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The large group occupied a piece of vacant land in Tafelsig on Saturday and built about 2500 shacks, saying they had been on the waiting list for many years.
But police opened fire on them with rubber bullets and sprayed the crowd - which included pregnant women and pensioners - with tear-gas.
"We have been on the waiting list for between 16 and 30 years," an elderly woman said.
A man sustained serious injury when he was shot in the eye. Resident Ismail Abrahams was also injured and admitted to Groote Schuur Hospital. Twelve other people were arrested.
Yesterday, people were busy re-building their shacks after an incident on Saturday.
Police, accompanied by several ambulances, gathered near the area. Sympathetic residents from Khayelitsha and ZilleRaine Heights, about 20kilometres away, came to give their support.
Back-yard dweller Faizel Lee, whose family and four others were staying in a big tent, said they would not vote in the local government elections tomorrow.
"Both the DA and the ANC have failed to address our housing crisis. We have decided not to vote," he said.
Lee, a father of three, said the ANC and DA had visited on Saturday and gave them food, which only showed that they were trying to buy their votes.
Terence Hoskins said he was also beaten by police armed with batons and that he had suffered injuries to his body.
Hoskins said they had been told by city officials that though there was land, there was no money to build houses.
Mastera Collop of the NGO Women of Action in Tafelsig, said people were tired of false promises and had decided to build their houses in the area.
"Residents will fight for their rights until the bitter end," Collop said.
She said that they were not happy about the situation and have threatened to disrupt tomorrow's elections.
ANC mayoral candidate Tony Ehrenreich was set to visit the area today to persuade the group to vote ANC. The withdrawal of hundreds of voters in Mitchells Plain would be a blow to the DA as this area is one of their strongholds.
City of Cape Town spokesperson Rulleska Singh said 18 people had been injured but defended the police's shooting of pregnant women.
"Yesterday some of the occupants on the land were using women and children as human shields.
"Law enforcement officers were also attacked with bricks and stones, necessitating the use of a water cannon and rubber bullets" Singh said.
She said the city had plans to build houses on that land and would not allow land invasions.