Cape Town's 50% Rule: Stay Under, or Go Commercial?

This is about a draft by-law, not law. The City of Cape Town’s draft Short-Term Letting By-Law, 2026 closed for comment on 5 October 2026, and no final text has been published. The 50% rule itself sits in the City’s Rates Policy, which Council approved on 29 June 2026, and the City’s FAQ says rating categories change from 1 July 2027. The way the 50% is measured may still change. The figures below are worked examples, not advice. Please take professional advice on your own property before you decide.

Read the proposal: the full draft by-law (PDF) · the City’s call for comment, which closed on 5 October 2026

If you let a home in Cape Town, you have probably heard that the City wants to treat a property let for more than half the year differently, and you may be wondering what that will do to your rates bill. That is a reasonable thing to worry about. The good news is that it comes down to a sum, and it is one you can do for your own place.

Most of what has been written about the draft by-law, including our own guide to the threshold, is about how to stay under 50%. That quietly assumes staying under is the right thing to do. For many homes it is. For some, it turns out to be the expensive choice.

Here is the part that often gets lost: the threshold is not a ban. Go over it and your property is rated as Business & Commercial instead of residential. Nobody stops you letting. So what you are really deciding is this:

Would closing enough nights to stay under cost you more, or less, than paying commercial rates?

We will take the two sides one at a time, then show three examples so you can open the one that looks most like your place.

Would you rather just have your own number? Ask our help agent what going commercial would cost your property. It asks a few questions about your property and what it earns, and gives you a rough answer in a couple of minutes. It is free, and you do not need an account.

The two sides of the sum

What staying under costs you

The City’s stated measure is nights offered, not nights booked (the threshold guide has the detail). On it, you stay under by offering no more than half your room-nights in a year. If you let the whole house, that means it can be open to guests for roughly 182 nights a year, whatever its size.

So staying under costs you the bookings you would have taken on the nights you close. Not the nights themselves: the bookings. A closed night in July that was never going to sell costs you nothing. A closed night in a busy shoulder month costs you a stay.

That makes the cost of staying under:

the nights you have to close × the chance each one would have sold × what a sold night is worth to you after costs

Close your cheapest, quietest nights first and this number can be surprisingly small.

What going commercial costs you

Rates are charged on your property’s municipal valuation, not on what it earns. Two things change if you are reclassified:

The rate goes up. The 2026/27 residential rate is 0.006428 rand per rand of value. The business and commercial rate is reported at 0.015106, about 2.35 times as much. (SASTRA, the South African Short Term Rental Association, puts it at 2.41 times.) The examples below use 0.015106. Check it against your own rates account.
You lose the residential exclusion. For 2026/27 the first R500,000 of a residential property’s value is reported to be rates-free. Commercial property does not get it.

So the extra you would pay each year is:

commercial rate × valuation − residential rate × (valuation − R500,000)

Because it follows the valuation, a very valuable home that lets only a little pays the same extra rates as one that is full all year.

That is the whole cost on the City’s side. As SASTRA reads the proposal, only the rates category changes: the zoning stays residential, and water, electricity and other tariffs are not affected.

Three examples: find the one closest to yours

Here is how the sum comes out for three quite different properties. The short version is in the table. Open any example to see the working.

	Valuation	Staying under costs	Going commercial costs	Cheaper to
The busy family house	R3 million	about R90,000 a year	about R29,000 a year	go commercial
The sea-view apartment	R4.5 million	about R25,000 a year	about R42,000 a year	stay under
The family home with a garden cottage	R25 million	nothing	about R220,000 a year	stay under

The busy family house Three bedrooms, valued at R3 million, booked most of the year. Cheaper to go commercial.

A three-bedroom house with a municipal valuation of R3 million, listed all year on two platforms.

Season	Nights open	Nights sold	Nightly rate
High	100	90	R4,500
Shoulder	120	80	R2,800
Low	145	50	R1,600
Year	365	220	R709,000 gross

To stay under, it can be open 182 nights. Keep all 100 high-season nights and 82 shoulder nights open. Close the other 38 shoulder nights and all 145 low-season nights.

Shoulder sells two nights in three, so the 38 closed shoulder nights would have sold about 25.
Every one of the 50 low-season bookings goes.

Assume 15% channel commission and R500 a night for cleaning, laundry and consumables. A shoulder night is worth about R1,880 after costs and a low-season night about R860:

Lost bookings	After costs
25 shoulder nights	R47,000
50 low-season nights	R43,000
Cost of staying under	about R90,000 a year

To go commercial: residential rates are (R3,000,000 − R500,000) × 0.006428 = R16,070. Commercial rates are R3,000,000 × 0.015106 = R45,318. The extra is about R29,000 a year.

