Finding Balance in the Cape Town Housing Conversation

Cape Town's housing market is at a turning point, and short-term rentals sit right at the centre of the conversation. From our position in the Cape Town property market, we're seeing how platforms like Airbnb have fundamentally changed the game, creating real opportunities for some and adding genuine pressure for others.

In neighbourhoods from Sea Point to Observatory, flats that used to house long-term residents are now cycling through tourists week after week. This has tightened rental availability and pushed prices up, making it harder for young professionals and families to find homes in the city. Rental availability has become increasingly constrained, and it's affecting people's ability to live where they work and build lives in Cape Town.

Here's where the conversation gets more complex. For many homeowners, short-term rentals have become an essential income. The ability to let out a garden cottage or spare room during peak season helps people cover bond repayments, maintain their properties, and navigate uncertain economic times. Retirees on fixed incomes and families needing financial flexibility see short-term rentals as survival, not a lucrative side hustle.

Tourism is part of Cape Town's economic backbone. Short-term rentals give visitors authentic experiences in residential neighbourhoods, spreading tourism spend beyond the Waterfront and city centre. Local restaurants, coffee shops, and small businesses benefit directly, while creating work for property managers, cleaners, and maintenance teams. The economic ripple effects support livelihoods across the city.

Winter, however, exposes the short-term rental model's weak spot. When tourists disappear, short-term rental owners face months of empty properties and no income. Seasonal volatility raises a legitimate question. Is it sustainable to remove residential units from the permanent housing pool for what can be inconsistent returns?

Nick Gaertner, Chief Operations Officer of Knight Frank, Cape Town, weighs in:

“Cape Town continues to face a pronounced stock shortage, and we don’t anticipate this easing too much in the near future. Demand remains strong across both sales and rentals, particularly in lifestyle-driven areas, which has kept supply tight and competition high. Short-term rentals are adding value, but are largely concentrated in the high-season months, meaning they are not a year-round solution for investors or landlords. We are seeing a growing number of clients adopting hybrid strategies — securing long-term rentals for 10 months, then pivoting to short-term lets during peak season to maximise returns. Growing investor sophistication drives demand for strategies that balance stability with flexibility.

At the same time, new developments in prime precincts are beginning to provide some rebalancing, offering modern stock that appeals to both local and international buyers. Regulatory changes are also shaping the market. Many sectional title blocks are tightening rules around short-term letting, which will limit opportunities in certain areas. Careful due diligence and strategic positioning is crucial. For investors and homeowners, the key is to understand these nuances and align with long-term value rather than chasing short-term gains.”

Cities worldwide are wrestling with these same tensions. What we're learning from places like Amsterdam and Barcelona is that thoughtful regulation can work. Registration systems, zoning guidelines, and caps on rental days help protect residential neighbourhoods while still enabling property owners to earn income from their assets. Cape Town is exploring similar frameworks. Finding the right balance will require input from all sides.

The reality is that short-term rentals aren't going anywhere, nor should they necessarily disappear entirely. What we need is smarter management. This might look like designated areas where short-term letting is actively encouraged, stricter rules in neighbourhoods facing housing pressure, and incentives for owners to consider longer-term tenants during quieter months.

Regulation alone doesn’t solve the housing challenge. Cape Town needs more supply. Faster development approvals, increased density where it makes sense, and innovative housing solutions could ease pressure and let the tourism economy thrive. Property owners, residents, developers, and policymakers all have roles to play.

What's become clear through this debate is that binary thinking won't work. Short-term rentals aren't the villain, nor are they consequence-free. They're a tool that can be used responsibly or recklessly, regulated intelligently or poorly. Success lies in acknowledging both the benefits and the costs.

The path forward requires genuine collaboration and data-driven decisions. We need to protect Cape Town's character as a liveable city for residents and still maintain its appeal as a world-class destination. That's not an easy balance, but it's vital.

Cape Town has always been a city that adapts and evolves. The short-term rental conversation is the latest chapter in that story. Getting it right will involve listening to all voices in the room, being honest about trade-offs, and focusing on solutions that serve the long-term health of our communities and property market.

The stakes are high, but so is the opportunity to create a model that works for everyone, residents, property owners, and visitors. That's the conversation worth having.