It’s official. Subdivided flats are now a priority political problem, not just a housing or social issue. The State Council’s Hong Kong and Macau Affairs Office director, Xia Baolong, has said so himself. Hong Kong leaders better listen up. News reports have focused on his spelling out the patriotic criteria for Hong Kong’s future politicians and warning against American interference in the city. But his sternly worded speech given at a forum in Beijing last week was also highly specific about the city’s problems. He said Hong Kong would be a vibrant city with no shortage of affordable housing by the time the nation celebrated the 100th anniversary of its founding in 2049. This means “caged homes” and subdivided flats must be phased out in the coming years. The market for such decrepit, unsanitary, and often structurally dangerous and even illegal units should not exist. Hong Kong officials would no doubt point to a rent control bill about to be passed in the legislature targeting specifically such partitioned units. Somehow, I think Beijing has in mind something more drastic. The median monthly rent for a median 124 sq ft of space in a subdivided unit is HK$4,800 (US$620). Measured by per square foot, it’s more expensive than non-partitioned rental flats: HK$39 per square foot against HK$28 and HK$34 for a full flat of less than 430 sq ft in the New Territories and Kowloon respectively. That’s why many landlords love to lease out subdivided flats despite the legal, regulatory and safety issues. Their properties, usually more than 50 years old, would fetch a lower rent if leased out as a single flat. The market for subdivided flats is as old as Hong Kong’s rental market, but they were at least affordable in the past. Hyper-inflated real estate prices since the last property market collapse, induced by the severe acute respiratory syndrome (Sars) epidemic in 2003, have made even partitioned flats unaffordable, or at least vastly overpriced for those on low incomes. But, if ever there is an ideological conflict between the local elite civil servants and mainland communist mandarins, it’s this. For the former, if there is a market for something with supply and demand, then the government should at most regulate it. For the latter, when something becomes such a deep-seated cause of social malaise and discontent, it must be resolved with full governmental attention and resources. Maybe Hong Kong leaders will finally get the message.