The Cape Town Short-Term Rental Market: Impact on Housing Prices and Mayor Hill-Lewis's Response

1. Introduction:

Cape Town's allure as a global tourist destination and a burgeoning hub for digital nomads has brought economic benefits but also raised concerns about housing affordability for its residents. Even before the rise of short-term rentals, the city faced housing challenges, now exacerbated by the increasing popularity of platforms like Airbnb. The number of Airbnb listings in Cape Town has grown significantly, concentrated in prime areas such as the Atlantic Seaboard and the City Bowl. This growth has led to worries that property owners are incentivized to shift from long-term leases to the more lucrative short-term rental market, potentially decreasing the supply of long-term rental properties and driving up prices for locals. The perception among Cape Town residents is that short-term rentals are a major factor in the increasing unaffordability of housing.  

2. The Impact of Short-Term Rentals on Housing Prices in Cape Town:

Data indicates a faster growth in rental prices in the Western Cape compared to other South African regions. This trend aligns with the imbalance between short-term rental listings and long-term rental availability, especially in central Cape Town. Early 2025 reports showed over 23,000 Airbnb listings versus fewer than 700 long-term rental options in the central city area. This suggests a significant portion of housing stock in high-demand areas is used for short-term accommodation, impacting permanent residents. The willingness of digital nomads to pay higher rents for short-term stays further intensifies this issue. The sheer volume of short-term rentals compared to the scarcity of long-term options in central locations points to a supply-demand imbalance likely influenced by the short-term rental market. The conversion of properties to short-term rentals in prime locations reduces the availability of long-term rentals, leading to increased competition and higher prices.  

The potential for higher financial returns from short-term rentals is also considered a factor in rising overall property values in Cape Town. Investors may purchase properties to list on platforms like Airbnb, potentially paying premium prices due to anticipated higher yields. This increased investor demand can contribute to an overall rise in property values, making it harder for first-time buyers and lower-income individuals to enter the market. However, Cape Town's inherent appeal as a tourist destination and internal migration also significantly contribute to property value appreciation. The city's desirable lifestyle and broader economic factors, such as a weakening rand attracting foreign investment, likely exert upward pressure on property prices, making it challenging to isolate the precise impact of short-term rentals.  

The stark contrast between the number of short-term rental listings and the limited availability of long-term rentals, particularly in desirable areas, strongly suggests a potential displacement of long-term housing options. Data from Inside Airbnb consistently shows thousands of active short-term rental listings concentrated in central and coastal neighborhoods, while long-term rentals in the same areas remain significantly lower. This geographical concentration reinforces the localized impact on housing markets within these specific areas. If a substantial portion of housing stock in prime residential areas is used for short-term rentals catering to tourists and digital nomads, locals seeking long-term accommodation in these same areas face drastically reduced options. This scarcity can lead to increased rental prices and potentially force residents to seek housing in less desirable or more distant locations, affecting their access to employment, social networks, and essential amenities.  

3. Mayor Geordin Hill-Lewis's Position and Proposed Actions:

Mayor Geordin Hill-Lewis has publicly acknowledged residents' concerns about the impact of short-term rentals on housing affordability, recognizing that many feel priced out of the city. He has expressed support for taxing short-term rental properties as a potential solution, aiming for an "equal playing field" within the accommodation sector. His focus is on taxing properties operating year-round as short-term rentals, similar to small businesses, rather than occasional short-term letting. This indicates that Mayor Hill-Lewis recognizes the issue and is proposing fiscal measures as a primary intervention. Taxing full-time short-term rentals more like hotels aims to reduce their financial advantage, potentially incentivizing some owners to return their properties to the long-term rental pool.  

A key part of Mayor Hill-Lewis's proposal involves adjusting the tariff structure for properties primarily used as permanent short-term rentals. The proposal is to reclassify these properties from residential to commercial tax rates. The rationale is that properties operating as full-time short-term rentals function as small hotels, providing accommodation services regularly, and should be subject to the same commercial tax obligations as traditional hotels and guesthouses.This proposed tariff adjustment targets entire properties used permanently for short-term rental purposes and does not apply to homeowners occasionally renting out rooms or a garden flat. This targeted approach shows an understanding of the difference between genuine home-sharing and larger-scale commercial operations focused on the short-term rental market. By focusing the increased tax burden on entire properties used as primary short-term rental businesses, the city aims to minimize the impact on homeowners who occasionally rent out parts of their primary residence while directly addressing concerns about the proliferation of commercial short-term rental activities.  

