City of Cape Town's value-based municipal charges unlawful, court rules

The City of Cape Town's new tariff structure came under fire from residents and property associations when it announced that charges would be linked to the value of a property.

Now the Western Cape High Court has found the City acted unlawfully in linking fixed charges for water sanitation and city wide cleaning services to property values.

RELATED:

• City of Cape Town budget faces backlash over proposed tariffs
• Cape Town homeowners urged to look beyond city’s claims of municipal rates relief

The case was brought by the South African property owners association (Sapoa) among others, who challenged the tariffs introduced by the City in its 2025/26 budget.

They argued that the tariff structure is unlawful, unconstitutional and improperly linked to property values.

Stephen Grootes gets input from property economist Francois Viruly, Associate Professor in Property Economics at the University of Cape Town (UCT).

Prof. Viruly points out that, for most municipalities, rates and taxes are a critical component of their revenue.

Where the problem arose in the case of Cape Town, is that the City was doing a bit of "mixing up of things", he says.

"We've got ourselves in a scenario where the question is: Is this about rates, or is this about utilities? I think that's where the mixing up came in because, ultimately, it is about the rates."

Another side to the problem is that while property prices have increased, particularly in Cape Town, and rates are going up, salaries are not keeping pace, Viruly says.

"On the one hand, yes, having a property market that functions well is great but then you have the other problem which is that municipal financing models are starting to fail in South Africa, of which this Cape Town case is a good example."

"Let's remind ourselves that 20% of this city's population lives in informal settlements and close to 50% of households live in properties below the R500,000 value limit where rates and taxes starts, so they are not paying. And I think this is the typical problem we're starting to face as urbanisation carries on at the rate that it is."

Prof. Viruly also touches on more efficient municipal financing models - take a listen in the interview audio at the top of the article