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

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.

“Only those who do not currently comply with the existing Rates Policy may see a change if they are operating a commercial enterprise but paying residential rates,” the City said.

Over time, the City has been working to identify non-complying properties where residential rates are being incorrectly applied. The proposed by-law would take these efforts further by allowing the City to assess occupancy and availability data sourced directly from short-term letting platforms to determine the primary use of a residence.

“This will allow the City to engage with property owners whose data indicates that they should be paying commercial rather than residential rates,” the City said.

Further details, including the full draft by-law and the public participation schedule, will be released once all required Council processes have been completed.

In the interim, the City has urged short-term letting operators not to wait for new measures to take effect.

“We encourage property owners to approach the City now to ensure that the correct commercial rates category is being applied where residences are primarily used for short-term letting,” the City said.

While reaffirming its support for the tourism economy, the City said it views short-term letting as an important sector but believes fairness must apply across the accommodation industry.

“The City supports the tourist economy in the strongest terms,” it said. “However, the playing field must be equal, with all businesses paying the correct rates category required of a commercial operation.”

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