Regulating Airbnb is not the solution to SA's housing issue

Regulating Airbnb in South Africa will neither free up more accommodation for locals nor bring down escalating rental prices.

This is according to Renier Kriek, Managing Director of innovative home loan provider, Sentinel Homes. "Those who portray themselves as champions of regulation are either misinformed or acting from ulterior motives," he says.

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

The real impact on accommodationWhile all of South Africa would be affected, a good case study is Cape Town where calls for Airbnb regulation are strong.

However, a 2024 report by the service, Airbnb's impact on the City of Cape Town, reveals compelling facts and figures that suggest a mostly positive economic influence.

Firstly, it reveals 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 percent of the 818,000 formal homes in the City. By "dedicated", the company means entire properties that were let and not partial listings, such as spare bedrooms or outside buildings.

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

Good for the economyOn the bright side, Cape Town Airbnb hosts welcomed 700,000 guests in 2023, resulting in R14,4 billion added to GDP. This supported 49,000 jobs, contributing R7 billion to wages.

All of these tourists will have stayed somewhere, and but for the availability of short-term letting would likely have stayed exclusively in hotels and guesthouses, which also take up real estate that could otherwise have been housing. 

While guests spend money with local retailers and services, so do the hosts they pay and the businesses they transact with. The positive impacts include greater 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 bring many benefits to the economy and have little to do with the availability and affordability of accommodation.

Yet, the City reportedly plans to not only start registering short-term rentals - which Airbnb itself supports - but also 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. And this will affect the poor and vulnerable the most, as usual," says Kriek.

The real culpritsSouth Africa's population is growing faster than new properties are being developed. 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 agrees 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!" he says. "It really should be that simply – all other efforts to address the issue should be secondary to the commonsense solution."

However, the mayor comments that the City is accelerating its efforts to make land accessible to microdevelopers but that funding for low-cost housing must come from national government programmes. This suggests such funding is not being made available soon enough.

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

In summaryAirbnb does not have a notable impact on the availability or affordability of accommodation in Cape Town or anywhere else in South Africa. It's addressing a small symptom when the larger illness is actually what demands our attention. 

Restrictive regulation of this beneficial economic activity - even if small like forcing hosts to pay commercial rates - will not solve the housing problem. In fact, it will leave everyone poorer and benefit the few - like 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. And this needs pro-housing policy development and reduction of 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," says Kriek.