The demolition of the Kowloon Walled City was decided at the beginning of 1987. By the middle of 1992, the city was (forcibly) deserted.
The Walled City, the world's biggest slum at the time, was inhabited by more than 33.000 people. It formed its own, almost isolated community without any jurisdictional supervision (except for a few drug raids). The inhabitants were employed by illegal businesses: manufactures, restaurants, and healthcare services that would have been absolutely illegal anywhere else. Famously, a lot of dentists and doctors were operating there without a license - people who learned the know-how from their parents, mentors, or elsehow. Manufacturers that did not have to comply with any safety and hygiene regulations provided cheap supplies for restaurants, and fake counterfeits for shops.
This documentary shows a very good glimpse of the businesses there: https://www.youtube.com/watch?app=desktop&v=S-rj8m7Ssow. It is evident that these businesses could not function anywhere with jurisdiction in such conditions. It is also implied that many of the inhabitants were outlaws, people who for whatever reason could not legally be in Hong Kong, were under warrant, or even born outside of the system and having no legal identity whatsoever.
My question is as follows: when the city was decided to be demolished, all these people had to relocate. This included all the illegal businesses. All the obviously very poor 33.000 inhabitants, who surely couldn't afford to buy a flat elsewhere. And these people were employed by the illegal businesses.
What happened to these businesses? What did their owners do once they were evicted? Surely, the unlicensed dentists could not operate outside the Walled City, and most business owners didn't have funds to set up a legal shop. How did they earn a living afterward?
And what about their employees? This eviction must have caused a surge of close to 33.000 unemployed people. People who have been employed by these illegal businesses, and most probably did not have any legal permit for the job they were doing. Especially the unlicensed dentists and doctors: how were they able to earn a living afterwards? Were there any official support from the government targeted to people who lacked licenses for their jobs?
And what about the situation with the outlaws? People who were illegally in Hong Kong, were wanted, or did not even exist in the eyes of the government? were they granted a kind of blanket amnesty and/or citizenship?
TL;DR: How did Hong Kong deal with the 33.000 very poor homeless and jobless people in a mere 5 years without causing a humanitarian catastrophe? Where did the illegal businesses go, including their equipment? Were there any government support related to this? How was the situation of illegalness and unemployedness handled? What happened to the outlaw people there?
This wasn't Hong Kong's first housing crisis.
The 1940s and 50s marked a giant influx of migrants from China to Hong Kong; there was some debate amongst Westerners the time if they should be called "refugees" to make it easier for humanitarian groups to solicit aid from donors. While some migrants were leaving the PRC for economic or political reasons, some were just following families or even neighbors as a unit.
Whatever the reasons, there was heavy concern during the early Cold War over the number of Chinese migrants, with 1.28 million people coming to Hong Kong between 1945 and 1949 alone. The booming population resulted in large squatter communities using makeshift homes, far more than the government could control (or tax). As part of this, there were a number of fires in squatter areas -- at least 12 between 1950 and 1953 -- resulting in making 100,000 homeless.
The end of 1953 was the most extreme example, that of Shek Kip Mei. Christmas Day: a massive fire, with 50,000+ people made homeless in one day.
Running for life with families / Grieving screams echo in the night / Everything lost after scaping from dreadful fire / Thousands homeless in freezing weather
-- Headline of Ta Kung Pao on the disaster
One account describes someone who at age 7 escaped with her mother and siblings (aged 3 and 3 months) with "the family's whole fortune of HK$30 in her pocket". Their house was of stone so they could return; their aunt, who lived in a hut of wood, had to resort for a while to "cardboard/wood" structures.
After the disaster, one of the later governors, Robert Black, said he wanted to:
...dodge the use of the word refugee to men and women who were becoming part of the population, and, instead, admit that were were giving rehabilitation to immigrants.
The fires led to a low-cost housing program which resulted in (by 1985) over 100 public housing estates, one of the largest in the world at the time. There additionally, in 1976 was launched the Home Ownership Scheme (or HOS) which allowed for renting or buying housing.
This is the context where the Kowloon Walled City project entered; exact compenstation was discussed starting in 1987. Inhabitants were offered rentals or housing facilitation through the HOS, or outright monetary compensation. Businesses were also made cash offers.
Whether the offers were adequate was up for strong debate among the residents. Most residents lived in roughly 200 square feet and given a compensation of $200,000, enough to scrape in a HOS unit but not much else. Those at ground level were offered the same rate as those higher (even though in Walled City real estate terms, ground level was much more valuable). (That number is in HK$, 1 US dollar is about 7.75 HK dollars in 1990.)
Business offers varied. An owner of a weaving factory (Yu Hing Wan) tried to get $200,000 but was offered $103,000 instead:
...there was an interview -- not a very satisfactory one -- where I was told to reduce the sum I was demanding. I don't think I will be able to find a similar place to continue the weaving business -- I can only afford $1500 a month in rent. The machines will be sold but no one will pay a high price for them.
As far as "what happened when they couldn't start a new business", well:
Maybe I'll change to another business.
One herbal doctor (Chan Pui Yin, pictured here with "more than 900 herbs and they all have more than one name") talks about how a new clinic would "probably cost $2 million".
It's hard to say what everyone would have done, especially with practices that were illegal; some people tried to fight the eviction, despite the fact by late 1988 there was an agreement for residents to get purchase priority with the public housing of the HOS. (Relatedly, some homes were available through the Private Sector Participation Scheme, where private developers would offer similar deals faciliated by the government. The first families that left in 1989 purchased homes through the PSPS.)
There were angry protests all throughout the moving process. Demolition started March 1993 and ended in April 1994 (generating 150,000 tons of rubble). Even once the park was finished and dedicated -- it was based on ancient designs and included eight landscape features -- there were people who tried to stay. In December 1995 the last squatters had a set of huts that were torn down.
...
Girard, G., Lambot, I. (1993). City of Darkness: Life in Kowloon Walled City. Watermark.
Madokoro, L. (2016). Elusive Refuge: Chinese Migrants in the Cold War. Harvard University Press.
Seng, E. M. F. (2020). Resistant City: Histories, Maps And The Architecture Of Development. Singapore: World Scientific Publishing Company.
Smart, A. (2006). The Shek Kip Mei Myth: Squatters, Fires and Colonial Rule in Hong Kong, 1950-1963. Hong Kong: Hong Kong University Press.
Yeh, A. G.-O. (1985). Planning for Uncertainty: Hong Kong’s Urban Development in the 1990s. Built Environment (1978-), 11(4), 252–267. http://www.jstor.org/stable/23286192