With 1.2 million people in poverty, Hong Kongs poverty rate is 17 percent.

While this is high, it is nowhere near the poverty rates in some U.S. cities (New York
Citys is 20%). Hong Kongs Gini coefficient is 53.3, the 13th highest in the world
between Paraguay and Thailand. The richest 10 percent of Hong Kong residents
take home 40 percent of the total income thats more than the poorest 70 percent
combined. Hong Kong has the highest level of income inequality in the developed
world.

The worst, however, is in Hong Kongs housing market.Housing prices have

doubled since 2008. The average price per square foot in Hong Kong is $2.84. For
comparison, the average price per square foot in New York is $1.17. Hong Kong has
the 3rd most expensive real estate in the world. Meanwhile, median wages in Hong
Kong have been stagnant since 2006. The explosion in Hong Kong property values
has left many poor residents behind.

The shortage of housing has created a market for low-cost housing. This
includes subdivided flats, which are apartments that have been divided up into tiny
rooms for beds. The per-square-foot rate for subdivided flats is $3.40

Subdivided apartments are legal and the regulations governing them are
rarely enforced. For many apartment owners, renting out many subdivided
apartments can be more profitable than renting out the apartment as is.

Many of the poorest live in stacked cages. These are essentially rooms that
are filled with wooden compartments or wire cages. Some apartments contain 10 to
20 cages. Many others live illegally in abandoned factories or on rooftops, though this
is becoming less common as the government has started cracking down on it.

The Hong Kong Government requires 5.5 square meters per person. Anything
over that is considered overcrowded. Oxfam estimates that over 60 percent of
those living in inadequate housing are in overcrowded conditions. These tiny
apartments are not only uncomfortable, but they are unhealthy.

The people living in these conditions include those who are unemployed,
disabled, and recent immigrants. As home prices have skyrocketed and wages have
remained stagnant, many were forced to move out of their apartments as rents were
raised. While Hong Kong does offer public education, for many who lose their jobs
later in life, learning more competitive skills is simply not an option. Hong Kongs
public housing does not extend to recent immigrants. Only those who have been
residents for more than 7 years can qualify for public housing.
 The housing crisis has attracted the attention of Hong Kongs chief executive,
Leung Chun-ying, who says he will make solving the housing problem his top
priority. Its a good thing too. Experts and activists are pushing for reforms that
shorten the waiting time for a public rental apartment and increase subsidies for rent
payments.

Hong Kong residents have also not remained silent on the issue. In 2011,
protesters called for the resignation of then Executive Donald Tsang. They demanded
a resumption of the construction of government-subsized housing and an increase in
measures to slow the rise in home prices. Tsang eventually stepped down in
response to an unrelated scandal.

The economic cause of Hong Kongs extremely high property values are
unclear. One major argument is that its a simple supply-demand issue. Currently,
only seven percent of Hong Kongs land use is designated for residential use and the
unused land is owned by the government. Some suggest that the government has
restricted its sale in order to raise property values and collect more from the sale of
land tracts to developers.

Another commonly cited reason is Hong Kongs currency peg. Currently, the
Hong Kong dollar is pegged to the U.S. dollar. 43 percent of goods imported to Hong
Kong come from China. This means the Chinese Yuans appreciation against the US
dollar has caused overall price inflation in Hong Kong. The peg (combined with the
U.S. Federal Reserves loose monetary policy) also forces interest rates in Hong
Kong down. This has further pressured housing values upward as investors seek
higher return in Hong Kongs historically fast-growing property market.

Recently, the government of Hong Kong is responding by instituting a number

of measures to try to cool down the property market. These measures include,
increasing the tax on foreign purchases of domestic property and instituting
maximum loan-to-value ratios. It seems unlikely that this will be enough to alleviate
the problems of Hong Kongs lower class.