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The paradigms in respect of arid areas have shifted from efforts to prevent desertification to the Dryland Development Paradigm. In this respect, the basic principles and socio-economic implications related to dryland development have been identified. However, the application of these paradigms has mainly focused on pastoral societies. This paper considers these principles in relation to the South African housing policy in a more formal settlement environment, and argues that the South African low-income housing policy scarcely considers the basic principles of the Dryland Development Paradigm, or the basic socio-economic realities associated with arid areas. At the same time, the question is asked as to how relevant these principles and socio-economic realities are in more formal settlements where the South African low-income housing subsidy is applied, and whether there is not, in reality, an inherent conflict between settlement development through low-income housing subsidies, on the one hand, and the basic principles of the Dryland Development Paradigm, on the other. (C) 2010 Elsevier Ltd. All rights reserved.