A fierce legal battle has erupted in the Western Cape High Court that could fundamentally change how property owners pay for basic services in South Africa’s most popular city. The South African Property Owners Association (SAPOA), representing the country’s largest commercial landlords and developers, has launched an urgent application to declare parts of the City of Cape Town’s 2025/2026 budget unlawful.

At the heart of the dispute is a fundamental shift in how the municipality calculates charges for essential services, a move that critics argue will squeeze the middle class and drive up rents, while the City defends it as a necessary step to fund infrastructure and support the poor.

The Controversy Over New Tariffs

While Cape Town property rates are set to increase by 7.96% for the 2025/2026 financial year, the legal challenge focuses on specific new levies. SAPOA has raised serious legal concerns regarding the introduction of a city-wide cleaning tariff, as well as new fixed charges for sanitation and water that are linked to property values rather than consumption.

Previously, service charges were largely based on how much a household used. However, under the new “Invested in Hope” budget, the City has introduced fixed tariffs calculated against the value of the property. SAPOA argues that these charges are unconstitutional. Their legal team contends that a municipality can only charge rates on property or consumption-based fees for services, but cannot combine the two to create a hybrid tax not authorised by national legislation.

The cleaning tariff, for instance, was previously a 10% surcharge on electricity buys but has now been separated into a standalone charge based on property value. The City argues this aligns with the “polluter pays” principle, providing a collective benefit of a clean environment.

The “Pro-Poor” Defense

Cape Town Mayor Geordin Hill-Lewis has strongly defended the budget, labelling the legal challenge by SAPOA as an attack on a “pro-poor” financial plan. The City asserts that these revenue streams are vital to fund a massive R39.7 billion infrastructure investment over the next three years.

According to the municipality, the funds are allocated to critical areas including policing, traffic services, and fire services, which receive 29 cents of every rand collected in property rates. The City maintains that despite the increases, Cape Town still offers the lowest residential and commercial property rates compared to other major metros like Johannesburg and Durban.

To soften the blow for lower-income residents, the City has highlighted relief measures, such as exempting the first R450,000 of a property’s value from rates. Additionally, the qualifying threshold for pensioner rebates has been increased to a household income of R27,000 per month.

The Middle-Class Squeeze

Despite these assurances, there are growing fears that the new rates model will disproportionately affect middle-class families and long-term residents. Property values in Cape Town have surged by 160% since 2010, driven by semigration and foreign interest.

This property boom has created a situation where many residents are “asset-rich but cash-poor.” A homeowner who bought a house decades ago for R1 million may now find themselves living in a property valued at R4 million to R8 million, without a corresponding increase in their salary or disposable income. These residents now face significantly higher monthly costs simply for remaining in their family homes.

Critics warn that this could force families to sell and downsize, effectively pushing lower-to-middle-income residents out of well-located areas. There are also concerns regarding the rental market. Landlords facing steeper fixed costs are unlikely to absorb the expense, meaning the increases will probable be passed on to tenants, further inflating rentals in an already expensive market.

A Warning for the Future

The outcome of this court case, which began hearings on December 2, 2025, will be closely watched by municipalities across South Africa. If the court rules in favour of the City, it could set a precedent for other metros to implement similar value-based charges for basic services. Conversely, a win for SAPOA could force Cape Town to completely restructure its budget and refund ratepayers.

For now, homeowners and businesses must brace for the financial impact. With the cost of living already high, the debate over who should pay for the maintenance of a “world-class city” is far from over. As the court proceedings continue, the tension between maintaining high service standards and ensuring affordability for residents remains the central conflict in South Africa’s real estate landscape.