To BnB or not to BnB? Why Cape Town's housing debate matters for business

As public comment closes on the draft Short-Term Letting Bylaw, property stakeholders warn that rising property prices directly impact workforce mobility and business overheads—urging municipal officials to focus on unlocking housing supply alongside any proposed platform regulation.

Clamping down on Airbnb and other short-term letting (STL) platforms will not resolve Cape Town's housing shortfall. 

That is according to building sector stakeholders responding this week to Cape Chamber queries regarding the City's draft Short-Term Letting Bylaw, currently under consideration following a period of public participation. Industry voices argue the municipality should prioritise making it easier for developers to build homes. 

“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,” commented John Jack, CEO of Galetti Corporate Real Estate, one of several voices calling for accelerated development approvals to spur housing delivery. 

“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.” 

Jack emphasized that development economics are straightforward: “A developer works backwards from what someone is prepared to pay for a property, deducts the land, construction, funding, and other overheads, and calculates the margin. If that profit level doesn't sit at 15–20%, the project is simply not viable.

“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 said. 

He added that Cape Town's current development pipeline stands at around R12 billion -- but mostly at the top end of the market, which does not directly address the shortage of affordable housing. “I'd much rather see us discussing how to unlock another 10,000 homes in Cape Town than how we shuffle around the existing stock.” 

Jeremy Wiley, Chairman of the Cape Chamber's Real Estate and Construction Sector Portfolio Committee, noted that the provision of affordable housing is largely driven by policy and public-private partnerships, rather than short-term letting:  “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—including public housing finance agencies, commercial banks, community housing groups, and private developers,” Wiley said. 

“The proper planning and development of medium- to high-density ‘Garden Cities’ on major, strategically located tracts of land such as Wingfield, Youngsfield, Culemborg, and Paardevlei in Somerset West would significantly boost the quality and quantity of well-located freehold, sectional title, and leasehold housing close to public transport and public amenities.” 

Wiley added that a structured, collaborative housing policy would build long-term construction skills, create sustainable employment, and build capital assets for the city's residents. 

Deon van Zyl, Chairperson of the Western Cape Property Development Forum (WCPDF), cautioned against the misconception that developers prevented from building STL properties would automatically pivot to 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,” van Zyl explained.

“A developer builds for clients who can deliver a fair return on the cost and risk incurred. Removing one option from the table means they will naturally gravitate toward other property types that still provide an acceptable return."

“Unfortunately, affordable housing comes with complexities and costs that cannot easily be recovered from the end user. The perceived risk is therefore higher than in STL developments. Because higher risk requires higher profit margins, conventional developers will shy away from affordable housing unless society shares that risk premium.” 

Van Zyl added that taxing short-term letting raises operational costs, which are inevitably passed on to end users: “Taxing STL increases operational overheads and drives up prices for tourists. If costs rise too high, tourists will walk away.  “The choice before us is clear: either restrict STL and increase costs for tourists, or establish a proper subsidy framework that incentivises developers to enter the affordable housing market.” 

Under the City’s proposed STL By-law, operators would face a new regulatory framework featuring mandatory municipal registration, compliance with health and building standards, and a baseline 50% annual room-night occupancy threshold designed to distinguish casual home-sharing from full-time commercial operations.

While property developers and tourism bodies have expressed reservations about added red tape, leading Western Cape social housing company Communicare—which develops and manages affordable rental housing across the metro—has welcomed the initiative in principle while calling for greater regulatory precision.

In its submission, Communicare welcomed the City of Cape Town’s draft Short-Term Letting (STL) By-law, but cautioned that the framework must pivot toward more targeted, proportionate measures in areas where severe housing shortages and displacement pressures are demonstrably concentrated.

While supporting the City’s objectives around mandatory registration and transparency, the social housing institution argued that a blanket, one-size-fits-all approach fails to address the complex realities of the urban housing market. Communicare stressed that regulatory intervention should explicitly differentiate between genuine primary-residence home-sharing and full-time, commercial-scale tourist accommodation units that permanently remove residential stock from the long-term rental pool.

The submission noted that relying solely on a broad 50% annual room-night occupancy threshold is insufficient to capture the true dynamics of housing supply strain. Instead, Communicare recommended that data gathered through the proposed municipal registration system—such as property locations, whole-home versus partial letting, and neighborhood clustering—be directly cross-referenced with rental affordability and tenant displacement metrics.

In its comments on local property dynamics, the City has emphasised the need to balance property uses within its property portfolio: "These uses are typically for community development, economic enablement, environmental protection, and housing provision," the City said in response to Chamber queries earlier this year.

"For properties within the human settlements pipeline, the City’s intent is to leverage the properties for housing delivered by both the private and public sector," the City said.  "Cape Town’s property market presents a diverse demand for housing. As such, the City attempts to balance a range of housing needs within the property portfolio, from grant funded programmes of informal settlement upgrades and Breaking New Ground (BNG) top structure delivery to housing provided by the private sector via the GAP housing programme, Small Scale Rental Units, and Affordable Housing."

"The City administers a diverse/ extensive housing programme because it is aware that many people in Cape Town won't qualify for a bond without some support from the municipality; either through the direct provision of a structure or through working with the private sector to incentivise affordable housing delivery.  The affordable housing programme target income earners who, as a household, earn less than R34 400 per month."