Land will be made available for Zwelihle backyarders, Western Cape Human Settlements MEC Bonginkosi Madikizela promised protesting residents on Tuesday.
Madikizela made the announcement at a community meeting at the local sports field where about 2 000 people had gathered.
While no houses could be promised yet, he said they had reached an agreement to provide land to residents as a first step.
Community leader Masibulele Jimlongo said they were very happy with this progress.
"We are excited. That is the response we had hoped for," he said.
"Now [that] we've got the land, we will assist to make sure the right beneficiaries get [it]."
Hermanus has been gripped by protests that started on Thursday and came to a head on Monday. A satellite police station was set alight, a library gutted and spaza shops looted.
Earlier on Tuesday, Madikizela had met with community representatives at the Overstrand municipal offices, where he acknowledged that there were problems with the housing list.
He suggested that it be audited and that the backyarders form a committee to set out grievances, and a task list.
He said there was also the possibility that the new annual budget, which comes into effect on Sunday, could be reprioritised.
However, the dilemma is that there are different "categories" of backyard dwellers - people who build or rent cramped structures at the back of an existing small house or shack.
Their ability to get on to a housing list or get a housing subsidy, depends on what they earn, Madikizela said.
He would not indicate where the land earmarked for the backyarders would be, to prevent attempts to occupy it.
The national and provincial government had agreed to "find the money" for the erven, which had already been identified.
The site would first have to be pegged and basic services installed, he explained.
The process would start on April 1, when the new financial year commences.
A backyard dwellers task team would be formed to count how many homes will be needed and to validate who the rightful recipients of land would be, Madikizela confirmed.