Subsidised housing often creates a segmented housing market, with some home owners falling into a gap between the subsidised and non-subsidised types. This gap particularly affects middle-income buyers, whose income may be too high to qualify for subsidy but too low to buy a non-subsidised house. Western Europe has policies and affordable products to bridge this gap. In this paper, based on a literature review and 15 interviews with South African policymakers and representatives from the financial sector, we assess whether the Western European products have potential in South Africa. We find some obstacles—differences in macro-economic context, the fact that South Africa seems to be locked into a capital subsidy policy pathway, the lack of a suitable regulatory framework and institutional problems at the local level—but also some potential in the form of alternative tenures and innovative housing finance in the areas of mineworker housing, inner city housing and social housing.@en