Housing Affordability in Cape Town: Evidence and Policy Recommendations

Rising housing costs have become a central issue in Cape Town. I assess the commonly cited causes of rising prices against the available public data and evaluate the policy options according to which sphere of government has the power to implement them. I argue that growing demand has met a housing supply that responds weakly to prices. Migration from other provinces is the cause most likely to affect prices across the city, while the effects of foreign buyers and short-term rentals are concentrated in a few coastal and central suburbs. Supply is constrained by land-use rules and slow approvals, water and sewer networks at capacity in parts of the city, a construction industry that has not grown with the city and a sharp fall in state housing delivery. Cape Town therefore faces two distinct affordability problems: rising prices in the formal market, and the larger problem that most households cannot afford formal housing at all. The measures the public demands most, rent control and a tax on foreign buyers, are national powers with weak supporting evidence. The City’s own tools, namely land-use rights, property rates, bulk infrastructure and the land it owns, can be used to expand housing in well-located areas, support small-scale rental housing and target specific sources of pressure such as short-term letting.