We present a model that focuses on the links between location and educational choices in South African cities. By comparing the Apartheid city (in which both schooling and land use are restricted on the basis of race) and the post-Apartheid city (in which there are no such restrictions), we show that the inequality in South Africa between blacks and whites decreases when Apartheid laws are removed. After Apartheid, blacks are better o¤ in spite of …ercer competition in the land market. This is because human capital externalities arise from the removal of Apartheid. Black students are induced to mix with white students, which gives them a chance to improve their human capital. Whites are worse o¤ due to negative human capital externalities and intensi…ed land market competition. In the post-Apartheid context, we show that reducing the commuting costs of black children cannot be Pareto improving but nevertheless reduces inequality.