Cape Town initially opposed implementing the Group Areas Act passed in 1950 and residential areas in the city remained unsegregated until the first Group Areas were declared in the city in 1957.[4] When Cape Town did start implementing the Group Areas Act, it did so more severely than any other major city; by the mid-1980s it became one of the most segregated cities in South Africa.[4]

Plans to build Khayelitsha were first announced by Dr Piet Koornhof in 1983, then Minister of Co-operation and Development. By 1985 the suburb Site C had 30,000 people. Khayelitsha was one of the apartheid regime's final attempts to enforce the Group Areas Act and was seen as the solution to two problems: the rapidly growing number of migrants from the Eastern Cape, and overcrowding in other Cape Town townships.

The Western Cape was a preference area for the local coloured population and a system called influx control was in place preventing Xhosas from travelling from the Transkei without the required permit. After the historic 1994 elections hundreds of thousands moved to urban areas in search of work, education, or both. Many of them erected shacks made of tin, wood and cardboard.