Verdict: go commercial. Staying under would cost this house roughly R61,000 a year more than paying the higher rates. It is a busy property, and the nights it would have to close are nights that sell.

The sea-view apartment Two bedrooms, valued at R4.5 million, busy in summer and quiet in winter. Cheaper to stay under.

A two-bedroom apartment with a municipal valuation of R4.5 million, also listed all year, but its owner uses it in winter and it sells mostly in summer.

Season	Nights open	Nights sold	Nightly rate
High	100	70	R3,800
Shoulder	120	40	R2,200
Low	145	10	R1,400
Year	365	120	R368,000 gross

To stay under, the same 182 nights: all of high season and 82 shoulder nights. Closing 38 shoulder nights loses about 13 bookings, since shoulder sells one night in three. Closing low season loses 10.

Lost bookings	After costs
13 shoulder nights	R17,800
10 low-season nights	R6,900
Cost of staying under	about R25,000 a year

To go commercial: residential rates are (R4,500,000 − R500,000) × 0.006428 = R25,712. Commercial rates are R4,500,000 × 0.015106 = R67,977. The extra is about R42,000 a year.

Verdict: stay under. It saves this apartment roughly R17,500 a year, and most of the nights it closes were never going to sell.

The family home with a garden cottage Six bedrooms plus a two-bedroom cottage on one erf, valued at R25 million. Stays under without closing a night.

A family home with six bedrooms and a two-bedroom garden cottage on the same erf, with a municipal valuation of R25 million. The family lives in the house. The cottage is let short-term and listed all year.

First, what counts. Under the draft, the property is the erf, and it includes every building on it: one title deed, one property. So the threshold is counted on all eight bedrooms, not the cottage’s two. (If the cottage is a separate sectional title unit with its own deed, it is its own property and this changes; check your title.) A Cottage on the Same Erf goes through this in detail.

	Bedrooms	Room-nights a year
Main house	6	2,190
Cottage	2	730
The erf	8	2,920, so the 50% line is at 1,460

The cottage listed every night of the year uses 2 × 365 = 730 room-nights, which is 25%. It cannot reach the line on its own, however it is let.

Staying under costs nothing. No night needs closing. There is even room to let the main house for about 120 nights a year on top before the erf reaches 50%.

Going commercial would cost a lot, because the whole erf would be reclassified, family home included, and rates follow the valuation:

residential: (R25,000,000 − R500,000) × 0.006428 = R157,486
commercial: R25,000,000 × 0.015106 = R377,650
the extra: about R220,000 a year

Verdict: stay under, comfortably. There is nothing to decide here, only something to protect: keep the main house’s letting inside its budget.

The reading that would change it. If the City counted only the part that is let, the cottage’s two bedrooms, the cottage listed all year would be at 100% and over from day one. Even then, staying under still wins. Say the cottage sells 90 of 100 high-season nights at R2,200, 60 of 120 shoulder nights at R1,500 and 30 of 145 low-season nights at R1,000, and costs R350 a night to turn round. Closing it down to 182 nights (all of high season, 82 shoulder nights) loses about 19 shoulder and 30 low-season bookings, roughly R33,000 a year after costs. That is far less than R220,000 of extra rates. Either way, this property stays under. Only how many nights the cottage may be open changes.

A high-value family home is exactly the property for which commercial rates are hardest to justify. The value is in the house the family lives in, not in what the cottage earns.

None of these quite like yours? Ask our help agent to run the sum on your own figures.

What decides it

The three examples show the pattern:

Valuation pushes you under. The more your property is worth, the more commercial rates cost, whatever it earns.
Off-season demand pushes you over. The more your quiet months actually sell, the more it costs to close them.
Size matters less than you might think if you let the whole house. On the availability reading, a whole house is capped at about half the year whether it has two bedrooms or five. It matters a lot if you let by the room, or a cottage on the same erf.

A busy, moderately valued house usually does better commercial. An expensive property with a strong summer and a quiet winter usually does better under.

Four things that can flip the answer

The final by-law might count bookings instead. The industry has asked for exactly that. SASTRA’s response to the City asks for the 50% to be measured on nights booked rather than nights offered, and for the line to be set at 65%. If the City agreed, the maths changes completely. The family house above sells 660 of its 1,095 room-nights, which is 60%. With the line at 65% of nights booked it would stay residential without closing a night. With the line at 50% of nights booked it would be over however it managed its calendar, unless it turned guests away. The apartment sells 240 of 730, which is 33%, and it would be comfortably under either way.