The central argument behind Mayor Hill-Lewis's proposed tax adjustments is the need to create an "equal playing field" within the accommodation sector. He argues it's unfair for owners operating permanent Airbnb rentals to avoid the same regulatory and tax obligations as traditional hotels, guesthouses, and other commercial accommodation providers. This view is supported by the Department of Tourism, which has expressed interest in aligning short-term letting with established tourism accommodation standards. The "equal playing field" rationale highlights a clear policy objective to ensure fair competition and potentially generate increased tax revenue for the city from short-term rental operations currently taxed at lower residential rates.  

4. Regulatory Landscape in Cape Town:

Cape Town currently has bylaws and regulations pertaining to short-term rentals. In 2019, the City approved a by-law allowing short-term letting from a house or flat for up to 30 consecutive days for the same guest. This serves as a local regulatory measure in the absence of comprehensive national legislation. The Municipal Planning By-law also regulates short-term rentals by determining permissible land and property use. While these local regulations provide a framework, the lack of overarching national legislation can lead to complexities and inconsistencies. The reliance on existing planning bylaws and the ongoing development of national regulations indicate a regulatory environment still adapting to the short-term rental market.  

In addition to the existing local by-law, new regulations are proposed by the Department of Tourism and the Cape Town municipality. The Department of Tourism is finalizing regulations to align short-term letting with tourism accommodation standards. These may include mandatory registration, adherence to health and safety standards, and hospitality taxes, similar to hotels. There might also be limits on the annual number of rental days. Mayor Hill-Lewis's proposed tariff adjustments, taxing permanent short-term rentals at commercial rates, are a key municipal regulatory measure. These proposed regulations from both national and local authorities indicate a move towards greater oversight and integration of the short-term rental market into the broader tourism sector, addressing concerns about housing affordability.  

Limiting the number of annual rental days is a strategy used by other cities to mitigate the impact of short-term rentals on long-term housing availability. This aims to prevent properties from being used solely for short-term accommodation, encouraging owners to consider long-term leases. Mandatory registration systems for short-term rentals are also beneficial, providing authorities with enhanced visibility of hosting activities. Registration facilitates data collection on the market's size and distribution, enabling informed policymaking and targeted interventions. It also helps ensure compliance with safety standards and tax obligations. Airbnb itself has called for a national registration system in South Africa, recognizing its potential to provide policy certainty and a level playing field. These potential restrictions and registration requirements are common regulatory tools used globally to manage short-term rental growth and mitigate negative impacts on local housing markets and communities.  

5. Growth and Characteristics of the Short-Term Rental Market in Cape Town:

Cape Town has seen a significant increase in short-term rental listings in recent years, particularly after the COVID-19 pandemic. Data from platforms like Inside Airbnb show a substantial number of active short-term rental properties.Reports indicate a sharp rise in listings, with an estimated 190% increase in areas like the City Bowl and the Atlantic Seaboard since 2022 . This growth in short-term rental options, especially in prime urban and coastal locations, highlights the increasing appeal of this accommodation model for property owners seeking higher returns and tourists and digital nomads seeking flexible lodging . This rapid expansion likely contributes to concerns about the reduction in long-term rental supply and increased competition, ultimately pushing up rental prices.  

The short-term rental market in Cape Town is characterized by relatively high occupancy rates and attractive revenue generation. Data suggests average occupancy rates ranging from 54% to 75% . Airbtics reported a median occupancy rate of 71% between August 2023 and July 2024 . These high occupancy levels result in substantial average daily rates, reported around ZAR 1,663 . Consequently, typical annual income for hosts in Cape Town can be significant, with an average revenue of ZAR 421,000 in 2023 . The Cape Town Airbnb market has also shown revenue growth, with a reported 15.34% year-over-year increase as of February 2025 . These strong profitability indicators provide a clear financial incentive for property owners to participate in the short-term rental market, potentially leading to further investment and property conversions from long-term to short-term use.

