The City of Cape Town has drafted a new by-law that could significantly impact short-term rental property owners. If implemented, properties available for short-term letting for more than half the year will be subject to commercial property rates, which could be three times higher than residential rates. This change aims to regulate short-term rentals and ensure fairness in the commercial accommodation sector. The by-law requires all properties listed on booking platforms to be registered with the municipality.
According to the City's data, Cape Town has over 27,000 listed short-term rentals on Airbnb alone, with nearly 6,000 of these in the inner city. The proposed by-law seeks to address concerns about large commercial operators running multiple apartments as 'decentralised' hotel businesses while paying residential rates. Mayor Geordin Hill-Lewis stated that the new rules would create a fairer environment within the hospitality sector and encourage investment in new hotels.
Under the new by-law, properties available on short-term rentals for more than half the year will be deemed commercial rather than residential. The City will then calculate property rates on a commercial basis, similar to those charged for hotels and guesthouses. For example, an inner-city residential property valued at R2.8-million currently has a monthly rates bill of R1,274. In contrast, an inner-city commercial property valued at the same amount would have a monthly rates bill of R3,945.
The draft Short-Term Letting By-law states that all properties in the city listed on booking platforms must be registered with the municipality. A registration number, which must be displayed on the listing, is required for all listed properties. Properties or parts of them, such as a granny flat, rented out without being listed on short-term letting platforms will not be affected and will not require a registration number.
The City's finance mayco member, Siseko Mbandezi, announced that changes to properties' rating categories would come into effect from 1 July 2027, based on data from the proposed registration system. Mbandezi emphasized that the City supports the tourist economy and regards short-term letting as an important sector for servicing diverse tourist needs. However, the City believes that businesses should be on an equal playing field, with all those using a property for commercial accommodation paying the correct rates.
According to a report by the Federated Hospitality Association of Southern Africa (FEDHASA), the proposed short-term rental by-law aims to address the imbalance in the hospitality sector. The report states that hotel investors have been finding it difficult to justify new hospitality developments due to short-term rental operators competing on a large scale while paying residential rates. This has discouraged investment in new hotels, despite continued growth in the number of tourists.
The City's Inner City Local Spatial Development Framework (LSDF) reveals that 70% of the city centre's residential units are used for commercial short-term accommodation, effectively removing them from the local housing market. The LSDF also states that only 30% of apartments or houses in the inner city are available for long-term leases or occupied by their owners. The remainder are either hotel managed or used for short-term rentals, with a significant number of listings belonging to hosts with multiple units.
Key points
- The proposed by-law could triple rates for Airbnb hosts with properties listed for over half a year.
- The City aims to create a fairer environment within the hospitality sector and encourage investment in new hotels.
- The new by-law requires registration for all properties listed on short-term letting platforms.
