Kowloon Walled City ended because it was attacked by the state, rather than through market forces.
Many of those people are now likely in worse shape effectively renting a cage sized bed, but now paying the governments cut on top of whatever black market shenanigans goes on in both the slum housing and kowloon.
Kowloon Walled City was neither a dystopia nor a utopia. It works and was able to maintain itself, but it could have been done better if it was actually supported by the government.
Many of those people are now likely in worse shape effectively renting a cage sized bed, but now paying the governments cut on top of whatever black market shenanigans goes on in both the slum housing and kowloon.