Cape Town Airbnb Rates: New By-Laws & Tax Hikes Explained

Cape Town to Reclassify Short-Term Rentals, Potentially Raising Rates

Cape Town is moving to reclassify properties used primarily for short-term rentals, like those listed on Airbnb and Booking.com, to ensure they pay commercial property rates rather than residential rates. The move, detailed in a draft by-law currently undergoing public participation, aims to address concerns about housing availability and level the playing field between short-term rental operators and traditional hotels.

The City of Cape Town has clarified that the proposed changes do *not* introduce a new tax or a general tax increase. Instead, the by-law seeks to improve compliance with existing rates policies. Currently, some property owners are reportedly operating commercial short-term letting businesses while paying the lower residential rates, a practice the city aims to curtail.

According to a statement released by the city on Monday, February 9, 2026, all premises primarily used for commercial accommodation, including short-term rentals, are already required to pay commercial property rates. The proposed by-law is intended to make it more difficult for owners to avoid this requirement.

The potential impact of the reclassification is significant. While primary residences occasionally used for short-term letting and long-term rentals where the tenant uses the property as their primary home will continue to pay residential rates, properties operated primarily as commercial short-term letting businesses could face substantial rate increases. These increases would stem from the shift from residential to commercial rates, not from a new tax.

Reports indicate that the rate hikes could be as high as 135%, a figure initially reported as a “tax hike” that the city is now actively correcting. Mayor Geordin Hill-Lewis has stated that the move is partly intended to ease pressure on the city’s housing market.

The city’s existing Rates Policy already mandates commercial rates for commercial accommodation. The proposed by-law is designed to address what officials describe as instances of property owners “gaming the system.”

As of September 2025, Cape Town had approximately 26,484 Airbnb listings, highlighting the scale of the short-term rental market in the city. The changes are expected to significantly alter how platforms like Airbnb and Booking.com operate within Cape Town.

The draft Short-Term Letting By-Law is now open for public participation, allowing stakeholders to provide feedback on the proposed changes. The city has not yet announced a timeline for the finalization and implementation of the by-law.