Restrictions on short-term rentals could have serious implications for the housing market, as Airbnb and similar services dangle the prospects of additional income for property owners, but add complications for communities.
The restrictions are contained in the Tourism Amendment Bill which is currently up for comment (see story above left). The popularity of Airbnb and other home-sharing services in the past few years could have contributed to a bubble in the property market, as rents sky-rocketed, with fewer units available for long-term rental, says Louisa Theart, spokesperson for the citizen action group One Host One Home.
Of 18417 short-term lets listed on Airbnb and HomeAway, 75% are entire home lets, says MarketMinder’s AIRDNA. Theart says with many of those properties empty most of the time, housing availability and affordability to lower income groups is affected.
“We have a country where hundreds of thousands live in shacks, and we’re using availability for tourists, not for permanent housing. When 12000 people can’t live in the CBD, they move to adjacent neighbourhoods, leading to rents going up because of increased demand. Then people who can no longer afford them move. I think there is definitely a knock-on effect.”
It’s not just Cape Town locals being pushed out. This is what French officials believed in 2017 when the Paris mayor’s office attributed falling urban population not just to lower birth rates, but also to the fact second homes were being let to tourists.
Regulations followed, and now one cannot let an apartment for more than 120 days a year, and the apartment must be registered with the city so it can be tracked. In other major cities, such as New York and San Francisco, hosts must also register.
There lets are capped at 90 days, and Airbnb lets are allowed only if hosts are full-time residents. Full-time residential status is the most important factor for Theart, hence One Host, One Home.
She believes the best use for Airbnb is home-sharing, where “the kind of tourism it opens up is in that market. People can offer you for R400 or R500 a nigh. That’s proper home-sharing and making travel more affordable for younger travellers unable to afford a R1000 a night room.”
But the line may not be so clear cut with part-time residents and subdivided houses. Security and noise concerns are major considerations. Popular Airbnb hubs, with many visitors coming and going, often negatively impact on full-time residents.
During the city of Cape Town’s public participation process regarding short-term lets, issues noted include “noise nuisance and security concerns,” says Marian Nieuwoudt, the city’s mayoral committee member for spatial planning and environment.
Theart says for some tenants in Atlantic seaboard apartments, security concerns atop noise concerns are breaking up communities. “Every week, new people are getting keys, pin codes and parking.”
But this may not be a zoning or government issue. The city reasons this can be controlled by body corporates. A proposed amendment says: “It is expected that body corporates, homeowners’ associations and the like control or prohibit short-term letting or accommodation in accordance with their own rules.”
Views for and against tourism bill
REGULATION The Tourism Amendment Bill could have serious implications for Airbnb rentals. Picture: Supplied
The debate over the Tourism Amendment Bill centres on the narrow line owners of Airbnb properties tread. Today, SA Airbnb hosts retain 97% of what they charge to let their space.
Since Airbnb’s founding in 2008, two million guests have been accommodated in the country, according to a 2018 Airbnb report. Meanwhile, hotels have to pay taxes and overheads and adhere to regulations for “accommodation establishments”, including alcohol licenses and food safety.
The Tourism Business Council of South Africa called for regulation of short-term rentals early last year, and supports the Tourism Amendment Bill, saying hotels in South Africa have been hurt significantly and the playing field should be levelled.
“How can someone who wants to enter the short-term rental space, competing for the same customer as hotels, B&Bs and guest houses, not have to meet the same regulations?” asks the council’s chief executive, Tshifhiwa Tshivhengwa.
“Government tells you what you can do with your property. There is no rules-free ownership. You can’t open a restaurant or hair salon in a private property without applying for a land-use departure, having it rezoned, paying commercial property rates and seeking permission from neighbours,” says Louisa Theart, spokesperson for the citizen action group One Host One Home.
Lobby group Sakeliga, opposing the bill, believes restrictions on short-term lets may infringe ownership rights. “In the South African legal tradition, ownership is a robust basket of wide-ranging rights to use, enjoy and sell your property. These amendments could potentially impede ways in which owners are allowed to employ leverage on their properties, drastically limiting their economic utility,” says Sakeliga legal analyst Daniel du Plessis.
The Western Cape government has similar concerns. “Any regulations that infringe people’s property rights, or impact on a host’s ability to earn a living, must be rejected,” says Western Cape MEC for economic opportunities, Beverley Schäfer.
Opponents of the amendment bill say it could seriously harm small-scale, short-term home rental businesses and “dissuade aspiring entrepreneurs from entering this market segment,” says Gerhard van Onselen, a senior analyst at Sakeliga. It will drive up costs for both owners and guests.
