Senior writer
Disgruntled renters in Cape Town have voiced concerns that rental prices are being inflated due to the surge in short-term rentals, such as Airbnb. There is a sense that the rise of short-term rentals has created a dearth of affordable properties for residents.
Cape Town Mayor Geordin Hill-Lewis has promised to work towards creating an equal playing field by adjusting tariffs for those who use their rental properties primarily as a business (rent to let) rather than offering occasional short-term rentals. This means that properties like Airbnbs would be reclassified from ‘residential’ to ‘commercial’ and pay an appropriate tax. Currently, these properties are taxed as if they were private houses, in the same way as those renting out a garden flat or rooms in their own home.
“The idea is simple,” said Hill-Lewis. “If you’re operating what essentially amounts to a small hotel, you should be taxed like a hotel.”
Senzo Nkala from the Department of Tourism has added his voice, saying that a framework for regulating these rentals is being considered to prevent large property owners from monopolising housing stock for short-term profit. However, it’s not just Cape Town that faces this challenge; it’s a problem across the country and the world.
Global practice
Among others, New York, London, and Barcelona have introduced restrictions on Airbnb lettings. Venice is yet another; here, natural persons can rent out an apartment for a maximum of 90 days per year and must maintain residence in the apartment (note that offering the apartment through platforms like Airbnb is considered the same as renting it out). In France, Portugal, and Spain, all short-term rentals are required to be registered with a specified authority, after which they are issued a registration number that must be displayed in all rental listings.
Tourist taxes are an interesting system. In Spain, for example, specific rates and collections vary depending on the rentals in certain areas, and where tourists are charged a tax per guest, per night. In France, the tourist tax is dependent on the municipality, if a star rating is applicable, and the time of year.
One of the starting positions of local and global governments in dealing with the short-term rental challenge is redefining what a short-term rental is. For example, Aviantio, a rental booking management software company, defines short-term rentals as “furnished accommodations rented out for shorter durations”, typically ranging from a single night to a few weeks. “They offer travellers an alternative to hotels, providing a more flexible and homey experience.”
By defining characteristics, Avianto says it is then easier to understand the legalities of short-term rentals and how regulations will apply, including zoning restrictions, registration requirements with local authorities, licensing procedures, safety standards, and tourist taxes. The point of all this is to ensure a fairer marketplace. In the absence of these, confusion and uncertainty will prevail.
It gets even more complicated in sectional title schemes
Grant Smee, CEO of Only Realty Property Group, adds that there is a further layer of complexity in South Africa when it comes to short-term letting properties – sectional title properties- saying that “Freehold property owners can act freely, while a different set of laws binds sectional title property owners.” He refers to complaints regarding noise, parking, property damage, and, most importantly, security in sectional title buildings.
“Body corporates have begun to implement short-term letting rules, and new regulations may force owners to adopt a long-term letting strategy in future.”
Only Reality highlights that, under the Sectional Titles Management Act (STSMA), property owners are obligated to inform the body corporate when they lease out their units, and the owners must ensure that tenants receive and adhere to the scheme’s conduct rules.
“A body corporate has the authority to establish and amend conduct rules that govern the use of individual units and common areas,” explains Smee. Body corporates may choose to impose a minimum lease period, such as six months, or ban short-term rentals entirely in rare cases. “However, these rules must be reasonable, applied equally to all property owners, and approved by the Community Schemes Ombud Service (CSOS).”
In addition to rental restrictions, body corporates may also implement strict record-keeping and rule dissemination policies. “At a municipal level, specific by-laws and regulations can influence the operation of short-term rentals, and therefore, it’s important that property owners clearly understand their zoning restrictions and whether they require special permission,” says Smee.
“Beyond municipal and body corporate regulations, the new regulations being developed by the government to further regulate short-term letting in South Africa may include mandatory registration, adherence to health and safety standards, and the payment of hospitality taxes.”
“Owning a short-term rental property remains an exciting opportunity, and with the right management, it can be highly successful despite evolving regulations. While security and other concerns are valid, staying proactive, informed and hands-on in the process is key to ensuring a smooth and profitable experience,” Smee says. With interest rates at a multi-year low, we anticipate more short-term rentals entering the market.
