Airbnb hosts in Cape Town might have to pay almost three times more on property rates, after the passing of a new City of Cape Town by-law that seeks to regulate short-term rentals in the Mother City.

Time is running out for objections and comments on the proposed by-law, with industry players having until 5 October to give their input on the City’s website.

In terms of the proposed by-law, all properties listed on booking platforms such as Airbnb, LekkeSlaap and Booking.com must be registered with the City under the draft Short-Term Letting by-law.

Every listing will have to carry a registration number issued by the City, which without the property cannot be listed at all.

ALSO READ: City proposes registration for short-term letting properties

List your property for short-term letting for more than half the year — 183 nights or more — and the City will reclassify it as commercial. Rates will then be charged on that basis, the same as for hotels and guesthouses. However, a property rented out without using a booking platform, will not be affected.

Availability vs booking

The City will assess a property based on its availability rather than actual bookings or use. In other words, the number of days a property is listed or advertised for short-term letting will be the determining factor — not how many nights it was actually booked or occupied.

Properties leased on a long-term as a tenant’s primary residence, for example on a year-long lease, will not be liable for commercial rates. A property can be de-registered as commercial if it is removed from booking platforms or its availability drops below the 50% threshold over a 365-day rolling period.

Announcing the draft by-law, the City’s Mayco member for finance, Siseko Mbandezi, said the City has been working systematically to identify properties used for commercial accommodation where residential rates are incorrectly being levied instead of commercial rates.

“The proposed By-law ensures fairness in the commercial accommodation sector. The City has been engaging with the commercial short-term letting stakeholders and will continue to provide support to the sector. 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,” he said.

27 000 listings in Cape Town

The shift reportedly stemmed from concerns raised by hotel investors, who struggled to justify new hospitality developments while short-term rental operators competed at scale yet paid only residential rates.

According to reports, Cape Town mayor Geordin Hill-Lewis said this imbalance was putting off investment in new hotels, even as tourist numbers continued to climb.

The short-term letting industry has grown so rapidly in Cape Town that the City’s draft by-law was a long time coming, says Rowan Alexander of Rowan Alexander Property Group. Currently, Inside Airbnb shows about 27 000 listings in Cape Town.

The by-law raises a straightforward question, he says, “Is it fair to pay residential rates on properties not being used for residential purposes?”

Alexander expects it to have a meaningful impact on the short-term rental market, with the 50% threshold likely to draw the most debate. It will affect how owners manage their properties.

The change also means additional revenue for the City. For example, a R3 million property, the residential rate runs about R21 000 per year, while the commercial rate jumps to roughly R50 700, he says.

“It is a substantial bump in income for the City. But it also affects bottom line for investor,” he says. “This difference gets bigger as you go up in the value chain.”

Alexander says it is important to understand that this is not simply a tax, but a change in how the City treats the property system.

“It has become contentious because Cape Town properties have grown exponentially in value,” he says.

Commercial rates are expected to take effect from 1 July 2027. The new rates will be implemented through the first supplementary valuations process once a property exceeds the 50% threshold in any 365-day rolling period, and will be effective from the date the change of category occurred.