I came across a video on Youtube discussing it (there are several), and Kowloon Walled City is just endlessly fascinating. A few notable videos I found on the subject were:
Kowloon Walled City: Hong Kong’s City of Darkness
Inside Hong Kong’s Kowloon Walled City
There is also a book on the city called City Of Darkness Life In Kowloon Walled City, which I found on archive.org in high resolution. It is full of photographs and detailed accounts of the comings and goings within the enclave.
The KMT repeatedly sent requests to reclaim the entire region but Imperial Britain pretty much refused (they proposed a ton of alternative solutions) and didn’t govern it either. So yes, it’s Imperial Britain’s fault. Since the day Britain agreed to transfer the territory to communist China there was a declared intent to demolish the place.