Cape Town short-term rental hosts face commercial rates under draft by-law

All Cape Town properties used for short-term letting would have to be registered with the municipality and display a registration number on their listing under a draft by-law open for public comment until October 5. Properties available to be let on a short-term basis for 183 nights or more a year - more than 50 percent of annual room nights - would be deemed commercial rather than residential and rated in line with hotels and guesthouses.

The City's own rates calculator illustrates the gap: an inner-city residential property valued at R2.8 million currently attracts a monthly rates bill of R1,274, while a commercial property of the same value is billed R3,945 a month. Cape Town has more than 27,000 listings on Airbnb alone, with almost 6,000 in the inner city. Properties, or parts of them such as a granny flat, that are rented out without being listed on short-term letting platforms are unaffected and do not require a registration number.

The main provisions are already reflected in the City's latest rates policy adopted on June 29, which defines commercial accommodation as a property where a primary place of residence is used or available for short-term letting for more than 50 percent of total annual room nights, and residential property as 50 percent or less. Finance mayoral committee member Siseko Mbandezi said changes to rating categories would come into effect from July 1, 2027, based on data from the proposed registration system, adding that the by-law "ensures fairness in the commercial accommodation sector" while the City continues to support the tourist economy.

Mayor Geordin Hill-Lewis told the Federated Hospitality Association of Southern Africa in April that the proposed rules would address large commercial operators running multiple apartments as "decentralised" hotel businesses while continuing to pay residential rates - an imbalance hotel investors cited as discouraging new hospitality developments despite growing tourist numbers.

The City has not presented the by-law as a measure to reduce short-term letting's impact on the housing market, but its Inner City Local Spatial Development Framework states that 70 percent of the city centre's residential units are used for commercial short-term accommodation, leaving only 30 percent available for long-term leases or owner occupation. Data from Inside Airbnb shows that of 5,931 inner-city listings, only 1,777 belong to hosts with a single listing, while more than 40 percent belong to hosts with 10 or more units and one host lists 147 apartments or entire homes.