“The minister is not going to promote the tourism industry – he is going to artificially drive up prices and interfere in an industry which self-regulates far better than the government can.” Sakeliga wants a review of existing regulations and the impact on cost structures of traditional B&Bs and hotels. “Deregulation should be considered where new technologies and market innovations.
Govenment plan time to comment
In response to an increase in short-term letting via online platforms such as Airbnb, the national government tabled the Tourism Amendment Bill on April 12.
In it, the minister of tourism is given the power to specify certain thresholds, such as number of nights, how much income short-term rentals such as Airbnb can produce and, possibly, exclusions in certain areas.
People have until June 11 to submit comments. Western Cape MEC for economic opportunities, Beverley Schäfer, has opposed the national government’s plan. She says the province needs “a sufficient mix of hotel, B&Bs and home-rental room nights to accommodate a variety of tourists and budgets”.
However some existing restrictions could be loosened by the City of Cape Town to allow the leasing of a secondary house or flat on a property for a period not exceeding 30 consecutive days.
Disruption: People will adjust
TOUGH COMPETITION Airbnb has disrupted the hotel industry. Picture: Supplied
Regulations or not, Airbnb has significantly disrupted the hotel industry, and the big boys have to pay attention. “Customer is king. If customers want to stay in other people’s houses, so be it and everyone will adjust,” says Tourism Business Council of SA chief executive, Tshifhiwa Tshivhengwa.
In late April, the real estate services firm JLL released its 2019 SA Hotel Investment Outlook report, forecasting R1.9 billion was to be invested in new hotels, many offering innovative lifestyle concepts such as Africa’s first AC Hotel by Marriott, opened at the V&A Waterfront.
“The agile and most consumer-focused hotel operators will triumph, and it is where investors will seek partnerships,” the JLL report reads. Marriott has also created a home-rental business offering 2 000 high-end homes throughout the US, Europe and Latin America.
Tech and travel: New choices
EMBRACE IT President Cyril Ramaphosa says tourism is important to the growth of the economy. Picture: Sharon Ang
President Cyril Ramaphosa has emphasised the tourism industry’s importance in growing Africa’s economy and promoting a country’s identity. Speaking at the closing of Africa’s recent Travel Indaba, he said: “Tourism is the one of the most international industries as it showcases the country’s identity and offerings to the world. If you want to showcase what you produce, clothing, food and arts, tourism is that window all of us can present to the world.”
He said tourism had an extensive value chain that stretched as far as manufacturing, the services sector and creative and cultural industries. The industry should embrace the technologies revalent in the Fourth Industrial Revolution.
“The industry must embrace this technology and be ready for the brave new world that is coming. Modern tourists are discerning because they are spoilt for choice when it comes to destinations. We live in the age of Airbnb and TripAdvisor. All these new technologies are opening up new opportunities and competition,” Ramaphosa said.
The case for a free economy
CENTRAL This De Waterkant Airbnb is one of many from which visitors to the city may choose, offering a unique space and local experience. Picture: AirBnB host Niels Colesky
Over the Easter weekend, I stayed in a lovely Airbnb in Parktown North, Joburg, with five friends. The decision to stay in an Airbnb was uncontested, debate and conversation centring only on where and how much we wanted to pay for extras.
To include a pool, fireplace and garden unit, it ended up costing just R1104 a head for our three-night stay. I certainly couldn’t afford a R1000-a-night hotel.
The spare money I had I splurged on meals and outings. With users like me drawn to travel with the platform, Airbnb boasts it generated an estimated R8.7billion in South Africa from June 1, 2017 to May 31 last year, according to Genesis Analytics.
Airbnb host Niels Colesky believes Cape Town’s De Waterkant restaurants and shops benefit from numerous Airbnb listings in the area which draw tourists. For example, there is a MotorCom shop around the corner from Colesky’s home, with SIM card promotions for foreigners.
Colesky began listing his subdivided house on Airbnb in November 2015. “For ourselves, the house is too big and having a natural subdivision, it made sense to let it. We couldn’t really afford the house if we didn’t,” he says.
The home and the rental area share the same footprint, but are distinctly separate, and Colesky sees guests only when they arrive or leave. He estimates it is booked 60% to 70% year round, with few openings between September and March.
“The government should stay out of regulating the business,” Colesky says, pointing to the foreign exchange his guests bring in, and that he pays tax on his additional income.