How township landlords and small-scale developers are shaping South Africa's affordable housing future

South Africa’s next wave of affordable housing delivery will be driven by township landlords and small-scale developers. 

In a groundbreaking move, the City of Cape Town has become the first municipality to amend its Municipal Planning By-Laws, enabling increased residential density based on plot size, without the need for rezoning, says Vanessa Murray, divisional executive of property finance at Nedbank CIB.

“Additionally, the city has approved prototypical building plans for select unit types, significantly reducing both time and costs associated with rezoning and the plan approvals process. This initiative was driven by a collaboration between uMastandi and the City of Cape Town,” Murray said.  

She added that if other municipalities adopt similar reforms and collaboration with developers, this could transform South Africa’s housing landscape, stimulating direct and indirect employment, empowering local entrepreneurs, and contributing to the creation of more inclusive, sustainable cities.

On Thursday, Nedbank Corporate and Investment Banking (Nedbank CIB) said it will once again partner with International Housing Solutions (IHS) at the 17th IHS Affordable Housing Conference, taking place on September 3 in Johannesburg.

The gathering will be themed: Foundations for the Future: Housing the New World. It intends to reaffirm a long-term commitment to positioning affordable housing as essential infrastructure for inclusive growth.

“Affordable housing deserves a place on the infrastructure agenda because location and build quality are what make homes truly affordable,” says Murray.

“When people live close to work, their travel time and transport costs decrease, positively impacting overall household expenditure. We finance developments that deliver measurable outcomes for both residents and investors, with design choices that improve energy and water efficiency.

"While the additional capital outlay can range from 4% to 11%, the payback starts almost immediately through electricity and water savings. This is a high-demand, fit-for-market segment, where micro-location, build quality, and strong tenant and leasing management are critical.”

She added that across well-located projects in this segment, they were currently seeing occupancy rates of around 98% when the product truly meets market needs.

“Developers have shown resilience in delivering affordable housing over the years. Municipalities can accelerate progress by maintaining local infrastructure and streamlining approval processes.” 

“In our portfolio, the product has evolved from basic houses to lifestyle-orientated homes,” says Rob Wesselo, group managing director of IHS.

“People are choosing to live closer to jobs, with amenities like workspaces, cafés, and gyms on their doorstep. That shift is now standard, and capital is responding. South African pension funds are investing at scale, with commitments in the billions of rand through dedicated funds and mandates.

"Development finance institutions seeded early transactions and are now expanding the model into new markets. With stronger growth, capable local authorities, and reliable infrastructure, the sector is poised to scale rapidly,” Wesselo said. 

He emphasised that inner-city success depends on consistent city management that protects both residents and capital. “When buildings are neglected or hijacked, services collapse, crime increases, and asset values decline. That is why partnerships with municipalities are essential to unlock investment at scale.” 

Nedbank CIB and IHS highlighted that recent projects demonstrate how different delivery models succeed when fundamentals are in place. 

They said IHS’ Circa Illovo, an office-to-residential conversion near Sandton, combines rental and for-sale components. Rental demand remained resilient during the high-interest-rate cycle, while sales improved as rates eased. 

Lesedi Village in Mahikeng is a greenfield development of freestanding homes in an urban-rural node. It is among the first projects in that area funded by IHS, supporting both housing delivery and broader regional development.

“Our priority at this year’s conference is a clear, practical commitment to collaboration,” Murray says. “We want stakeholders across the public and private sectors to work together to reduce the housing backlog by improving township planning approval turnaround times, ensuring dependable local infrastructure, and backing investable, well-located projects.” 

“To effectively address the challenges of affordable housing, we need to understand the needs of players operating in the lower end of the affordable rental market,” says Zama Mgwatyu, programme manager at the Development Action Group (DAG). 

“The government must clarify its role in regulating this market, while private sector stakeholders must contribute by providing access to finance, which remains a significant challenge for micro-developers building rental stock in township areas. Innovative finance products are crucial in supporting the development of affordable housing.” 

However, he says it is essential to recognise that these developments are not a one-size-fits-all solution and should be part of a broader range of housing options that cater to households across various income levels.

“Ultimately, we need to ask ourselves: affordable housing for whom, and how can we ensure that our solutions are inclusive and effective?”

In its June 2025 Property Newsletter, automotive and property data provider Lightstone reported that only one formal house exists per 3.3 families, who earn less than R26 000 per month. This accounts for more than 80% of South African households. 

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