CAPE TOWN'S AIRBNB RULES ARE CHANGING: WHAT PROPERTY OWNERS, INVESTORS AND BUYERS NEED TO KNOW
- Natascha Miller
- Jun 16
- 4 min read
By Natascha Miller
Over the past few months, headlines have suggested that Cape Town is introducing an "Airbnb tax", banning short-term rentals, or making Airbnb operations impossible.
The reality is far less dramatic.
However, property owners, investors, estate agents, developers and buyers should pay close attention because the City of Cape Town is moving toward stricter regulation of commercial-scale short-term letting.
The proposed changes could have a significant financial impact on certain property owners.
What Has Actually Happened?
The City of Cape Town has published a proposed Short-Term Letting By-law aimed at improving compliance with its existing Rates Policy. The City's stated objective is not to prohibit Airbnb-style accommodation, but rather to ensure that properties operating as accommodation businesses are paying the correct municipal rates.
According to the City, properties that are effectively being run as commercial accommodation enterprises should not enjoy the same municipal rating treatment as ordinary residential homes.
In simple terms:
A homeowner who occasionally rents out a spare room is not the target.
A property operating year-round as a de facto hotel may be.
Is Airbnb Being Banned?
No.
Short-term letting remains lawful in Cape Town.
The City has repeatedly clarified that it is not introducing a ban on Airbnb or similar platforms. Instead, it seeks to identify properties that are primarily being used for commercial accommodation purposes and ensure they are categorised correctly for municipal rating purposes.
The Most Important Issue: Commercial Rates
Many media reports have referred to a "135% Airbnb tax".
Technically, this description is inaccurate.
The City's position is that commercial accommodation properties are already required to pay commercial property rates under existing policy. The proposed by-law is intended to improve enforcement and close compliance gaps where commercial operators may still be paying residential rates.
For some property owners, this distinction may be significant.
The issue is not the creation of a new tax.
The issue is whether a property should have been categorised differently all along.
Understanding the Proposed 50% Threshold
One of the key features of the proposed framework is the introduction of a measurable threshold.
The City's draft policy indicates that a property may be classified as Business and Commercial where the short-term letting availability ratio exceeds 50% of annual room-night capacity.
In practical terms, this means the City may consider:
- How often bedrooms are available for short-term rental;
- The extent of commercial guest accommodation activity;
- Whether the property functions primarily as accommodation rather than a residence.
The focus is not merely whether a property appears on Airbnb.
The focus is whether the property's primary use is commercial accommodation.
Will Every Airbnb Owner Be Affected?
No.
Based on the City's published statements, the following categories are generally not intended to be affected:
Primary Residences
Homeowners who occasionally let their homes or spare rooms while continuing to use the property as their primary residence remain residential property owners.
Long-Term Rentals
Properties leased to tenants under ordinary residential lease agreements remain residential in nature. These properties are not regarded as commercial accommodation businesses.
Casual Holiday Letting
Occasional holiday rentals that do not amount to a commercial accommodation enterprise are unlikely to fall within the City's enforcement focus.
What About Sectional Title Schemes?
This is where many investors get caught off guard.
Even if municipal rules permit short-term letting, a sectional title scheme may have its own restrictions.
Property owners should carefully review:
- Conduct Rules;
- Management Rules;
- Exclusive Use Area Rules;
- House Rules;
- Trustees' resolutions;
- Registered scheme governance documents.
Municipal approval does not automatically override sectional title governance.
A property owner may comply with City requirements while still breaching scheme rules.
What About Zoning?
Historically, zoning concerns created uncertainty regarding short-term letting.
The current regulatory approach places greater emphasis on municipal rating classification and property use rather than broad prohibitions on short-term letting itself. However, owners should still ensure compliance with all applicable planning, land use, building and municipal requirements relevant to their particular property.
Every property should be assessed on its own facts.
How Might The City Enforce Compliance?
The City has indicated that it may utilise occupancy and availability data obtained from short-term rental platforms to assess whether properties are operating as commercial accommodation businesses.
Where information suggests that a property's primary use is commercial short-term accommodation, the City may engage with the owner regarding the appropriate rating category.
What Should Buyers Do Before Purchasing An Airbnb Investment Property?
This is no longer a simple numbers game.
Before purchasing a property primarily for Airbnb use, buyers should investigate:
- Current municipal rates classification;
- Applicable zoning and land use rights;
- Body corporate or HOA restrictions;
- Potential commercial rates exposure;
- Occupancy projections;
- Compliance obligations;
- Insurance implications;
- Future municipal policy changes.
A property that produces excellent returns under residential rates may look very different under commercial rates.
Due diligence has never been more important.
What Does This Mean For Sellers?
Sellers of properties heavily marketed on Airbnb income projections should be cautious when making representations regarding future profitability.
Prospective purchasers are increasingly conducting deeper investigations into municipal compliance, rates exposure and scheme restrictions.
Full disclosure remains the safest approach.
The Bottom Line
Despite the social media noise, Cape Town is not banning Airbnb.
The City is attempting to distinguish between ordinary residential property owners and commercial-scale accommodation operators.
For many homeowners, very little may change.
For investors operating full-time short-term rental businesses, however, the financial implications could be significant.
As always, property ownership is about more than bricks and mortar.
It is about understanding the legal framework that sits behind the title deed.
And when that framework changes, wise property owners pay attention.
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Natascha Miller & Associates
Property Law | Conveyancing | Deceased Estates | Forensic Investigations | Mediation
📞 068 608 1894
This article is intended for general informational purposes only and does not constitute legal advice. Specific legal advice should be obtained in relation to individual circumstances.
"Position accurate as at June 2026 and subject to future amendments, public participation outcomes and Council approval processes."
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