Protesters set fires and police deployed tear gas and a water cannon as tens of thousands of demonstrators took part in an illegal march in Hong Kong, showing that a raft of recent government measures hasn’t quelled months of unrest in the city.

Hong Kong leader Carrie Lam in her annual policy address last Wednesday pledged to boost the supply of low-cost homes, offer mortgage assistance for first-time buyers and increase mass-transit fare subsidies, in an attempt to sap momentum from the protest movement by improving people’s...