A notable characteristic of Cape Town's short-term rental market is the significant geographical concentration of listings. As mentioned, these are most densely located in areas near the ocean and popular tourist attractions, such as the Atlantic Seaboard and the City Bowl . These are often the same areas where long-term rental affordability is a major concern for local residents. This geographical clustering suggests that the impact of short-term rentals on the housing market is not uniform across the city but is more pronounced in these specific, highly desirable areas. The concentration of short-term rental properties in these prime locations can lead to a localized effect on housing dynamics, potentially contributing to the displacement of long-term residents who may find it increasingly difficult to compete for the limited available properties or afford the rising rental prices in these neighborhoods. This can also lead to changes in the character of these areas, as they become more oriented towards transient visitors rather than permanent communities.  

Key Statistics of Cape Town's Short-Term Rental Market (2023-2024)

MetricValueSource(s)Number of Active Airbnb Listings (Sep 2024)19,114Year-over-Year Revenue Change (Feb 2025)15.34%Average Occupancy Rate (Aug 23 - Jul 24)71%Average Daily Rate (Sep 2024)ZAR 1,663Typical Host Annual Income (2023)ZAR 421,000Long-Term Rentals in Central Cape Town (Jan 2025)< 700Total Airbnb Listings (Dec 2024)Over 25,800Increase in Listings (City Bowl & Atlantic Seaboard since 2022)190%

6. Perspectives of Cape Town Residents and Community Organizations:

Many Cape Town residents have expressed significant concerns regarding the impact of the surge in short-term rentals on their ability to afford housing. Disgruntled renters feel rental prices are inflated due to platforms like Airbnb, leading to a perceived scarcity of affordable properties for permanent residents . Some residents accuse local authorities of prioritizing the city's appeal as a tourist destination over the housing needs of the local population. In historic neighborhoods like Bo-Kaap, residents are particularly worried about potential gentrification and displacement driven by tourism and foreign property investments, as increased property prices threaten long-standing communities. This widespread negative sentiment among residents highlights a significant social cost associated with the growth of the short-term rental market, potentially impacting community cohesion and the long-term sustainability of Cape Town as an inclusive home for its diverse population.  

Residents' concerns have also led to organized actions, such as the online petition opposing "Nomad Week" in Cape Town, which garnered over 3,000 signatures. This demonstrates a level of organized resident concern regarding the increasing presence of digital nomads and the associated growth of the short-term rental market. Furthermore, advocacy groups like Ndifuna Ukwazi have been vocal in their criticism of how platforms such as Airbnb are exacerbating the ongoing housing crisis in Cape Town . Their consistent advocacy and public statements highlight a growing awareness and organized resistance to the perceived negative impacts of short-term rentals on housing affordability for local communities .  

Housing activists and community organizations have consistently argued that the rapid increase in Airbnb listings has worsened the existing shortage of affordable long-term rental properties in Cape Town . They advocate for stronger tenant protection measures, better rent control policies, and a greater overall focus on creating affordable, well-located housing options for local residents . Many argue that the issue extends beyond simply taxing short-term rentals or addressing the presence of digital nomads, requiring a more comprehensive and multifaceted approach to balance the needs of both tourists and the city's permanent residents .

7. Economic Analyses of Short-Term Rentals and Housing Prices:

Several economic studies and reports have analyzed the relationship between the growth of the short-term rental market and housing prices in Cape Town. Notably, Airbnb itself commissioned a report suggesting little to no significant correlation between the number of Airbnb listings and rising rental prices in the city . This report highlights that dedicated rental listings on Airbnb account for a small percentage of the total formal housing units in Cape Town, typically less than 1% . Furthermore, the report emphasizes Airbnb's substantial economic contribution to Cape Town's GDP and the creation of numerous jobs . However, this analysis has faced criticism for potentially downplaying the impact by focusing primarily on "dedicated" listings, often defined as entire homes booked for more than 90 nights per year .

