The Group Areas Act of 1950 has resulted in post-apartheid South African cities being characterised by spatial patterns with limited access to social and economic opportunities for the black and coloured population. Typically, high-density low-income housing is located peripherally, while low density high-income housing is located in accessible central areas. With increased rural-to-urban migration, the demand for formal housing has historically surpassed supply, which has increased the growth of informal settlements. Current discourse within South African land use policy suggests that in-situ upgrading of informal housing is a viable response to integrate informal settlements into the formal city. In parallel, it is proposed that new low-income residential areas and employment-generating land uses should be located along transport corridors to improve access to transport, its infrastructure and the opportunities it provides for previously marginalised groups. This study uses Cape Town as a case city to explore two land-use driven development strategies directed at informal settlements and low-income housing. A dynamic land use transport model based on a cellular automata land use model and a four-stage transport model was used to simulate land use and transport changes. Specifically, in-situ upgrading of informal settlements and strategically locating new low-income residential and employment generating land uses along transport corridors were considered. The results from the analysis suggest that in-situ upgrading is a viable option only if new informal settlements are in areas with easy access to economic centres. With regards to low-income housing, targeted interventions aimed at ‘unlocking’ low-income housing activities along transport corridors were found to be useful. However, it was also observed that middle-income residential development and employment generating activities were also attracted to the same corridors, thus, resulting in mixed land uses, which is beneficial but can potentially result in rental bids between low and middle-income earners thus displacing low-income earners away from these areas.