Western Cape Premier Helen Zille said the "pioneering" housing project expected at the site of the derelict old Conradie Hospital in Cape Town could "make or break" the current housing system.
A R3bn mixed-income residential project, set for the vast grounds of the old hospital could provide the solution for the country's "failed" free housing system, Zille said on Wednesday.
"No government in the world can provide free houses for everybody," Zille said at the 22-hectare site between Thornton and Pinelands, to the east of Cape Town's CBD.
If people went into debt because they couldn't afford to pay for the services in their free houses, municipalities could "build themselves into bankruptcy".
"So, this demonstrates that the past model has failed. That is why today is so different."
Called the "Conradie Better Living Game Changer", the provincial government, the City of Cape Town and Murray & Roberts descendant, Concor Construction, plan to put up 3 602 residential units at a cost of R3bn.
Of these, 1 764 will be subsidised and the balance will be sold on the open market.
Situated close to major arterial routes, the site is expected to include a mix of parks, two new schools, commercial space and recreational spaces. The land is currently filled with yellowed veld grass and buildings that have fallen into disrepair.
Plumbing and other reusable building materials were mostly stripped out.
Applicants for the subsidised houses will have to have a job and an income and if successful, will receive a subsidy based on what they earn.
They will also be expected to tap into other grants available to them.
Speaking after the sod-turning, Zille said the subsidised units were meant to cater for people who earn a salary, but not enough to buy a house.
Today, Premier @helenzille is hosting the official sod turning ceremony of the Conradie Better Living Model Game Changer development - a major milestone for affordable integrated housing. pic.twitter.com/rkuwdHu83o— Western Cape Gov (@WesternCapeGov) January 16, 2019
"The margins are unbelievably tight," Zille said of the arrangement. "The cross-subsidies have to work within an inch of their life. But we all know this is a pioneering make or break project for South Africa."
She claimed that if it worked, it would undo apartheid-era spatial planning.
Human Settlements MEC Bonginkosi Madikizela added: "We have come a long way for us to be where we are. We've been trying for years to break this ground."
Physical construction is set to start towards the end of 2019.