Business Insights | Hong Kong’s Hostels in the City Scheme: A Strategic Push for Student Housing and Urban Revitalization

To address the growing demand for student accommodation and revitalize underutilized commercial properties, the Hong Kong SAR Government started to accept applications for the Hostels in the City Scheme (“Scheme”) in July 2025. This initiative supports the conversion of commercial buildings—into privately funded student hostels, reinforcing Hong Kong’s role as a global education hub.

Rising Demand for Student Housing

According to official statistics, the number of full-time non-local students in Hong Kong reached 79,000 in the 2024/25 academic year, nearly doubling from four years prior. This growth reflects the success of policies aimed at attracting international talent and enhancing the city’s competitiveness in the global education market. However, the rapid increase in student numbers has outpaced the development of purpose-built student accommodation.

As existing dormitories offered by the schools are not able to meet the demand from both local and international students, many of them have to find private rental apartments near the school areas. A continuous rising enrolment numbers creates nearly 50,000 demand for student accommodation beds. This often means paying high rents for suboptimal living conditions, sometimes far from their campuses. The lack of affordable, accessible, and student-friendly housing has become a bottleneck in Hong Kong’s ambition to become a leading education hub.

Policy Innovation: Converting Commercial Properties

To address this issue, the government proposed the new pilot scheme to provide policy supports and regulatory adjustments. This aims to make potential conversions easier and more attractive for property owners and developers. Key features of the policy include:

1. Planning Regime Consideration 

The Town Planning Board (“TPB”) expanded the Definition of Terms (“DoTs”) under the planning regime for “Hotel” use to also cover “student hostels supported by Government’s policy”, which refers to eligible student hostels under the Scheme. Therefore, student hostels after conversion are able to run within the zones which allows Hotel or Residential Institution (RI) uses.

1. Commercial Zones
   If “Hotel” is a Column 1 use (always permitted), no planning permission is required for conversion into a student hostel.
   
   
2. Other Specified Uses (Business)
   If “Hotel” is a Column 2 use (requires permission), applicants must apply for planning permission under Section 16 of the Town Planning Ordinance (Cap. 131).
   
   
3. Other Specified Uses (Mixed Use)
   Either “Hotel” or “RI” is under Column 1 use, therefore no planning permission is required.
   
   
4. Residential Zones
   Student hostels are treated as “RI” use and allowed under Column 1, no planning permission is required.
   
   R(C) zone where both Hotel and RI are Column 2 uses is an exception. Conversion within R(C) is required a Section 16 planning application.  
   
   
5. Industrial Zones
   Not permitted 

 
2. Gross Floor Area (GFA) Flexibility

The policy allows building owners to retain and repurpose any “excess” GFA from the original building. GFA exemptions are typically aimed at promoting community benefits, sustainability, and broadening urban planning goals. For example, there were back-of-house (BOH) facilities exempted from GFA for hotels;  car parking and loading/unloading purposes floor spaces enjoy GFA exemption for office buildings. This space can be used for communal facilities such as study rooms, gyms, and social lounges, even central kitchen—amenities that are increasingly important for student well-being and academic success.

3. Land Premium and Lease Modification Implication

Most potential projects will not trigger additional land premiums or require lease modifications when converting commercial and hotel properties to student hostels given that those leases user restrictions already permit “non-industrial” or “commercial” uses. 

This reduces both the financial burden and the time required to bring projects to market, making the scheme more appealing to private investors.

4. Streamlined Approval Process

A new Project Facilitation Office under the Development Bureau has been established to coordinate cross-departmental approvals. This “one-stop shop” approach enhances administrative efficiency and provides greater certainty for developers and institutions.
 

5. Strict Eligibility and Usage Guidelines

To ensure the integrity of the scheme, the Education Bureau has set clear eligibility criteria. Only full-time local and non-local post-secondary students are allowed to reside in these dormitories. Furthermore, units cannot be sold individually, preventing speculative real estate activity and ensuring that the properties remain dedicated to student use.

Market Response and Investment Momentum

Even before the official rollout of the policy, the market had begun to respond positively. For instance: Hong Kong Metropolitan University invested nearly HK$1 billion in early 2025 to acquire Urbanwood and set to be renamed as MU88, which is now being converted into a student residence. Centaline Property, one of the city’s largest real estate agencies, purchased a hotel in Tsim Sha Tsui and launched a new student housing brand called Campus One Communities, signaling growing interest from private capital.

