Cape Town’s Airbnb Reevaluation Raises Concerns Over Property and Tourism Effects

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JEREMY MAGGS: It appears Cape Town is re-evaluating the classification of short-term rental properties, with certain Airbnb-like residences potentially being viewed more as commercial entities than standard residential properties.

The city cites equity as a rationale; however, the property industry is raising red flags, cautioning that this could harm homeowners, the tourism sector, and investment stability. This has the potential to spiral into a major dispute.

Here with me is Craig Mott, the national sales manager at Rawson Property Group. Welcome, Craig. While the city professes to seek fairness, you think the proposal might be misdirected. How so?

CRAIG MOTT: Absolutely. I think the proposal risks oversimplifying what defined commercial usage entails.

Not all short-term rentals are the same. Some large operators manage multiple properties as businesses, while ordinary homeowners may rent out a single room to augment their income.

Implementing a uniform commercial rate could unintentionally penalize occasional hosts instead of addressing genuine commercial entities.

The concern lies not in the objective, but in whether the policy can be effectively fine-tuned to realize that objective fairly.

JEREMY MAGGS: Is there a clear demarcation between a homeowner earning extra income and someone overseeing a larger commercial accommodation business? Has that line been drawn?

CRAIG MOTT: That is indeed the crux of this issue we face—how do we differentiate the two? Is it about the rental length, whether the owner resides on the property, or the number of units owned?

Read: Short-term rentals transition from seasonal ‘gold rush’ to long-term property investment.

This categorization is intricate, and it’s vital for the city to strike the right equilibrium in assessing this situation and determining who will be impacted.

Is it merely an ordinary homeowner renting out a room, or are we looking at someone running a more commercial operation?

JEREMY MAGGS: How would you even go about assessing that? It must be quite difficult for the city to accurately determine how often a property is rented.

CRAIG MOTT: Yes, they will likely rely on external data sources and platforms like Airbnb and Booking.com, using their data to evaluate how many nights a year a property has been rented. Hopefully, they can accurately aggregate that information.

It’s crucial that they gather the right data and ask the right questions to discern whether it’s a homeowner or a commercial operation. This heavily hinges on comprehensive data from these platforms.

JEREMY MAGGS: Is that information readily available?

CRAIG MOTT: That’s the pivotal question. I anticipate there could be some contention regarding data sharing. However, I believe all platforms will cooperate, as it’s a regulatory necessity. We’ll see how it unfolds.

JEREMY MAGGS: On a broader scale, do you see a risk that general homeowners might face penalties for just trying to cope with rising bond and municipal costs?

CRAIG MOTT: Yes, I fear so, particularly if the regulation is misinterpreted; this concern is indeed valid.

Homeowners rely on this income, especially with soaring interest rates and living expenses. If they are penalized for seeking financial assistance, it could have severe repercussions.

JEREMY MAGGS: If taken to its extreme, could this drive some homeowners out of the short-term rental market entirely? Surely that would affect Cape Town’s tourist accommodation supply, particularly during high seasons?

CRAIG MOTT: Certainly. I firmly believe this will reduce the number of short-term rental options.

This could also drive up prices for tourists visiting the city.

I am convinced this will negatively impact the tourism ecosystem, as we require a range of accommodation choices to serve this sector.

JEREMY MAGGS: To your knowledge, how much resistance is currently being directed at the City of Cape Town?

CRAIG MOTT: There is definitely opposition, primarily from short-term rental management companies whose revenue may be affected. Homeowners are voicing their concerns too, as many have designed their investment strategies around short-term rental ownership.

Therefore, I expect considerable resistance.

Ultimately, the objective should be balance. It’s essential to have regulations that ensure fairness and proper management of this sector, alongside reliable measurement mechanisms.

Listen/read:
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Regulation could be introduced positively, but anticipate considerable pushback from homeowners and property owners in the short-term rental market.

JEREMY MAGGS: As things stand, this proposal appears to add another facet of bureaucracy to an already stretched property market.

CRAIG MOTT: Absolutely. This will involve extensive compliance requirements. I recommend that homeowners and property owners assess their properties, consider the potential income implications from this regulation, and formulate future strategies accordingly.

JEREMY MAGGS: Do you think that full-time Airbnb investors should be distinguished from family homeowners?

CRAIG MOTT: Yes, particularly in instances of multiple property ownership. Regulation is warranted, as they are benefitting from residential rates in what is essentially a commercial environment.

JEREMY MAGGS: So you support some form of regulation, Craig. What might a fairer and more actionable policy look like? Has the industry contemplated this?

CRAIG MOTT: That’s an excellent question. We need a system for fair measurement that ensures transparency and certainty in evaluating these situations. However, what this entails is not precisely clear.

The current goal should be to safeguard the single homeowner renting out a room, ensuring they aren’t disproportionately penalized, while concentrating regulation more on commercial entities with multiple units.

Yet, defining this boundary and determining how to measure it accurately is rather complex.

JEREMY MAGGS: Do you have any insight into a timeline for implementation?

CRAIG MOTT: They are proposing a 12-month period. It seems this timeframe could indeed hold, but we’ll need to keep a watch on the progression.

Listen: Airbnb vs housing: Cape Town ponders regulation.

The by-law for enforcing this policy is in place and will require public input and council ratification, estimating a timeline of around 12 months.

JEREMY MAGGS: Is there considerable concern regarding this issue that may result in legal challenges?

CRAIG MOTT: Yes, I see the potential for that. If there’s significant backlash from the public and the industry, it could very well lead to court action.

JEREMY MAGGS: Thank you very much, Craig Mott, national sales manager at Rawson Property Group.