On 26 June 2025, Cape Town City Council approved important changes to its Municipal Planning By-law in support of small-scale rental housing. This regulatory reform marks a significant step forward for this housing sector, which delivers more affordable rental accommodation in cities than the public and conventional private sectors combined. HSRC researchers have contributed to this policy change through years of research and engagement.
Changes to a Cape Town municipal planning by-law may support small-scale rental options to address the housing shortage. Photo: HSRC
Well-governed cities are engines of economic growth, technological innovation, and human development. However, rapid urban population growth creates major challenges, including serious shortages of decent housing. While the delivery of public housing has fallen far below the levels required, individual homeowners and micro-developers are providing thousands of more affordable rental units to low- and middle-income households every year.
Small-scale rental housing (SSRH) usually refers to higher-quality backyard dwellings built with bricks and mortar and rental flats. It plays a vital role in giving people access to the city, while contributing to the long-standing policy objective of urban densification and stimulating local economic activity. Indeed, SSRH offers enormous potential for township economic development as homeowners and micro-developers spend millions of rands every year on the planning, construction, management and maintenance of rental dwellings.
However, widespread informality and non-compliance with planning and building regulations have created serious health and safety risks and contributed to ‘over-development’ in some areas, imposing mounting pressure on public infrastructure, social amenities and local communities. Non-compliance also precludes homeowners and micro-developers from accessing building insurance and affordable finance to scale-up construction. Informality prevents municipalities from collecting rates and taxes from the revenues that developers generate, which can be substantial in the case of double- and triple-storey blocks of flats.
From research to policy impact
HSRC researchers Andreas Scheba and Ivan Turok have been leading research with stakeholders such as the Development Action Group (DAG), City of Cape Town, National Treasury, Sustainable Livelihoods Foundation, Bitprop and Township Developers’ Forum. They have highlighted essential policy and regulatory reforms to support the sector and maximise its potential. One of the most urgent recommendations was to simplify and streamline local planning schemes and by-laws to formally recognise SSRH and allow for more units to be built on each plot. After years of concerted effort and deliberation, the City of Cape Town has now amended its planning legislation to support the sector.
Planning is a responsibility of every municipality, and the Municipal Planning By-law (MPBL) is the primary local legislation to regulate land use and urban development. On 26 June 2025, Cape Town approved several significant changes to the MPBL, including revisions to formally recognise affordable rental flats as an additional land use right in selected residential areas across the city.
This means that owners of properties that are zoned as Residential 1 and located in the 194 designated areas (see map 1) are now allowed to build up to eight ‘affordable rental flats’—or 12 if there is no dwelling house on the plot. They can do so as a right, which means they do not have to apply for land use approval. This has previously delayed projects and increased their costs, as shown in a landmark report produced by the HSRC in collaboration with DAG. Removing this step offers considerable time and cost savings, especially for bigger developments such as double-storey blocks of 12 rental units.
Map 1: The 194 areas where owners have additional land use rights for affordable rental flats in Cape Town. Source: City of Cape Town
Those property owners can now more easily apply for building plan approval for their projects. To assist homeowners and micro-developers in this regard, Cape Town’s Urban Design Unit, with input from stakeholders including Turok and Scheba, has developed prototype building plans that can be used as a basic template and adapted to the specific requirements of individual sites. This was another recommendation highlighted in the HSRC research, along with several others that have also been taken up (for example, the Development Charges Fund and Local Planning Support Offices) or are in development. These initiatives aim to enhance the capabilities of emerging developers and not simply reduce red tape.
Beyond the law—a way forward
While Cape Town’s reform of the MPBL marks an important milestone, it is not without criticism. One concern relates to the 194 designated areas where affordable rental flats are permitted. These are confined to former township areas and some peripheral districts, appearing to perpetuate historic divisions within the city. The justification is that these tend to be the places with the highest prevalence of SSRH, and therefore policy efforts should focus on regularising property investments and mitigating the negative effects of density.
Yet, this means neighbours in township areas no longer have the right to object to rental blocks next door, while residents in the suburbs retain this right. The next step is surely to expand the map into the suburbs and inner-city to spread the costs and benefits of densification more widely. Significant opportunities exist to densify Cape Town’s affluent areas, and efforts should be made to encourage suburban property owners to provide rental units in their backyards. This will provide additional rungs on the housing ladder and increase upward social mobility.
To ensure that SSRH contributes positively to sustainable neighbourhood development in the newly designated areas, additional investments into public infrastructure, social amenities, community engagement, building support services and local entrepreneurial ecosystems are required. As part of a growing and dynamic urban reform coalition, the HSRC’s Turok and Scheba will continue working with the sector and contributing to positive change through evidence-based research.
Research contacts and acknowledgements
This article was written by Profs Andreas Scheba (senior research specialist) and Ivan Turok (honorary research fellow) in the Equitable Education and Economies Division of the HSRC. Scheba is also an associate professor in the Centre for Development Support at the University of the Free State, and Turok holds the NRF Research Chair in City-Region Economies at the University of the Free State.