Will Cape Town’s new by-law change the game for short-term letting operators?

Cape Town plans a draft by-law to ensure Airbnb-style short-term lets pay the correct commercial property rates. The City of Cape Town is preparing to release a draft Short-Term Letting By-law for public participation, aimed at improving compliance with its existing Rates Policy by ensuring that properties primarily used for commercial-scale short-term letting are correctly charged commercial property rates. Under the City’s current Rates Policy, all premises mainly used for commercial accommodation businesses — including short-term letting operations — are required to pay commercial rates.

The proposed by-law is intended to strengthen enforcement of that policy by making it harder for commercial operators to pay residential rates while effectively running a business. “The proposed by-law does not introduce a new tax or a tax increase,” the City said. “It is about improving compliance with the City’s existing Rates Policy, which already requires commercial short-term letting operations to pay commercial property rates.” The City stressed that the by-law will not apply to primary residences that occasionally engage in short-term letting, nor to long-term rental properties, where residential rates will continue to apply.

“Properties that are mostly used as a primary residence, with some short-term letting, will not be affected,” the City said. “Long-term rental is also not considered a commercial enterprise, as the property is used as a primary residence by the tenant.” According to the City, only property owners who are currently operating commercial short-term letting enterprises while paying residential rates could experience an increase.