Airbnb crackdown won’t solve Cape Town’s housing crisis

Cape Town’s proposed short-term letting rules have sparked a wider debate over housing affordability, tourism and investment, with industry leaders calling for faster development approvals, more housing supply and smarter regulation.

• Property developers warn that restricting Airbnb will not automatically deliver affordable housing without faster approvals, infrastructure and viable investment incentives.
• Communicare supports targeted regulation, distinguishing occasional home-sharing from commercial short-term letting that removes homes from the long-term rental market.
• Industry leaders want public land unlocked, stronger public-private partnerships and more affordable housing near transport, employment and essential services.

The Airbnb debate is really about housing supply

Will tighter regulation of Airbnb and other short-term letting platforms make Cape Town more affordable, or could it introduce additional costs without addressing the city’s underlying housing shortage?

That question is at the centre of a growing debate involving property developers, investors, social housing providers and business leaders following the public participation process for the City of Cape Town’s proposed Short-Term Letting (STL) By-law.

While the proposed regulations aim to improve oversight of short-term accommodation, industry stakeholders argue that restricting holiday lets alone will not resolve the shortage of affordable, well-located homes.

The debate has implications far beyond tourism. Rising housing costs affect workforce mobility, recruitment, household finances and the operating costs of businesses seeking to attract and retain employees.

For property investors, the outcome could also influence rental strategies, development feasibility and the economics of furnished accommodation.

Developers: Build more homes, don’t just regulate existing stock

John Jack, CEO of Galetti Corporate Real Estate, believes Cape Town risks focusing on the symptoms of its housing shortage rather than the underlying supply constraints.

“I think we need to be careful that we don’t end up trying to regulate our way out of what is fundamentally a housing supply problem,” says Jack.

He acknowledges the need to examine how short-term letting affects residential availability but argues that the bigger opportunity lies in removing obstacles to new housing development.

“I understand the thinking behind the STL bylaw, and there is a conversation to be had around how short-term letting impacts residential stock availability. But the much bigger question is why we aren’t making it easier for developers to build more homes in the first place.”

According to Jack, development feasibility depends on a relatively straightforward financial calculation: the achievable selling price must cover land, construction, funding and other development costs while providing an acceptable return for the risk involved.

He suggests that developers typically seek margins of approximately 15% to 20%, depending on the project. Without sufficient returns, developments struggle to attract capital.

“The City could have a meaningful impact if it released land, sped up approvals, put bulk infrastructure in place, and generally made it easier for private capital to operate. Government doesn’t necessarily need to build the houses, it needs to enable everyone else to build them,” Jack says.

He points to a development pipeline of approximately R12 billion, which he says is concentrated largely at the upper end of the market.
For Jack, the priority should be unlocking thousands of additional homes rather than simply changing how existing properties are used.

Unlocking public land for Affordable Housing

Jeremy Wiley, Chairman of the Cape Chamber’s Real Estate and Construction Sector Portfolio Committee, believes a coordinated housing strategy involving government and private capital is essential.

He argues that national, provincial and municipal authorities control strategically located land that could be used for affordable and social housing developments.

Potential partners include commercial banks, public housing finance agencies, community housing organisations and private developers.

“National, provincial, and municipal government hold well-located public land that should be made available for social housing developments, planned in partnership with private sector entities,” Wiley says.

He identifies major land parcels such as Wingfield, Youngsfield, Culemborg and Paardevlei in Somerset West as potential opportunities for medium- to high-density residential development.

Properly planned, these locations could accommodate a mix of freehold, sectional-title and leasehold housing close to transport routes and public amenities.

Wiley argues that a long-term housing programme would deliver benefits beyond additional residential units, including construction employment, skills development and the creation of household assets.

For Cape Town’s business community, more accessible housing could also reduce the distance between where people live and where they work.

Why Airbnb restrictions won’t automatically create affordable homes

Deon van Zyl, Chairperson of the Western Cape Property Development Forum (WCPDF), challenges the assumption that restricting short-term letting will automatically redirect developers towards affordable housing.

“The common perception is that if developers cannot build for short-term letting, they will magically develop affordable housing or that affordable housing will magically become less costly. This is simply not the case,” he says.

Developers allocate capital according to achievable returns, development costs and risk. Affordable housing often carries additional challenges, including infrastructure costs, limited end-user affordability and financing constraints.

Where these risks cannot be adequately priced into a development, private investors may pursue other property sectors instead. Van Zyl argues that meaningful affordable housing delivery requires a framework in which government and society share some of the risks that private developers cannot reasonably absorb.

He also warns that additional taxation or operating costs imposed on short-term accommodation could ultimately be passed on to visitors, potentially affecting Cape Town’s tourism competitiveness.

