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Following widespread reporting about a proposed “tax hike” on Airbnb-style rentals, the City of Cape Town has clarified that the planned short-term letting by-law does not introduce a new tax or across-the-board rate increase.
"All premises primarily used for commercial accommodation businesses (including short-term letting) are required to pay commercial property rates under the City's existing Rates Policy. To improve compliance, a draft Short-Term Letting By-Law will soon go out for public participation," the city said in a statement.
"The proposed by-law will make it harder to game the system," it added, as some of these short-term letting businesses are "only paying residential rates while operating a commercial short-term letting enterprise."
However, under the City's existing Rates Policy, all premises primarily used for commercial accommodation businesses, including short-term letting, are required to pay commercial property rates.
Who is affected - and who isn’t?
According to the City, short-term rental hosts
Not affected:
- Primary residences that occasionally do short-term letting
- Long-term rentals, where the tenant uses the property as a primary home
- These properties will continue to pay residential rates.
Affected:
- Properties primarily operated as commercial short-term letting businesses that are currently paying residential rates instead of commercial rates could face hefty rate increases, only because their residential rates would be reclassified.
According to Airbnb’s 2024 Impact Report for Cape Town, dedicated short-term rentals - defined as properties rented out for stays of 90 days or more - make up about 0.9% of all formal housing units in the city. In 2023, hosts on the platform welcomed over 700,000 guest arrivals, and activity on Airbnb contributed an estimated R14.4 billion to Cape Town’s gross domestic product, including supporting around 42,000 jobs and generating about R7 billion in labour income.
While Airbnb and other short-term letting platforms such as Booking.com have enabled many South Africans to supplement their income, the rapid growth of holiday and vacation rentals has also intensified concerns about housing affordability in certain neighbourhoods.
In Cape Town in particular, critics argue that the expansion of short-term letting has reduced the supply of long-term rental housing, making it harder for locals to find affordable homes. The city’s rise as a digital-nomad hotspot is often cited as a factor that has compounded these pressures.
These concerns are not new. In 2021, steps were taken toward a national short-term rental registry to improve oversight of the sector and help authorities better understand its scale and impact on local housing markets.
READ: Why Cape Town’s becoming a top nomad destination
What the proposed by-law will do
The draft by-law, which will be released for public participation after the required Council process, aims to make it harder to avoid commercial classification by:
- Using occupancy and availability data from short-term letting platforms to assess a property’s primary use
- Engaging directly with owners whose data indicates they should be paying commercial rates
The City says full details, including the draft by-law text and the public participation schedule, will be published once internal processes are complete.
Calls for pro-active self-regulation
In the meantime, the City is encouraging short-term letting operators to proactively check their rate classification rather than waiting for enforcement measures to begin. While reaffirming its support for Cape Town’s tourism economy and the role of short-term letting, the City says its goal is to ensure a level playing field between hotels, guest houses and commercial short-term rental businesses.
ICYMI: Airbnb’s Big Expansion Plans: What it means for your next Cape Town stay
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