Airbnb and Commercial Property Rates: The City of Cape Town's proposed Short-Term Letting By-law

Airbnb Market Penetration and Economic Impact

Cape Town has a higher "Airbnb penetration" (the ratio of short-term to long-term rentals) than both Barcelona and New York City. There are approximately 27 000 active listings in the city, representing about 4% of Cape Town’s roughly 650,000 residential properties.

As Airbnb’s most popular destination in South Africa, the platform is a magnet for digital nomads and affluent tourists. Economically, the sector is a powerhouse, estimated to have generated around 100 000 jobs within the city.

Global Precedents and Local Price Surges

Data analyst Melville du Plessis notes that major global hubs like New York and Barcelona have already taken drastic action, ranging from strict restrictions to outright bans. In Cape Town, the shift toward short-term letting has significantly impacted the long-term rental market. Average rental prices have climbed by nearly 25% in the CBD and adjacent neighbourhoods:

• Tamboerskloof: 50% increase
• Gardens: 62% increase

The Supply and Demand Reality

The data suggests that Airbnb is not the sole driver of Cape Town’s housing affordability crisis; rather, it is one factor fueling a massive surge in demand. In the CBD and its surrounding suburbs, competition for housing is likely the highest in South Africa. Ultimately, the current demand has simply outstripped the available supply, leading to the pricing pressures seen today.

Cape Town revealed its plan last week to crack down on commercial operators paying residential taxes on their accommodation properties : releasing a media statement indicating its intention to publish a draft Short-Term Letting By-law for public comment.

The Core Goal: Fairness

The City noticed that some properties are being used strictly as full-time businesses but are still paying "residential" tax rates, which are cheaper. The goal of this new law is to ensure that commercial-scale rentals pay commercial rates, putting them on the same playing field as hotels and B&Bs.

What You Need to Know

• No New Tax: This isn't a new fee or a "tourist tax." It’s just enforcing rules that technically already exist.
• Residential vs. Commercial: If you live in your home and rent out a room occasionally, or rent out the whole place while you're on vacation, nothing changes for you. You will still pay residential rates.
• Long-Term Rentals: If you rent your property to a long-term tenant, it is still considered a home, so it stays on the residential rate.
• The Target: The City is looking for properties used primarily as short-term rental businesses.

How the City Will Check

To find out who is "running a hotel" out of a residential house, the City plans to:

1. Check the Data: They may get info directly from booking platforms to see how many nights a year a property is actually being rented out.
2. Contact Owners: If the data shows a house is being used mostly for business, the City will reach out to the owner to discuss changing their tax category.

What Happens Next?

The City will soon release the full draft of this law and ask the public for their thoughts. However, officials say owners shouldn't wait—if you know your property is essentially a full-time business, you should update your status with the City now.