Short-term letting on Cape Town's Atlantic Seaboard has run for years with little formal regulation. That is changing. The City of Cape Town has signalled tighter rules on how short-term rentals are rated, and national government has published a draft code that could standardise the sector. Here is a clear, current explainer of where things stand and what they mean for your rates and returns.
What the City of Cape Town has proposed
The City has been clear that it is not introducing a new tax. Its position is that its existing Rates Policy already requires any property used primarily as a commercial accommodation business, including short-term letting, to pay commercial property rates rather than the lower residential rate. The proposed Short-Term Letting By-Law is a compliance measure: a way to identify properties run as businesses but still rated as homes, and to apply the correct category.
To do that, the City intends to draw on availability and occupancy data from booking platforms such as Airbnb and Booking.com, and to engage directly with owners whose data suggests they should be rated commercially.
The 50% availability test
The clearest detail from the draft 2026/27 Rates Policy is a threshold. If the share of nights a property's bedrooms are made available for short-term letting exceeds 50% over a 365-day period, the municipal valuer may classify the property as "business and commercial". Below that line, a property used mainly as a residence, or let on a long-term basis, continues to be rated residentially.
A home listed for most of the year sits well over the 50% line. A home let only across the summer peak may sit comfortably under it. The difference in the rates bill can be significant, which makes your availability ratio a number worth managing deliberately.
The City has stressed the intention is not to penalise someone letting a cottage or spare room part of the year, but to address properties operating at genuine commercial scale.
The national picture
Alongside the City's process, the national Department of Tourism has published a draft Code of Good Practice for Short-Term Rentals for public comment. In its current form it is voluntary, but it signals the direction of travel: standards closer to those applied to hotels and guesthouses, and the possibility, raised in commentary, of future measures such as annual caps on letting days. None of this is settled law, but owners planning ahead should assume the environment will become more regulated, not less.
What this means for your property
Two practical consequences follow. First, fixed costs may rise. A property reclassified to commercial rates carries a higher monthly rates bill regardless of performance, which makes occupancy and nightly rate matter more, not less. Second, records matter. Availability ratios and booking history are now relevant to how a property is rated, so owners who keep clear records and manage their calendar deliberately are in a far stronger position.
What owners can do now
- Check your current rates classification against how your property is actually used.
- Estimate your availability ratio over the past year relative to the 50% mark.
- Model what a move to commercial rates would do to your monthly costs.
- Keep proper records of bookings, availability and income.
- Take professional advice on rates and tax specific to your property.
Where things stand
As of mid-2026, the amended Rates Policy has been through its public comment period, while the separate Short-Term Letting By-Law is still moving through the City's process, with its full text and public participation schedule expected to follow. Details may change before anything is finalised.
Good management positions you well for a tighter regime: deliberate availability, strong yield to offset higher fixed costs, and clean records. Veida Properties handles all of it. Request a free assessment, or read how we lift returns in our guide to property earnings.
This guide is general information reflecting publicly reported proposals as at June 2026. It is not legal, tax or financial advice. Rules are still being developed and may change. Confirm your property's rates classification with the City of Cape Town or a qualified professional.
