Airbnb storm brewing in South Africa

South Africans are locked in a debate over the positive and negative impacts of the proliferation of the short-term rental market in the City of Cape Town.

The Western Cape as a whole has had the highest rents in South Africa since 2016, and according to data collated by PayProp, the average rental cost in the province is R10,673 – 21% higher than the national average.

While prices go up, Cape Town’s short-term rental sector in particular is soaring, boasting properties on the likes of Airbnb, Booking.com and LekkeSlaap.

The biggest platform for the short-term rental market, Airbnb, has 23,564 active listings across the City, surpassing the number sported across numerous popular tourist destinations like San Francisco (7,888), Amsterdam (9,310), Athens (13,274), Berlin (13,759), Sydney (15,548), Tokyo (16,518) and Barcelona (18,925).

Its proliferation in the Mother City is linked to the city’s booming tourism sector and increased realisation of the lucrativeness of the opportunity.

According to research from the short-term rental platform, in 2023, Airbnb hosts in Cape Town welcomed over 700,000 guests, contributing approximately R14.4 billion to GDP, supporting 42,000 jobs and generating R7 billion in labour income.

A typical host earned R74,000 in the year and almost half rely on this income to manage living costs, with many feeling pressured to host more due to the economic climate.

However, some critics have argued that this is linked to “tourism gentrification” of the Mother City.

Very broadly, tourism gentrification refers to the process where an influx of tourists staying in short-term rentals leads to the transformation of a neighborhood, often resulting in rising property values and living costs that price out locals.

The Sunday Times recently reported that the listings boom in Cape Town is drawing flak from residents who say that they are being priced out of their city.

However, the issue of gentrification is more complicated in Cape Town, a tourism-dependent city that is seeing ever-increasing housing demand and a lackluster proliferation of new housing supply.

The recent research from Airbnb says that its listings make up only 0.9% of the city’s formal housing units and less than 1.5% of the number of additional housing units needed to meet growing housing demand over the next four years.

However, it still makes up much of the city’s overall available rental market.

Data analyst Melville du Plessis outlined that the availability of short-term Airbnb, booking.com, and LekkeSlaap rentals significantly outstrips that of long-term rentals.

Looking at costing, du Plessis said that the proliferation of short-term rentals targeted for tourists due to its lucrativeness “inflates rental prices to a point where locals can’t compete.”

For example, using the Big Max index shows that the rental cost of a studio in Cape Town is among the highest in the world.

He also compared the average price for all long-term rentals in suburbs around Cape Town and converted it to a daily rate.

The daily rate for short-term rentals is exponentially higher than that of a long-term rental, which he said has contributed to its boom.

However, Airbnb refutes this.

According to the group’s research, “if dedicated rentals hosted on Airbnb were suddenly added to long-term rental supply (an unrealistic assumption), it would lead to an average reduction in rent of only R69 per month.”

“Despite rising rents, the number of active listings has not significantly increased since 2020, indicating little correlation between Airbnbs and rent hikes,” it added.

Du Plessis said that he is “not hating on Airbnb, and tourism is good for the economy… [but] the scarcity of available, and affordable, long-term rentals [in Cape Town] is a problem.”

“It is arguably a direct consequence of the fact that it is more often than not more lucrative for an owner to offer their apartment for short-term rental through companies like Airbnb, than it is to offer it as a long-term rental.

“There must be some regulation around this, where both local residents and businesses benefit [and] I do think there needs to be a discussion between all stakeholders,” he said.

Short-term rental regulation

The rise of Airbnb has prompted significant regulatory responses in various cities due to public pushback. In Barcelona, for example, communities protested short-term rentals, arguing they displace local businesses and raise living costs.

In response, Mayor Jaume Collboni announced a ban on short-term rentals starting in 2028, with plans to convert 10,000 short-term apartments back into long-term housing.

In 2023, Airbnb signed a memorandum of understanding with the Department of Tourism to develop a collaborative relationship aimed at promoting tourism.

Minister Patricia de Lille emphasized that better access to Airbnb data is crucial for informed policy-making, as the short-term rental sector lacks regulation.

The Department of Tourism is developing regulations for this sector, proposing a differentiated regulatory system and improved reporting frameworks. Among the proposals is giving the Minister of Tourism the authority to set limits on rental bookings.

Airbnb has urged the government to establish a national host registration system to enhance oversight and provide better data for regulatory measures.

“In South Africa, there are myriad factors contributing towards housing supply and affordability challenges, which include the spatial legacy of apartheid, the rate of housing construction, and semigration, to name a few,” said Airbnb.

It stated it wants to help local authorities regulate short-term rentals effectively and is advocating for balanced, evidence-based regulations, including data sharing for local oversight.

“[Airbnb] believes regulation, if it’s simple, if it’s appropriate, and if it’s proportionate, can be a really good thing,” for both the market and communities, Middle East and Africa regional lead Velma Corcoran previously told MyBroadband.

However, it cautioned against “hastily formed regulations” that do not consider the broader impacts of the entire value chain.

“Eliminating the revenue earned through Airbnb would be a major economic blow to these hosts, in some cases undermining their ability to afford to live in the area,” said the company.

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