When the Dutch established a colony in Table Bay in 1652, they required a great quantity of good timber for building and other purposes. There were no large forests in the immediate vicinity of the settlement, mainly because the rainfall was not high enough. It was soon apparent that the colonists would be able to get the wood they needed in the wetter valley that lay on the other side of a low pass (called Constantia Nek) between the southern end of Table Mountain and Constantiaberg. The area was originally made up of two farms, which were slowly subdivided to make way for urban expansion. While still maintaining its rural feel the area now has more than 12 000 residences inhabited by a population of about 42 000 people.
Hout Bay is divided into several neighbourhoods. The Hout Bay Neighbourhood Watch describes 28 distinct areas. Suburbs include Scott Estate, Hanging Meadows, Baviaanskloof, Hillcrest, Bergendal, Penzance, Imizamo Yethu, Meadows, Oakwood, Bokkemanskloof, Overkloof, Silvermist, Longkloof, Valley, Victorskloof, Nooitgedacht, Beach Estate, Northshore, Mount Rhodes, Klein Leeukoppie Estate, Ruyteplaats, Tierboskloof, Kronenzicht, Hangberg, Hout Bay Heights and Hughenden Estate. Llandudno an entirely separate village of about 200 houses lies over the "Suikerbossie" pass from Hout Bay.
Hout Bay is surrounded by mountain to the North, East and West and the Southern Atlantic Ocean to the South. In the North it is bordered by Table Mountain National Park comprising of the Orangekloof Nature reserve and the bottom slopes of Table Mountain beyond that. To the North-West it is bordered by the backside of the Twelve Apostles, known as the Oranjekloof. To the West it is bordered by Little Lion's Head (Klein Leeukop), Karbonkelberg, Kaptein's Peak and the Sentinel. To the East it is bordered by the Vlakkenberg, Skoorsteenskopberg and Constantiaberg. The world famous Chapman's Peak Drive is carved out of the mountainside and leads towards Noordhoek and onwards to Cape Point.
The Hout Bay bay has a whitesand beach, a popular attraction for tourists and locals (and their dogs) alike. Hout Bay has one of the busiest harbours in the Western Cape with an established tuna, snoek and crayfish industry. The harbour is home to the Hout Bay Yacht Club and several restaurants.
There are three roads leading to and from Hout Bay, all over mountain passes. One goes to Llandudno and Camps Bay through the pass between Judas Peak (part of the Twelve Apostles) and Little Lion's Head. This pass is known as "Suikerbossie" (known as the toughest hill on the Cape Argus Cycle Race). Between Hout Bay and Noordhoek there is Chapman's Peak Drive, which was closed for many years and finally reopened in early 2004 with a controversial toll booth. Lastly a road leads to Constantia over the Constantia Nek pass between Vlakkenberg and the back slopes of Table Mountain.
Hout Bay, also known as "Dungeons" to the surfing community, is one of the sixteen recognised big wave spots around the globe. The annual Red Bull Big Wave Africa competition is held here. Swells of up to have been recorded here as well as numerous deaths as a result of boating, diving and surfing-related incidents in the area. The spot itself consists of various reefs. The most popular is called "2.5 "since it is 2.5 m deep. Behind it is "3.5", which is 3.5 m deep. There is also a reef that is reputed to be able to hold a high wave, should one ever come. Before the use of jetskis to enter and leave the area, the surfers who braved these waters had to paddle through a dark and deep channel, through to where the waves break.
Hout Bay is a popular tourist attraction among both local and international visitors. There are a variety of restaurants in the village as well as two hotels (the Hout Bay Manor and the Chapman's Peak Hotel), many bed and breakfasts and self-catering accommodation where visitors can stay. The harbour is a worthwhile visit, as there are spectacular views of the bay and boat rides to Duiker Island and around the Sentinel. Chapman's Peak Drive is one of the world's most scenic mountain drives and has recently undergone renovations to ensure the safety of travellers using the route. The East and West forts built by the Dutch in the 18th century can also be visited, with the original cannons and barracks still standing on the slopes of Chapman's Peak. The East fort is the oldest operating gun battery in the world. The mountains surrounding Hout Bay also make for good hiking trails. In the same area is the bronze statue of a leopard looking out over the ocean.
The Red Bull Big Wave Africa surfing contest is held on the other side of the Sentinel mountain, at the famous Dungeons. Some of the biggest waves in the world are found here and these attract surfers from all over the world. The competition can only be held during May to August, when the waves reach heights of 15-20 ft.
The Hout Bay Yacht Club is situated in the working harbour and provides moorings for both recreational, fishing and sailing boats.
Hout Bay is often called a microcosm of the rest of South Africa, with a vibrant and diverse mix of poor people integrated with rich people living in some of the finest properties in Cape Town.
The tension between these diverse economic communities arise from the location of Imizamo Yethu. It is situated right next to an affluent community. The initial response to Imizamo Yethu was not favourable. The residents of Hout Bay, represented by the Hout Bay Ratepayers' Association and the Hout Bay Residents' Association, strongly objected to the location and management of the informal settlement and also the suggestion of an increase in the land used for the settlement in 2001. Both associations feared that the land invasions at the time were racially motivated, whereas the African National Congress feared that the Residents Association of Hout Bay were creating a racially charged environment and refusing to develop land for housing. Current issues between residents of Hout Bay and Imizamo Yethu are focused on service delivery for the informal settlement. The 18 hectare area supports 20 000 people, living in cramped and squalid conditions with no plumbing, roads or any discernible infrastructure for sustainable living. This is in sharp contrast to the affluence of much of Hout Bay. In addition to much middle income housing for local South Africans, there are also a number of multi-million rand mansions, luxurious holiday homes and some small wine estates. As of 2007, political differences between the Democratic Alliance and African National Congress have hampered the building of houses for the residents of Imizamo Yethu.
The settlement has also been linked to crime within Hout Bay. Crime increased markedly up to in 2003, particularly in property crime such as housebreaking and vehicle theft. In response to the escalating crime situation, the Hout Bay community formed a successful neighbourhood watch group. This neighbourhood watch has been extremely effective in greatly reducing crime in the valley. Initiatives of this group include further policing, roadblocks, CCTV monitoring, radio network, day and night patrols and the establishment of an 24-hour emergency call centre.