These examples demonstrate that the policy is not only attracting educational institutions but also opening up new investment opportunities for the private sector. With over 54,500 post-secondary students in Hong Kong annually and a significant shortfall in student hostel supply, the demand is expected to remain strong.

Areas near major universities—such as Hung Hom, Jordan, and Sai Ying Pun—are particularly attractive for conversion projects due to their proximity to campuses and existing infrastructure. Many underutilized Grade B and C office buildings and hotels in these districts are now being evaluated for conversion potential.

Challenges and Considerations

Despite the promising outlook, several challenges must be addressed to ensure the long-term success of the scheme:

• Design and Safety Standards: Clear guidelines are needed to ensure that converted dormitories meet appropriate standards for space, ventilation, fire safety, and accessibility. In particular, office conversion face specific challenges in meeting requirements for natural lighting and ventilation (NL&V), which applicable to domestic buildings. Poorly designed conversions could compromise student welfare and damage the reputation of the initiative.
• Operational Oversight: A robust regulatory framework is essential to monitor the management and maintenance of these dormitories. This includes ensuring fair rental practices, adequate security, and proper grievance mechanisms for residents.
• Public-Private Collaboration: The government is encouraged to promote public-private partnerships (PPPs), enabling universities to collaborate with developers and property owners. Such partnerships can leverage the strengths of both sectors—public oversight and private efficiency—to deliver high-quality student housing.
• Strata Buildings and Vertical Urban Ecosystem: The scheme allows partial conversion of strata buildings into student hostels, presenting an opportunity to seamlessly integrate student populations within the vision of Vertical Urban Ecosystems in Hong Kong. It can leverage current infrastructure to increase the supply of student housing while fostering vibrant, mixed-use vertical communities. However, careful consideration must be given to ensuring the smooth integration of student hostels, addressing concerns from current strata owners, navigating complex ownership structures, and aligning building requirements for student hostel uses.
• Exit Strategy: Importantly, the scheme includes a key sales restriction: if the hostel building is to be sold, the current owner must provide a minimum of six months’ notice to both the government and existing tenants. Additionally, any prospective buyer must sign a declaration committing to continue operating the property as a hostel. This clause serves as a safeguard to protect students and schools residing in the Hostel, ensuring continuity and stability. However, it is an important consideration for investors and should be factored into any acquisition plans. Further, the scheme includes a non-alienation clause that prohibits strata-title sales of hostel rooms. However, since this clause is not enforced through government lease conditions, investors retain flexibility. Should they wish to sell on a strata basis in the future, they need to discontinue hostel operations and delist from the scheme, and then proceed with alienation as original building condition. 

Conclusion

While the scheme will not cover industrial buildings, commercial buildings that have undergone wholesale conversion from industrial buildings located on non-industrial zonings would be eligible under the scheme. It would be inferred that the government sees potential value in allowing the conversion of suitable industrial buildings, as long as they are no longer zoned for industrial purposes. This could provide opportunities to increase the supply of student housing or other uses, while also revitalizing underutilized commercial spaces.

As of now, approximately 3.4% of hotel stock has already been converted into co-living or student accommodation before the Scheme announcement. We believe the Scheme opens up more opportunities for lower-tier hotels. These properties are well-positioned for conversion into hostels due to the relatively minor adjustments required—such as the addition of common facilities like central kitchens and the installation of loose furniture including bunk beds. In contrast, converting commercial buildings involves significantly higher capital expenditure due to the need for room subdivisions, E&M upgrades, and compliance with fire safety regulations. 

As a result, we anticipate a higher volume of applications from existing hotel buildings than from commercial properties. Location will also be a critical success factor—proximity to schools and MTR stations will heavily influence the viability of such conversions. 

As the scheme moves from pilot to full implementation, continued stakeholder engagement, transparent governance, and adaptive policy refinement will be key to its success. If executed effectively, this initiative could not only support Hong Kong’s ambitions as an international education hub but also contribute to a more resilient and dynamic urban future. CBRE Valuation and Advisory Services is well-positioned to support existing and prospective building owners in navigating the application process under the “Hostels in the City” Scheme. If you are exploring conversion opportunities or assessing eligibility, please don’t hesitate to contact us for professional guidance.