Internet15.01.2025

Good news for Airbnb in South Africa

Cape Town is increasing the supply of dwellings in the city to address its lack of affordable housing, a problem that has been attributed to Airbnb. This resulted in significant criticism of the short-term rental platform.

News of Cape Town’s plans to develop more housing comes after mayor Geordin Hill-Lewis said the best way to deal with rising rental costs is to regulate the supply side of the problem rather than the demand side.

The city is Airbnb’s most popular destination in South Africa and helps accommodate numerous tourists and digital nomads every year. It has also created over 100,000 jobs so far, according to Hill-Lewis.

He highlighted this when addressing criticism that the influx of digital nomads increased long-term rental prices.

However, Hill-Lewis said that while demand — increased by digital nomads — may be inflating long-term rental prices for properties in and around the CBD, the issue needs to be solved on the supply side.

He believes that the city’s lengthy construction approval processes are to blame for an inconsistent supply of affordable dwellings and that manipulating regulations should not be considered.

MyBroadband contacted the City of Cape Town (CoCT) to determine whether they took the same stance regarding short-term rentals and platforms like Airbnb, which has also been blamed for pushing up long-term rental prices.

“Various initiatives are underway to release well-located municipal land for affordable housing,” the metropolitan municipality told MyBroadband.

“This also incentivises small-scale developers to deliver safe, compliant affordable housing, including discounting development charges in 194 areas of highest demand.”

The land parcels in the city’s affordable housing pipeline are expected to deliver more than 12,000 “well-located residential opportunities across the metro.”

It has also released sites yielding over 4,200 affordable units over two years as part of its Mayoral Priority programme for land release for affordable housing.

While acknowledging the increase in long-term rental costs, Hill-Lewis noted that areas particularly affected by inflated prices, such as the CBD and surrounds, are popular because of convenience but not the only areas to reside in Cape Town.

However, while this is true, the metro was listed as the fifth most congested city in the world, according to the 2024 INRIX Global Traffic Scorecard.

To mitigate this, Cape Town said it is investing R444 million into congestion relief projects over its current three-year budget cycle.

Cape Town’s MyCiti bus service also operates over 40 routes across parts of the metro, offering an alternative to private transport.

While many parts of the city remain excluded from this service, the CoCT is investing in its expansion.

“The City is further expanding the MyCiTi service through transformative flagship projects like the R6.3-billion new MyCiti Bus route development to link Khayelitsha and Mitchells Plain with Claremont and Wynberg,” the City of Cape Town said.

It also plans to make rail the backbone of its public transport service, with detailed business plans for the takeover of Metrorail expected by mid-2025.

Airbnb facing regulation

One of the primary reasons Airbnb has been blamed for creating a supply shortage in the city is that property owners have been incentivised to list their dwellings because it is more economically appealing than renting them out as long-term rentals.

Data analyst Melville du Plessis found that, when comparing the average daily rate, short-term rentals prove far more lucrative when looking at the difference in return between the two markets.

When looking at the monthly return of short-term rentals and assuming a 50% occupancy rate, only three of the ten suburbs around the Cape Town CBD offer a higher income from long-term rentals.

There is also an evident trend of speculators and investors paying a premium for a property because of the potential returns it yields if turned into an Airbnb, says Only Realty Property Group, Grant Smee.

To solve these issues, Airbnb, which has advocated for the government to regulate its own platform for some time, has been involved in formulating such regulations.

Two proposed regulations are limiting the number of nights owners can rent out their property on a short-term basis and creating a national registry of all short-term rentals.

Cape Town’s current attention to the supply side indicates that short-term rental platforms may not be subject to heavy government regulation.

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