. In Sham Shui Po, renting a cage home costs HK$1,000 to HK$1,200 a month.

Occupants of cage homes also have to pay for electricity and water, and while landlords are billed for power at a rate of 91.5 HK cents per kilowatt-hour, they would typically charge tenants HK$1.30 per kilowatt-hour, Sze said.

The sharp increase in rents was mainly due to the fact that the redevelopment of old districts had accelerated in the past two years.

"The redevelopment projects in Tai Kok Tsui and Yue Man Square in Kwun Tong have forced people to move to other outlying districts," she said.

Sze estimated there were still more than 100 cage home apartments operating in the city, most of which did so without the necessary licences issued by the Department of Home Affairs' Office of the Licensing Authority.

"Their living environment is poor. No windows, no light, no fresh air, no privacy. Fifty people have to share two washrooms in an apartment. And they have to live with rats, cockroaches and woodworm.

"Some suffer mental illness after they live there for a few years. They lose all hope and feel that they are useless," she said.

Chan Wah-keung, a licensed operator of cage homes, said his family had operated cage homes since the 1960s and in the 1970s they owned nine apartments in Kwun Tong that were subdivided into cage homes.

Now all that remains is a single apartment at Lap Shing Building in Kwun Tong that still offers cage homes, while the other eight apartments have been converted into small "suites" that are leased to immigrants from the mainland and lower-income earners.

"I want to convert the apartment into four small suites with floor areas of 150 sqft each. But the tenants want to stay so I will convert the flat after they move out," he said.

Demand for small suites is now stronger than for cage homes, which was strong 40 years ago, Chan said. "Kwun Tong was full of factories at that time. Workers liked to live closer to the factories to save transport expenses," he said. But demand for cage homes dropped after the factories moved to the mainland.

Chan said his 700 sq ft apartment at Lap Shing Building provided 20 cage homes. The unit provides a kitchen and bathroom.

He also said he charged tenants who rented his cages a monthly rent of between HK$600 and HK$750, which meant he collected HK$12,000 to HK$15,000. If he converted the apartment into a four-suite flat, he said, he would collect about HK$2,500 per suite, which meant he could generate a monthly rental income of HK$10,000 if he leased out the four suites.

"The monthly income is about 30% higher than if I lease the unit to a single tenant," he said.

Property agents said the average price of a flat in Lap Shing Building was about HK$1.6 million, which meant Chan could earn a gross rental yield of 7.5% from leasing four suites in his flat.

Living conditions in cages were poorer than in public housing, said Chan, but many tenants preferred to stay in cage homes because they were in central locations.

And tenants willing to move into public housing estates in the New Territories would have to wait for many years before they could do so, added Sze, which meant they remained dependent on cage homes.

Sze said the government should build more public housing estates in urban areas and then prohibit the operation of cage homes. – South China Morning Post