In contrast to Airbnb's findings, independent research and analyses suggest a more significant impact of short-term rentals on housing affordability in Cape Town, particularly when considering a broader definition of commercial activity that includes both full-time rentals and multi-listings operated by the same host . These analyses, often using data from platforms like Inside Airbnb, indicate that a substantial portion of short-term rentals in Cape Town are indeed operating as commercial enterprises rather than just occasional home-sharing activities . By including multi-listings in the assessment of commercialization, researchers have found that the number of properties effectively removed from the long-term rental market could be significantly higher than what Airbnb's reports suggest . This divergence in findings likely arises from differences in methodologies, data sources, and definitions used to categorize short-term rental activity as "commercial" or "home-sharing" .

Data from platforms like Inside Airbnb offers a valuable independent perspective on the dynamics of the short-term rental market in Cape Town, providing insights that may differ from those in reports commissioned by Airbnb . While Airbnb's reports tend to emphasize the positive economic contributions of their platform and argue for a minimal impact on the overall housing supply in Cape Town , independent data sources can offer a more objective view of overall market trends and potential consequences for local communities and long-term residents .

The economic impact of short-term rentals is a subject of ongoing debate, with differing perspectives on the extent and nature of its effects . Proponents argue that short-term rentals can bring tourism revenue into neighborhoods that may not traditionally benefit from the hospitality industry, thereby spreading economic benefits more widely . However, critics suggest this revenue might not always represent entirely new economic activity but could instead be a transfer of spending that would have otherwise gone to traditional hotels and other forms of accommodation . Furthermore, concerns have been raised about the nature of employment within the short-term rental sector, with some studies suggesting it can be characterized by precarity and a lack of job security .

8. Lessons from Other Cities: Regulations and Best Practices:

Many cities worldwide experiencing significant growth in their short-term rental markets have implemented regulations to address arising challenges and concerns . Cities like Amsterdam, Barcelona, Berlin, London, New York, and Santa Monica have taken steps to manage the impact of short-term rentals, often due to concerns about housing affordability, neighborhood disruption, and potential loss of tax revenue from traditional lodging . These regulations vary but often include measures like limiting rental days, requiring mandatory registration and licensing, and sometimes banning certain types of listings, especially non-owner-occupied ones in primarily residential zones .

Regulatory approaches adopted by different cities often combine taxation, registration requirements, and rental period limitations . Taxation is used to level the playing field between short-term rentals and traditional hotels . Registration systems require short-term rental operators to register their properties with local authorities . Limiting annual rental days directly addresses concerns about the reduction of long-term housing supply .

Drawing on other cities' experiences, several best practices in short-term rental regulation have emerged . Establishing clear policy objectives is crucial . Regulations should be enforceable . Simplicity and clarity in the regulatory framework are also important . Effective communication with hosts is essential . Robust enforcement mechanisms are necessary . The use of technology can aid in monitoring and enforcement .

9. Conclusion and Recommendations:

The analysis suggests a correlation between the growth of Cape Town's short-term rental market and rising housing costs and reduced long-term rental availability, especially in desirable areas . Mayor Hill-Lewis has proposed tariff adjustments for permanent short-term rentals , and broader regulations are under development . While economic impact perspectives differ , residents' concerns about affordability and displacement require consideration .

To balance tourism benefits with local housing needs, the following recommendations are proposed:

1. Implement the Proposed Tariff Adjustments: Reclassify properties operating primarily as short-term rentals to commercial tax rates .
2. Consider Implementing a Mandatory Registration System: Establish a registration process for all short-term rental properties .
3. Explore Implementing Limits on the Number of Rental Days: Evaluate the potential of setting reasonable limits on annual short-term rental days .
4. Enhance Enforcement of Existing and New Regulations: Invest in resources and technology for robust monitoring and enforcement .
5. Promote the Development of Affordable Housing: Prioritize and invest in affordable housing options .
6. Foster Dialogue and Collaboration: Encourage ongoing dialogue among all stakeholders .
7. Regularly Review and Adapt Regulations: Continuously monitor the impact and effectiveness of regulations .

By implementing targeted regulations, enhancing enforcement, prioritizing affordable housing, and fostering collaboration, Cape Town can strive for a sustainable and inclusive future that balances tourism's economic benefits with the housing needs of its residents.

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