In a bid to improve compliance with existing Rates Policy, the City of Cape Town last week released a media statement indicating its intention to publish a draft Short-Term Letting By-law for public comment. Against the backdrop of debates surrounding short-term letting and Cape Town’s affordable housing crisis, the law purports to ensure that properties primarily used for commercial short-term letting pay the correct commercial property rates.
Under the current Rates Policy, any premises primarily used as a commercial accommodation business, including short-term letting operations, are required to pay commercial rates. Crucially, the draft law does not introduce a new tax, nor does it impose a blanket rates increase on all short-term letting properties. Instead, it seeks to close compliance gaps where some commercial-scale operators are incorrectly paying residential rates.
Importantly, the proposed measures do not apply to primary residences where owners occasionally let out their property on a short-term basis. In such cases, residential rates remain applicable. Similarly, long-term rental properties are not classified as commercial accommodation businesses as the property serves as a primary residence for the tenant.
To facilitate adherence, the City has been working to identify properties that may not be complying with the existing Rates Policy. The draft legislation is thus intended to strengthen these efforts and promote fairness within the accommodation sector. According to the City, the ultimate goal is to ensure that businesses operating in the same commercial space are subject to the same rates obligations.
As part of compliance monitoring, the City may source occupancy and availability data directly from short-term letting platforms to determine the primary use of a property. Where data indicates that a residence is being used predominantly for commercial short-term letting, the City will engage with the property owner regarding the appropriate rates category.
Per the release, the full draft of the by-law and details of the accompanying public participation process will be made available following Council procedures. Short-term letting operators, however, are encouraged not to wait for the by-law to be finalised but to proactively ensure they are correctly categorised under the existing Rates Policy.
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