VAT. VAT registration is compulsory once taxable supplies pass R1 million in any twelve months, and short-stay accommodation is then charged at 15%. It has nothing to do with the rates classification, but going commercial usually means selling more nights. If you are close to R1 million, the extra nights can cost you more in VAT than they earn. See running it as a business.

Your home. If the property is also where you live, trade use reduces the primary residence exclusion when you sell. More letting, more apportionment. It is a real cost, just a deferred one.

It is a decision for a year, not a month. The threshold is judged on a year of room-nights. Opening up for a busy December and closing again in January does not undo nights already counted. Pick a side and plan the whole year’s calendar to it.

Doing it on your own numbers

You need four things for each property:

Your municipal valuation, from your rates account.
What each season actually sold: nights open and nights booked, across every channel together, not one platform’s view.
What a sold night is worth after costs: rate, less commission, less cleaning and consumables.
Which nights you would close to get down to half your room-nights, starting with the cheapest.

The first is on a piece of paper. The other three are the hard part, because most hosts’ booking history is scattered across two or three platforms and a spreadsheet.

If you only want a rough answer today, our help agent will work it out with you from the figures you know off the top of your head. For the answer on your real numbers, this is where Airflow comes in.

What Airflow does today

Measures where you are. The letting limit gauge counts offered room-nights across every channel you connect, forecasts the date you would cross, and records every day from the moment you switch it on.
Shows which nights you would close. When the coming 12 months are over the limit, it proposes closing your least valuable nights first, and shows every night sorted by value so you can see that the nights it closes are the ones that matter least.
Closes them for you, if you ask it to. Switch on automatic blocking and it closes a few of your least valuable open nights each week, well ahead of time, to keep you under. It never touches a night that is booked, and you can reopen any night it closes.
Learns from your history. To begin with, “least valuable” means your lowest-priced season. Once a year or more of your bookings is in Airflow, each night is weighed by its rate and by how often that month has actually sold, so a cheap month that always fills is kept open ahead of a dearer one that never does.
Shows what each night earned. The per-night value chart shows what every night in the year was offered at and what it earned, which is the “chance it would have sold” and “what it is worth” in one picture.
Takes your history. Import past bookings from a CSV, a Google Sheet or your channels’ calendars, so all of the above works on the years you already have, not only from today. Upload your history and Airflow blocks the least valuable nights for you.

Ask the Account Manager for the verdict

AI Flow is the assistant built into your Airflow account. You open it from any page of the portal and choose the agent for the job. The Account Manager is the one that knows your account: your properties, your bookings and your settings. With two years of your history imported, it works out the verdict for you, property by property:

It asks for what it needs, one question at a time: your municipal valuation, roughly what your channels charge in commission, what a night stayed costs you in cleaning and consumables, and any months the property is not let at all. It saves each answer, so you are never asked twice.
If you have less than two years of history, it sends you to import it first. A CSV, a Google Sheet or a channel export. Past stays are recorded as history: no invoices are raised and no guests are emailed.
Then it runs the sum in this article on your own numbers: which months you would close, the bookings you would lose, what that costs after commission and costs, against the extra rates at your valuation. It tells you which side of the line to plan for, and by how much.

Two years, because one year is a single sample of each season. A quiet winter might have been the weather. Two tell you whether it is the property.

A conversation with the Account Manager costs 2 actions, and it is free while a paid account is being set up. The verdict itself costs 2 actions on top, charged only when a verdict comes back. It is arithmetic on your own history, not legal, tax or rates advice.

What else the Account Manager can do Setting up a property, your booking website, prices and more.

Set up a property from your website. It reads your site and fills in the listing: description, location, capacity, rates and photos.
Build and update your booking website: logo, cover photo, colours, pages such as About and Contact, and publishing it when you are ready.
Change your prices, including seasonal rates for your high and low seasons.
Update your property and organisation details: names, descriptions, contact details and your host profile.
Help you connect your calendars, and find your booking forwarding address.
Answer questions about your bookings and revenue, property by property.

It shows you what it is about to change before it changes it, and it never creates, changes or cancels a booking. AI Flow also has a free Help Agent, a Web Designer and a Market Analyst; more in Meet AI Flow.

Where to start

Open an account and add the property.
Connect every channel’s calendar, and import your past bookings.
Switch on the letting limit gauge and choose Cape Town (draft 2026).
Ask the Account Manager: should I stay under or go commercial?
Watch for the City’s revised draft. The comment period closed on 5 October 2026, and the measure may still change. The City’s FAQ says rating categories change from 1 July 2027, so the year to plan is the one before it.

Know another host who is worried about this? Send them this article on WhatsApp.