Are long-term tenants being priced out by Airbnbs?

A row has kicked off in South Africa over the impact of short-term rental properties on the residential rental sector.

At the centre of the debate is Cape Town, where more than 700,000 people stayed at an Airbnb in 2023, according to the platform. Not discounting other major cities like Johannesburg, Pretoria and Gqeberha, which are home to thousands of active Airbnb listings, the Mother City has more active listings than San Francisco, Tokyo or Barcelona, at over 23,000.  

Locals in tourist areas worry that short term rentals are reducing supply, driving up prices for longer-term residential renters. The latest rental market data as reported by the PayProp Rental Index shows that rents in the Western Cape are growing faster than anywhere else in the country. The province reached 9.7% year-on-year growth in Q2 2024, taking rents to an average of R10 673 a month.

However, even the highest residential rents in South Africa still can’t match the amounts that property owners can make through short-term rentals, potentially reducing available stock and pushing prices out of the reach of locals. According to Inside Airbnb, the average property in Cape Town rented for R2 367 per night.

Airbnb denies that its listings are the reason for rising rents, saying they make up just 0.9% of the Cape Town housing market. According to their analysis, converting every Airbnb in Cape Town into a long-term residential rental home would reduce average rents by R69 a month. The platform also argues that Airbnb rentals contribute R14.4 billion a year to the local economy.

Inside Airbnb’s data also shows that a majority of listed properties are rented out for less than 30 days a year, suggesting that they wouldn’t be used as long-term rental properties if they couldn’t be rented out on a short-term basis. Many of these properties may normally be lived in by their owners and then rented out while they are away temporarily.

But housing experts warn that the growing popularity of Airbnb is driving up property prices, as investors measure them against the potential return of a short-term rental. New investors in residential rental properties then have to set the rent high enough to cover the higher repayments on their bond. Those commentators recommend that the government creates a mandatory register of short-term rentals – a proposal also backed by Airbnb.