The City of Cape Town and national government are moving on parallel tracks to bring greater oversight to the booming short-term rental sector, amid growing concerns about housing affordability and fairness in the accommodation market.

The City has confirmed it will soon release a draft Short-Term Letting By-law for public participation, aimed at improving compliance with its existing Rates Policy.

Under current rules, properties primarily used as commercial accommodation, including full-time short-term rentals, are already required to pay commercial property rates.

However, the City says some operators are effectively running “mini-hotels” while still paying lower residential rates.

“The proposed by-law is not a new tax or a rate increase,” the City said in a media release.

“It is a compliance measure to ensure that those operating commercial short-term letting enterprises pay the correct rates category.”

Importantly, the City clarified that:

• Primary residences that are occasionally let short-term will continue to pay residential rates
• Long-term rentals remain classified as residential use
• Only properties primarily used for short-term letting as a business may face higher charges if they are not already compliant

The municipality is also exploring the use of occupancy and platform data from companies like Airbnb to identify properties that should be classified as commercial.

The move comes as Cape Town grapples with a tightening rental market, with estimates suggesting tens of thousands of properties are currently listed on short-term rental platforms, reducing the supply of long-term housing.

At a national level, Tourism Minister Patricia de Lille has published a draft Code of Good Practice for short-term rentals, now open for public comment.

De Lille said the rapid growth of the sector has exposed regulatory gaps, as the current Tourism Act of 2014 does not give the minister powers to directly regulate short-term rentals.

Instead, the draft code sets out guidelines for responsible conduct, including:

• Compliance with municipal bylaws, zoning and tax obligations
• Clear communication of rules between hosts and guests
• Fair and ethical business practices

While acknowledging concerns that short-term rentals may be contributing to rising rents and housing shortages in major cities, De Lille cautioned against heavy-handed regulation.

“This is a very important sector within tourism,” she said, noting that it expands accommodation options and supports travel in areas without traditional hotels.

She emphasised that municipalities, not the national government, hold the primary authority over zoning, land use and rates, placing responsibility on cities to manage the housing impact.

At the same time, De Lille argued that the housing crisis cannot be attributed to short-term rentals alone, pointing to longstanding spatial inequality and a lack of affordable housing in well-located urban areas.

“The solution is for cities to use available land to build more affordable housing in city centres,” she said.

The draft national code is open for public comment for 60 days and is expected to inform future amendments to tourism legislation, which could eventually introduce more formal regulation of the sector.

Both the City and national government have stressed the need to strike a balance:  supporting tourism growth while ensuring fair competition and protecting access to housing.