The City of Cape Town is moving into one of the most contested spaces in the local property market: short-term rentals. For years, Capetonians have argued that the growth of full-time holiday letting has tightened the supply of long-term rentals and pushed up prices in already pressured neighbourhoods. Now the City is proposing a new way to distinguish between occasional home-sharing and commercial-scale short-term letting, with the financial consequences potentially significant for some owners.
At the centre of the proposal is a change to how certain properties are rated. The City says premises used for commercial short-term letting should be paying commercial property rates, in the same way as hotels, guesthouses and bed-and-breakfast establishments. Its argument is that many operators are effectively running tourism businesses while still paying residential rates, and that this creates an uneven playing field in the accommodation sector.
The proposed system turns on a technical but important threshold: more than half of a property’s annual availability for short-term letting. In simple terms, the City measures how often a property is made available for short-term bookings across the year. If it crosses that threshold, it can be classified as a commercial operation. If not, it remains residential. Long-term rentals are not affected because the property continues to serve as a primary residence.
That distinction is central to the City’s approach. Officials have made it clear that short-term rentals are not being banned or restricted outright. Instead, the aim is to bring structure to a rapidly expanding sector while maintaining the economic benefits of tourism.
Cape Town has seen strong investor activity in short-term rentals, particularly in high-demand areas where returns can exceed those of traditional long-term leasing. Property specialist Ross Levin says the market is entering a new phase. “Short-term letting is not going anywhere, but regulation is inevitable,” he said, adding that even policy direction alone can influence investor behaviour before implementation.
This could begin to shift parts of the market. Some property owners may return units to the long-term rental pool, while others may reassess their investment strategies as costs and compliance requirements increase. Over time, this could help ease pressure on rental availability, although any changes are expected to happen gradually.
The City is also looking at ways to improve compliance, including potential data-sharing arrangements with online platforms and clearer mechanisms to identify properties operating as full-time short-term rentals.
Public participation is expected to play a key role before any final decisions are made, with residents, investors and industry stakeholders given the opportunity to comment on the proposal.
The outcome of this process could shape the future of Cape Town’s property market, as the City attempts to balance the needs of residents, investors and the tourism sector in a changing economic environment.
Source: IOL – Given Majola.
