Cape Town responds to fury over 20% rate hikes

The City of Cape Town’s proposed 2025/26 budget has sparked some backlash, particularly regarding property rate increases for higher-valued homes.

Under the proposal, property rates for all residential, commercial, and industrial properties would rise by 7.96%, but owners of more expensive homes could face hikes of over 20%.

Speaking to CapeTalk, Cape Town Mayor Geordin Hill-Lewis defended the budget, citing large infrastructure investment, expanded policing, enhanced cleaning services, electricity price relief, and support for indigent and pensioner residents.

“There are larger than usual proposed increases for more valuable properties,” he said, calling it a necessary step to balance the books for these plans.

Hill-Lewis acknowledged the backlash, saying the issue had been a “major point of contact and communication” with residents, particularly those owning homes valued at R4 million and above.

Around 40,000 households fall in the R4 million to R7 million range, out of over 1 million rateable properties.

For homes above R7 million, increases could exceed 20%, while he said that the “huge majority” of households would see “very reasonable single-digit increases.”

Some properties in the R1 million to R1.5 million range might even see decreases, he said, while properties valued between R2.5 million and R4 million are expected to face “low double-digit” increases.

However, residents affected by higher hikes are voicing frustration. One homeowner facing a potential 25% increase on a R4 million property said:

“I don’t care that I’m paying lower rates in terms of the services I get than people in Johannesburg; I care about my monthly bill – and it’s going to go up by 25%.”

Hill-Lewis countered that comparison with other cities, arguing that Cape Town remained a “functional working city at the lowest cost in the country” while other municipalities saw services collapse.

Yet many residents feel the increases are unaffordable, especially without corresponding service improvements.

Some residents had bought their homes long ago and may be living without significant income to absorb large hikes.

They noted that while their property’s value had risen, their income had not, leaving them unable to cover a potential well over 20% hike.

A resident said: “It doesn’t matter how good the services are… there is no way I am able to afford this kind of increase. I can’t, I just can’t.”

Hill-Lewis said “the criticism that I’ve heard, and which I really wholeheartedly accept, is that not everyone in the R4 million to R7 million category is wealthy.”

‘Balancing investment and affordability‘

The city argued that the increases are necessary to fund vital improvements.

Hill-Lewis pointed to “significant improvements to services funded in this budget,” including cleaner beaches, regular cleaning of waterways, daily highway cleaning, and more community cleaning efforts.

Additionally, the budget funds over 500 extra law enforcement officers being deployed evenly across wards – an “enormously expensive exercise” aimed at improving safety, he said.

He said “record-breaking South African infrastructure investment” of R39.7 billion over three years, addressing ageing water systems, road congestion, and sewerage.

“These enormously expensive projects must be funded if we’re to avoid the kind of infrastructure collapse seen in other cities,” he warned.

Cape Town’s budget pressures have been compounded by national funding cuts. The mayor noted that national grants to the city had been slashed by R2.5 billion over time, though not in a single year.

The budget employs a cross-subsidisation model, with “the more valuable properties dialled up to protect the poorer families” living in properties valued under R2.5 million.

Hill-Lewis said this was necessary due to National Treasury requirements that utility services must be financially self-sufficient rather than subsidised by property rates.

He rejected calls for a flat fee model for services like waste, saying it was not “justifiable in the context of South Africa,” where a quarter of rateable homes are valued under R1 million, and many informal settlement residents fall outside the rates system.

In response to affordability concerns, the city has proposed several relief measures.

He said this includes reducing the cross-subsidisation in the citywide cleaning tariff for homes in the R4 million to R7 million range, introducing additional rebates for this group, and increasing the pensioner rebate from R22,000 to R27,000.

Hill-Lewis said modelling showed these “softening measures” could reduce monthly increases by “several hundred rand” from what might otherwise have been around a R1,000 rise.

Despite this, increases are still expected, prompting ongoing concerns about affordability and the risk of residents defaulting on payments.

While aware of the political risk ahead of next year’s local elections, Hill-Lewis said “not to the extent where I’m going to allow an irresponsible decision for the future of the city that puts at risk the success that we’ve built here.”

He reiterated that the priority was to make the investments needed to ‘guarantee Cape Town’s continued functionality and prosperity.’