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Written by Nathan Scott (Primenest Realty)
The City is planning a major shift in how short-term rental properties are taxed and the message is simple – if your property operates like a hotel, it should be taxed like one.
Up until now, most Airbnb homes have been paying residential municipal rates, even though many operate full-time as income-producing rentals. That’s what Cape Town wants to change.
Under the proposed policy, properties used primarily for short-term letting would be reclassified as commercial, putting them in the same category as hotels and guesthouses.
And the impact?
For many owners, municipal rates could increase by around 135% – more than double what they’re paying now.
Why this matters (and how big it really is)
Cape Town has over 25,000 Airbnb listings – more than cities like New York and Amsterdam. That means this isn’t a niche issue. It affects thousands of property owners across the metro, from Sea Point and the CBD to Woodstock and beyond.
The City’s view, backed publicly by Geordin Hill-Lewis, is that short-term rentals have effectively become “decentralized hotels” – generating commercial income while benefiting from residential tax rates.
From the City’s perspective, that’s a mismatch.
It’s not just about tax – it’s about housing
There’s a second, bigger issue driving this – housing pressure.
Cape Town’s rental market is tight. Long-term rentals are expensive and scarce, while more properties are being pulled into the short-term market for tourism.
The hope is that higher commercial rates will:
- Push some owners to reconsider full-time Airbnb use
- Bring more properties back into the long-term rental pool
- Reduce pressure on locals trying to live and work in the city
Whether that actually happens is still up for debate.
The pushback
Not everyone agrees this is the right move.
Tourism bodies argue that Airbnb:
- Supports jobs
- Brings in foreign spend
- Helps keep Cape Town competitive as a destination
There’s also concern that owners will simply pass the cost on to guests, making short-term stays more expensive – without meaningfully improving housing supply.
Smaller, casual hosts could be hit hardest – people who rent out a flat occasionally or their home while travelling, may find the numbers no longer work.
On the flip side, housing advocates say this correction is long overdue and that tourism shouldn’t be indirectly subsidized through residential tax rates while locals struggle to find accommodation.
What happens next?
The bylaw is still in the planning phase, with timelines and implementation details expected to be confirmed in the coming months.
But the direction is clear.
Some owners will:
- Exit short-term letting altogether
- Shift to long-term rentals
- Reprice aggressively to absorb higher costs
Others will double down and operate more explicitly as commercial businesses.
My Thoughts
This isn’t just a rates increase.
It’s a line in the sand.
Cape Town is signaling that the era of treating full-time short-term rentals as residential properties is coming to an end.
If you operate like a hotel, the City wants you taxed like one.
Whether this fixes housing pressure or reshapes the Airbnb market in unexpected ways – we’ll only know once it’s live.
But one thing’s certain:
the short-term rental math’s in Cape Town is about to change.
Read the article here.