This paper presents an application of the conditional logit model to a small, Nelson Mandela Bay neighborhood housing data set, with the objective of determining the impact of proximity to a low-cost housing development on nearby property prices. The results of this pilot study show that the average household in the neighborhood of Walmer is willing to pay between R27 262 and R195 564 to be located 86m further away from an existing low—cost housing development. In addition to this, the probability of choosing a specific house increases if the house has a swimming pool, an electric fence, the lower its price and the closer it is to the nearest school.

The provision of social housing in South Africa has received lots of attention recently. This is mainly due to two reasons: first, there is a shortage of affordable low cost housing in the major urban areas in South Africa, and second, housing developments of this nature have the ability to reconnect residents to resources within cities. Not unlike similar housing developments overseas, the proposed low-cost ones in South Africa have been met with substantial resistance, mainly from those who believe that the prices of properties adjacent to the low-cost developments will be negatively affected.