His preferred approach is a structured subsidy and incentive framework that makes affordable housing development financially viable.

What Cape Town’s proposed Airbnb rules mean

The City’s draft Short-Term Letting By-law seeks to establish a more formal regulatory framework for properties offered through platforms such as Airbnb. The proposals described during the public participation process include:

• Mandatory municipal registration for short-term letting operators.
• Compliance requirements relating to relevant health, safety and building standards.
• Platform obligations intended to improve transparency and regulatory oversight.
• A proposed 50% annual room-night threshold to help distinguish occasional home-sharing from more intensive commercial accommodation use.

An important issue raised during consultation is how the proposed threshold should be measured. Property stakeholders have questioned whether the number of nights a property is advertised as available, rather than the nights actually booked, should determine its treatment.

For example, a three-bedroom property has a theoretical annual capacity of 1,095 room-nights. Under an availability-based calculation, listing it for more than half that capacity could potentially trigger different regulatory or rates treatment, even if actual bookings are significantly lower.

That distinction matters because availability does not necessarily translate into rental income.

The by-law remains a proposal in the material considered here. The final adopted provisions, commencement dates and any municipal rates implications must be confirmed before investors make decisions based on the proposed framework.

Communicare: Regulation Must Target the Real Housing Pressure

While some property developers and tourism stakeholders have raised concerns about additional regulation, Communicare, a major Western Cape social housing provider, has welcomed the proposed framework in principle.

However, the organisation argues that regulation should be more precise and proportionate.

Its central concern is the distinction between occasional home-sharing and commercial-scale tourist accommodation that removes properties from the conventional residential rental market.

Communicare believes a blanket approach could fail to address the neighbourhoods experiencing the greatest housing pressure.

Instead, it proposes using information collected through municipal registration to identify where short-term letting is most concentrated and where its impact on housing availability is most significant.

This could include examining:

• The location and concentration of short-term letting properties.
• Whether entire homes or individual rooms are being rented.
• The relationship between short-term accommodation activity and local rental affordability.
• Evidence of tenant displacement and pressure on long-term housing supply.

Communicare also cautions against relying solely on the proposed 50% room-night threshold, arguing that it may not adequately reflect the realities of different neighbourhoods and property uses.

Its position introduces an important counterpoint to the development industry’s concerns: while increasing housing supply is essential, the use of existing residential stock also matters in areas facing acute affordability pressures.

The City’s Response: Housing Needs Extend Beyond Airbnb

The City of Cape Town has emphasised that its property portfolio must accommodate competing priorities, including housing provision, economic development, community facilities and environmental protection.

In comments provided in response to Cape Chamber queries, the municipality outlined its approach to delivering housing through both public and private-sector programmes.

These include informal settlement upgrading, Breaking New Ground housing, gap-market housing, small-scale rental units and affordable housing initiatives.

The City acknowledges that many households cannot access conventional mortgage finance without some form of public support.

Its affordable housing programme targets households earning less than R34,400 per month, according to the City’s comments.

This illustrates the scale of the challenge: Cape Town needs housing solutions across multiple income categories, not only additional properties for sale or rent at prevailing market prices.

What Property Investors Should Watch

For residential investors, developers and short-term letting operators, the debate raises three important strategic considerations.

First, regulatory risk must be built into investment feasibility. Owners considering furnished or holiday accommodation should test returns against possible registration requirements, rates changes, compliance costs and realistic occupancy levels.

Second, gross rental income is not the same as investment performance. Higher nightly tariffs can be offset by vacancies, cleaning, management fees, maintenance, furnishing costs and regulatory expenses.

Third, housing supply remains a fundamental investment issue. Well-located, appropriately priced residential developments near transport and employment centres could help meet genuine demand, provided land, infrastructure, finance and planning conditions support viable delivery.

Investors should assess the actual economics of each property rather than assume that either long-term letting or short-term accommodation will always deliver the better return.

The Way Forward: More Housing and Smarter Regulation

Cape Town’s Airbnb debate should not be reduced to a choice between protecting tourism and providing affordable homes.

Both are important contributors to the city’s economy.

The challenge is to create a regulatory environment that recognises the legitimate role of short-term accommodation while addressing the loss of residential stock where it contributes to housing pressure.

At the same time, government and industry must tackle the structural barriers that prevent new housing from reaching the market.

Faster planning approvals, access to well-located public land, bulk infrastructure investment, targeted incentives and effective public-private partnerships are all part of the solution.

The strongest outcome would combine proportionate, evidence-based short-term letting regulation with a credible programme to expand housing supply.

Cape Town cannot regulate its way out of a housing shortage. But it also cannot ignore how existing homes are being used. The real opportunity lies in getting both sides of the equation right.