Cape Town has seen significant new development and investor activity driven by short-term letting.
Image: File
The City of Cape Town (CoCT) has proposed new amendments that would classify certain short-term rental properties as commercial if they are used for that purpose more than 50% of the year.
Last week, CoCT said that the City’s rates policy requires that commercial property rates be paid for premises used for commercial short-term letting. It said this does not apply to people supplementing their income by renting out some of their residence for some of the time, or for long-term rentals.
To improve compliance for commercial short-term letting properties incorrectly paying residential rates, it said a short-term letting by-law draft will go out for public participation in due course.
That brings higher rates, more oversight and tighter compliance, says Ross Levin, licensee for Seeff Atlantic Seaboard. He says short-term letting is not going anywhere, but regulation is inevitable.
“What's different now is that we're starting to see how it may take shape. And that's where it gets interesting from a property perspective. Because markets react to the travel of policy, they don't wait for implementation.”
According to Horizon Grand View Research, the short-term vacation rental market in South Africa is expected to reach a projected revenue of US$ 3,419.4 million by 2033. A compound annual growth rate of 9.5% is expected for the South African short-term vacation rental market from 2026 to 2033.
For an investor running a full-time Airbnb operation, this introduces a new layer of cost and complexity, the licensee says. He says if one is on the fence about how to use their property, it may influence that decision. And over time, he says that starts to shift behaviour.
What could happen:
The forthcoming by-law aims to improve compliance with the city’s existing rates policy, which already requires that commercial property rates be paid for premises used for commercial short-term letting.
Commercial rates do not apply to people who part-time let some of their residences to supplement income, or to long-term rentals, as these properties are considered the primary residence of the tenant.
To improve compliance for commercial short-term letters, the by-Law will propose mechanisms for the city to source data on a property’s short-term letting availability directly from online letting platforms, says CoCT.
It said the by-law will further outline the process for determining if a residential property’s short-term letting availability ratio exceeds 50%, in which case the property will be categorised as ‘business and commercial’ by the municipal valuer.
“The 50% ratio is arrived at by calculating the portion of nights a property’s total bedrooms are available for short-term letting over 365 days. This calculation is now set out in the 2026/ 2027 rates policy draft ahead of the proposed by-law.
“Over time, the city has been working to systematically identify commercial short-term letting properties where residential rates are incorrectly being paid instead of commercial rates.”
According to the city, the proposed by-law will aim to take these efforts a step further to improve Rates Policy compliance and ensure fairness in the accommodation sector.
The city said it continues to support the tourist economy in the strongest terms and regards short-term letting as an important sector for servicing diverse tourist needs.
“However, the city believes that the playing fields for businesses should be equal, with all those using a property for commercial short-term letting paying the correct rates category required of a commercial business, as hotels, guesthouses and B&Bs already do.”
Public participation on the proposed by-law will be announced in due course, and the city is further engaging with stakeholders.
In the interim, the amended rates policy is available for public comment until 30 April 2026 as part of the broader city budget public participation process. Visit the City of Cape Town website and click on the Draft Budget for 2026/27 section.
For more information on the envisaged short-term letting by-law and related rates policy updates, please see https://resource.capetown.gov.za/cityassets/Media%20Centre%20Assets/CCT-short-term-letting-FAQs.pd
According to Levin, Cape Town has seen significant new development and investor activity driven by short-term letting. He says if that model becomes more regulated, it will naturally start to rebalance parts of the market.
“This could be quite meaningful for those in sales and long-term rentals, and for investors, this is not necessarily negative. But it does mean the model is maturing. And maturing markets tend to reward those who understand the detail, not just the headline returns.”
The key point is that it isn't shutting down short-term rentals, but rather bringing structure to a part of the market that has grown quickly and, until now, rather unchecked, he says. “And, obviously, when structure comes in, markets adjust,” Levin says.
Independent Media Property