Cape Town to hike rates on Airbnb rentals by up to 135% in housing crackdown

The City of Cape Town is preparing to more than double municipal rates on properties used mainly for short-term rentals, in a move aimed at easing pressure on the city’s strained housing market.

The City says homes operating as full-time short-term accommodation businesses will be charged commercial tariffs – similar to hotels and guesthouses – potentially pushing rates up by about 135%.

With an estimated 26,000 short-term rental units listed on Airbnb alone, Cape Town now outpaces global cities such as Barcelona, Amsterdam, New York and Hong Kong in terms of listings.

How the City plans to distinguish business from side hustle

Speaking at a live event last week, Mayor Geordin Hill-Lewis outlined how the City intends to separate commercial operators from residents who occasionally rent out a spare room or garden cottage.

“We are bringing out a bylaw in a couple of months to require the platforms to give us a list of their listings in the city,” he said.

Hill-Lewis explained that the City does not want to penalise small-scale hosts supplementing their income.

“If it is on the market for more than 60% of the year on the platform, it’s available for booking, and it’s the whole residence, then it is very, very likely to be a business. It’s not your granny renting out an extra room to supplement your income. And then that person is going to be automatically put onto commercial tariffs, and they will be treated exactly the same as hotels.”

The proposed threshold – more than 60% of the year and the entire property listed – will be used to determine whether a property is effectively operating as a hospitality business.

Housing crisis driving intervention

Nathan Scott, founder of The Real Estate Route, said the move comes amid mounting pressure on Cape Town’s rental market.

“It is a very grey area at the moment as to what defines a private [host],” Scott said.

He noted that while there may be around 26,000 listings, between 15,000 and 18,000 are believed to be active.

“This just puts so much more strain on the supply that we have for the longer-term tenants, pushing up the pricing across the market,” he said.

Scott added that Cape Town is facing a ‘major housing crisis’, with rising semigration into the city intensifying demand for affordable rental stock.

Will higher rates burst the short-term rental bubble?

The City insists it is not anti-tourism. In fact, the mayor has repeatedly said he wants more visitors and digital nomads, citing the economic spin-offs for local businesses.

Scott does not expect the policy to deter tourism.

“All across the world, they have not seen a shift in this change of policy. So, I can’t see this having an effect on that,” he said.

Instead, he believes the City hopes to nudge some investors back into the long-term rental market, especially since there is little room left for further development within Cape Town’s existing footprint.

However, he cautioned that the outcome would depend on how property owners respond.

“Higher taxes alone don’t automatically create the housing supply. They may influence the behaviour, but whether the property is actually moved back into the long-term rental depends on enforcement and exemptions,” Scott said.

He warned that increased costs could simply be passed on to guests.

“Usually, when the costs of a service increase, it just gets passed down to the consumers. So, let’s see what happens.”

What counts as short-term?

Under current interpretations, short-term rentals are generally defined as leases of under three months.

This includes scenarios where foreign owners occupy properties for part of the year and let them out for the remainder, often through platforms such as Airbnb and Booking.com.

For some critics, this represents housing stock effectively removed from the local market, particularly when rental income flows offshore.

The debate now centres on whether charging commercial rates will meaningfully increase long-term rental supply, or whether operators will absorb the higher tariffs and continue targeting the lucrative tourist market.

As the City prepares to table its bylaw, the question remains: will the intervention cool Cape Town’s short-term rental boom, or simply raise the cost of doing business?

For more detailed information, listen to Scott using the audio player below: