Cape Town’s Airbnb rethink raises concern over property and tourism

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JEREMY MAGGS: Now, as I understand it, Cape Town wants to look again at how short-term rental properties are rated, with some Airbnb-style homes potentially treated more like commercial businesses than ordinary residential properties.

The city says it’s about fairness, but the property industry is warning, and warning quite hard, that it could hurt homeowners, tourism supply and investment certainty. It has the potential to become a really contentious issue.

Craig Mott is the national sales manager at Rawson Property Group and joins me now. Craig, a very warm welcome. The city says it’s about fairness, but you believe, if I understand this, that the proposal may miss the mark. In what respect?

CRAIG MOTT: One hundred percent. I think the proposal risks being too broad in how it defines commercial use.

Not all short-term rentals are the same. You’ve got large-scale operators that are running multiple units like businesses, but you also have ordinary homeowners renting out a room in their property and using the income from that to supplement their income.

If you apply a blanket commercial rate across the board, you risk penalising the smaller occasional participants rather than the true commercial operators.

The concern isn’t really the objective, it’s whether the policy is precise enough to achieve that objective fairly.

JEREMY MAGGS: Is there a line, then, between a homeowner earning extra income and someone running a bigger commercial accommodation business? Has that been determined?

CRAIG MOTT: That’s the question, I think that’s the core issue that we are worried about at the moment – how do you draw that line? Does it come down to the number of days rented or whether the owner actually lives on the property or the number of property owners?

Read: Short-term rentals move from seasonal ‘gold rush’ to long-term property play

I think that’s where this becomes quite tricky and it’s very, very important that the city gets the right balance when it comes to assessing this and determining who will be impacted in this.

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Is it just the ordinary homeowner renting out a room, or is it people who are running a more commercial operation?

JEREMY MAGGS: How, in fact, do you assess that, I wonder? It would be difficult, surely, for the city to reliably know how often the property is being let out?

CRAIG MOTT: Absolutely. They’re going to be looking at third-party data supply and looking at listing platforms like Airbnb and Booking.com and relying on data from them to determine how many nights per year the property has been rented. So hopefully they can get that data mix correct.

They can get the right data and ask the right questions in determining whether it’s for a homeowner or whether it’s a commercial enterprise. It’s going to rely strongly on rich data from those suppliers.

JEREMY MAGGS: And that data is freely available, is it?

CRAIG MOTT: That’s the question. I would imagine that there’s going to be some contention around the sharing of that data. But ultimately, I believe all the platforms will comply and will provide it. They’re going to have to; it’s a regulation. So yeah, we’ve got to see what comes.

JEREMY MAGGS: More broadly, do you think there’s a danger here, a risk, Craig, of ordinary homeowners simply being punished for trying to cover rising bond and municipal costs?

CRAIG MOTT: Yes, I think there is, if the regulation is taken out of context and it’s looked at incorrectly, I definitely think there is.

These homeowners are reliant on this income, as you say, there are rising interest rates and cost of living has gone up, and they rely on the income from these properties to provide for them at the end of the day.

If they end up being penalised for that, it may well affect them quite seriously.

JEREMY MAGGS: So pushed to its logical conclusion then, this might push some owners out of short-term letting altogether. And this could have an impact on Cape Town’s tourism accommodation supply, surely, which we know at certain times of the year is in short supply?

CRAIG MOTT: Absolutely. I definitely think it will reduce the number of short-term rental units available.

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It may also push prices up for tourists visiting the city.

I definitely think it will impact the broader tourism ecosystem, and we need diverse accommodation options for that tourism sector. So I definitely think it will, yes.

JEREMY MAGGS: To the best of your knowledge, how much pushback is currently being levelled at the City of Cape Town?

CRAIG MOTT: I definitely think there is, certainly from the short-term rental management companies, their income could potentially be affected by this as well.

Homeowners are definitely pushing back and there are a lot of people who have built strategies around short-term rental ownership, and that forms a big part of their investment portfolio.

So I would imagine there’s going to be a lot of pushback.

But I think at the end of the day, the goal should be balance. We need regulation for this. We’ve got to regulate that portion of the market and ensure that it’s fair and that it’s managed correctly, and we measure it correctly.

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I think it could be done in the correct way. But definitely I think we’re going to have quite a bit of pushback from homeowners and property owners in the short-term space.

JEREMY MAGGS: As things stand at the moment, the proposal creates, I imagine, another layer of red tape in an already pressured property market.

CRAIG MOTT: Very much so. There’s a lot of compliance that’s going to come into this. I think for homeowners and property owners at the moment, the best thing you can probably do is get out there, assess your property, understand the effect that this could have on your income and determine your strategies going forward. I think that would be the best strategy at this time.

JEREMY MAGGS: Do you think full-time Airbnb investors, though, should be treated differently from families?

CRAIG MOTT: Yes, I think so, and especially in the case where you’ve got multiple property owners and things like that, I think it does need to be regulated and they are benefiting from residential rates, albeit commercial setup or commercial environments. So yes, I do think there should be regulation in that regard.

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JEREMY MAGGS: So you’re calling for some kind of regulation then, Craig. What would a fairer and more enforceable policy look like in that respect? Has the industry applied its mind to that?

CRAIG MOTT: It’s a good question. I think we need to be able to measure this fairly, and do it in a way that we can see what’s happening, where there is clarity, there is certainty on how we measure it. What that exactly could entail, I’m not 100% sure.

At this stage, hopefully it is the single homeowner who is renting a room in their property who won’t be penalised with something like this, and obviously getting more into multiple property ownership where it is more of a commercial enterprise.

But where that line is and how best to determine between the two, I think is a very tricky space.

JEREMY MAGGS: At this point, do you have any sense of timeline of implementation?

CRAIG MOTT: They’re talking about 12 months. It looks like it’s going to be 12 months, but we’re obviously going to have to see how it goes.

Listen: Airbnb vs housing: Cape Town considers crackdown

The by-law to enforce the existing policy is there. It must go through public participation and council approval and all that sort of thing but we’re estimating probably 12 months.

JEREMY MAGGS: Is there enough consternation about this particular issue to see it ending up in court?

CRAIG MOTT: Yes. I think there could well be. If there’s enough kickback from the public, if there’s enough kickback from industry, I definitely think it could end up in courts, yes.

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

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