There's a great book called "City of Darkness" about it - a lot of what we believe about it was a campaign funded by the Hong Kong government to turn public opinion about it negative because they wanted the land back from China.
Most of the reason there were any problems there at all was that there was no legal jurisdiction over it, there are still buildings in Hong Kong that have nearly that density with none of the legal issues.
There was no zoning, no fire safety inspections, no fire safety, haphazard infrastructure, lack of water to drink and clean with, etc…it was basically an unregulated slum (which you can still find in many countries).
Hong Kong has density sure. But no one would call it cheap density.
Most of the reason there were any problems there at all was that there was no legal jurisdiction over it, there are still buildings in Hong Kong that have nearly that density with none of the legal issues.