The City of Cape Town has opened a two-month public participation process for its draft Short-Term Letting By-Law, bringing the municipality one step closer to implementing commercial property rates for properties used predominantly for short-term rentals such as Airbnb.
The draft by-law, which is open for public comment from 5 August to 5 October, aims to improve identification of properties operating as commercial accommodation businesses by introducing a mandatory registration system and direct information-sharing from online booking platforms.
Under the City’s existing Rates Policy, commercial property rates must be levied for premises used for commercial accommodation. However, enforcement has been challenging. The proposed by-law seeks to close this gap by requiring all properties listed on booking platforms to register with the City and display a City-issued registration number on their listings.
How the system will work
Commercial property rates will apply if a property is available for short-term letting for more than 50% of the total annual room nights. The City calculates this ratio by determining the portion of nights a property’s total bedrooms are available for short-term letting over a 365-day period.
Property owners who rent out part of their primary residence occasionally to supplement their income will not be affected if they fall below the 50% threshold. Similarly, long-term rental properties that serve as the primary place of residence for tenants are exempt.
The by-law will require all properties listed on any booking platform to register with the City, display a City-issued registration number on all listings, and share data on listing availability with the municipality. Booking platforms, owners and operators will be obligated to provide this information.
Changes to a property’s rating category will take effect from 1 July 2027 based on data from the proposed registration system, giving property owners a grace period to adapt.
Financial implications
Business and commercial properties are rated at a ratio of 2.35 times the residential base ratio, which could result in rate increases of up to 135% for affected properties. This reclassification would bring short-term rental businesses in line with hotels, guest houses and bed and breakfast establishments.
The City’s Mayoral Committee member for finance, councillor Siseko Mbandezi, said the proposed by-law ensures fairness in the commercial accommodation sector.
“Over time, the City has been working to systematically identify properties used for commercial accommodation where residential rates are incorrectly being levied instead of commercial rates,” Mbandezi said.
“The City 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 accommodation paying the correct rates.”
Industry concerns
Industry groups and property owners have expressed concern about the financial pressure the reclassification could impose, particularly on those who rely on occasional rental income to cover bond repayments, maintenance and operational costs.
Critics have also raised questions about the administrative burden of the registration and monitoring process, the clarity of threshold definitions and the need for a transparent appeal process.
There is ongoing debate among stakeholders about whether the policy will successfully increase the supply of long-term rental housing or simply increase the cost of doing business for short-term rental operators, potentially impacting the tourism sector.
The City maintains that the policy does not constitute a new tax or tax hike, but rather a move to improve compliance with existing regulations. It emphasises that many commercial short-term operations have incorrectly benefited from residential rates while functioning as full-scale commercial entities.
Have your say
Comments, recommendations and input may be submitted by email to STL@capetown.gov.za, online at www.capetown.gov.za/haveyoursay and www.capetown.gov.za/collaborate, or through written submissions delivered to any of the City’s subcouncil offices or libraries.
The draft Short-Term Letting By-Law and its executive summary are available on the City’s website. The executive summary is available in the three official Western Cape languages at subcouncil offices during the public participation period.
The City’s Public Participation Unit will assist people living with disabilities who are unable to submit written comments.
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