Airbnb warning for South Africa

Experts have warned that regulating Airbnb will not solve South Africa’s housing crisis, as the platform has a minimal impact on accommodation supply and actually boosts the economy.

This is according to Sentinel Homes Managing Director Renier Kriek, who said Airbnb regulations in South Africa will neither free up more accommodation for locals nor bring down escalating rental prices.

“Those who portray themselves as champions of regulation are either misinformed or acting from ulterior motives,” he said.

While Airbnb regulation may seem like a promising quick fix to the housing problem, it diverts attention away from the real culprits and the only solution to the dilemma.

While all of South Africa would be affected, a good case study is Cape Town, where calls for Airbnb regulation are strong.

A 2024 report by the service, “Airbnb’s Impact on the City of Cape Town,” however, revealed compelling facts and figures that suggest a mostly positive economic influence.

Firstly, it found that from January 2020 to January 2024, the total number of Airbnb listings that resulted in stays increased very little. Secondly, Airbnb dedicated listings accounted for only 0.9% of the 818,000 formal homes in the City.

By “dedicated”, the company means entire properties that are let, rather than partial listings, such as spare bedrooms or outbuildings.

“With partial listings, accommodations are shared with existing residents, so they are not drivers affecting availability or affordability,” Kriek said.

On the bright side, Cape Town Airbnb hosts welcomed 700,000 guests in 2023, resulting in a R14.4 billion contribution to the GDP. This supported 49,000 jobs, contributing R7 billion to the economy in wages.

The impact of Airbnb

All of the tourists who have used Airbnb would have stayed somewhere, but due to the limited availability of short-term letting, would likely have stayed exclusively in hotels and guesthouses, Kriek said.

These properties also occupy real estate that could otherwise be used for housing. While guests spend money with local retailers and services, so do the hosts they pay and the businesses with which they transact.

The positive impacts include increased economic, supply chain, and business-to-business activity, resulting in higher GDP, more jobs and wages, and ultimately, increased tax revenue for the country.

It appears, then, that short-term letting actually brings many benefits to the economy and has little to do with the availability and affordability of accommodation.

Yet, the City reportedly plans not only to start registering short-term rentals – which Airbnb itself supports – but also to force hosts to pay commercial property rates for their properties.

“These regulation suggestions are still palatable and reasonable, given competing interests, but by driving prices up for Airbnb landlords to any significant degree will simply dampen tourism and leave Cape Town worse off,” he said.

According to Kriek, the impact of these regulations will, as is usually the case, affect the poor and vulnerable the most.

The real issue

South Africa’s population is growing faster than new properties are being developed, Kriek explained. In Cape Town’s case, this is exacerbated by the semigration trend.

The City’s mayor, Geordin Hill-Lewis, noted in a recent article that consumer retail data indicated about 100,000 people from other parts of the country had moved to Cape Town in the last 3 years.

With this influx, the area’s projected population for 2025 is 5.1 million people. Kriek agreed with Hill-Lewis that the problem is not Airbnb but a housing supply deficit, especially among the poorer working class.

“And how do you solve a supply problem? You create more supply. It really should be that simple – all other efforts to address the issue should be secondary to the commonsense solution.”

The mayor commented that Cape Town is accelerating its efforts to make land accessible to the city’s microdevelopers.

However, he added that funding for low-cost housing must come from national government programmes. This suggests such funding is not being made available soon enough, Kriek said.

For commercial developers, bureaucratic red tape means new developments that should take years to complete instead take decades as approvals languish in municipal back offices.

“Currently, in South Africa, and including Cape Town, from identifying a piece of land for housing development to families moving in takes 7-18 years, depending on the precise situation of the land,” Kriek said.

“Most of this time is taken in planning approvals and similar regulatory burdens. Obstacles like these are an illness that needs to be addressed if housing is to keep pace with the needs of society.”

Kriek stressed that Airbnb does not have a notable impact on the availability or affordability of accommodation in Cape Town or anywhere else in South Africa.

Regulating it is only addressing a small symptom when the larger illness is actually what demands South Africans’ attention.

Restrictive regulation of this beneficial economic activity, even if small, such as forcing hosts to pay commercial rates, will not solve the housing problem.

In fact, it will leave everyone poorer and benefit the few, such as foreign hotel groups, who will see increased business.

In addition, it delays acknowledging the real solution our housing market needs – accelerating the supply of housing.

This, Kriek said, requires the development of pro-housing policies and a reduction in bureaucratic load and uncertainty.

“If you want what’s good for the country, or if your concerns are for the poor and the vulnerable, then you don’t want significant Airbnb regulation.”