Short-term lets: business and regulatory impact assessment

Annex A: Assumptions underpinning the licence fee model

1. This annex provides further detail on the assumptions and methodology used to calculate the indicative, average application fees that would need to be charged to recover establishment and running costs in scenarios 1 and 2 from section F. It is worth reiterating that the actual fees to be charged will be determined by local authorities and the information provided in this BRIA is not to be seen as a requirement on local authorities or a commitment by them to charge any particular fees. These assumptions have been informed by discussions with local authority licensing officials or other sources of information.

2. Our approach to this costing has been to devise two indicative, hypothetical scenarios for the time and cost involved in processing an average licence application and applying five different levels of premises inspection for each scenario. Scenarios 1 and 2 are designed to reflect a situation where there are low or high operating costs, respectively. Section F presents the main assumptions. Other assumptions not outlined there are set out below.

Further assumptions

3. We have factored in the cost of staff training, adding 2% to the cost of staff at each grade. This is equivalent to assuming that a member of staff working full time on short-term lets will require one month of training, during which time they are unable to undertake other work, and that this training will last for five years (because the member of staff may rotate to another area or otherwise leave post, or further training might be required after five years) so that the costs can be spread over this period. We value this time using the staff costs (on a cost to business basis) for the appropriate level of staff.

4. As part of the licence application process, we have presented a range of rates of physical property inspections, which environmental health officers will carry out, namely: 10%, 25%, 50%, 75%, and 100% of applications under both scenario 1 and scenario 2.

5. We have assumed that local authorities will need to lease vehicles so that environmental health officers can visit short-term let properties. Public transport (or, in some areas with a high density of short-term lets, walking) may be a cheaper and viable alternative in some instances and this could reduce cost. However, in local authorities where there is a lower level of population density, this would be impractical (i.e. cost more than running a vehicle(s)). We have assumed in scenario 1 that it takes an environmental health officer 1 hour to drive to a short-term let premises and a further 2.5 hours to carry out their inspection and write-up; before taking 1 hour to drive on to the next one. In scenario 2, we have assumed that it takes 2.25 hours to drive to a short-term let premises and a further 2.5 hours to carry out their inspection and write-up; before taking 2.25 hours to drive on to the next one. The latter reflects a rural local authority where it may take a considerable amount of time to visit each short-term let (given they are likely to be located in more remote areas). We have assumed that it costs £300 per month per vehicle in lease costs, and have made an allowance for fuel costs.

6. We have assumed that postage costs for local authorities will be negligible (making up all of the 'Other' column total of less than £1 per application). Postage costs relate to notification of interested parties in relation to applications going to committee. This includes costs of envelopes, stamps and printing.

7. We have assumed in both scenarios that it takes, on average, 1.5 hours of licensing officer time to deal with objections about an application or renewal, and this affects 10% of applications in scenario 1, and 20% of applications in scenario 2. In some instances, the time taken might be much shorter, but in others could be considerably longer; this is an average and we would expect the variance to be high.

8. We have assumed that where an application goes to committee that input will be required from both licensing officers and solicitors. In scenario 1 we have assumed that 3% of cases will go to committee, and that this will involve 5 hours of licensing officer time and 5 hours of solicitor time. In scenario 2 we have assumed that 6% of cases will go to committee, and that an additional 5 hours of solicitor time will be required to prepare a statement of reasons^[77].

9. Where licence applications are appealed, this is likely to demand a significant amount of time from licensing authorities, particularly from solicitors and senior solicitors. However, the likelihood of cases being appealed is assumed to be low in both scenarios. In scenario 1 we have assumed that 0.5% of applications will be appealed, requiring 5 hours of licensing officer time, 25 hours of solicitor time, and 10 hours of senior solicitor time. In scenario 2 we have assumed that 2% of applications will be appealed, and that this will require 10 hours of licensing officer time, 20 hours of solicitor time, and 25 hours of senior solicitor time.

10. We have allocated half an hour of licensing officer time in both scenarios to responding to general queries.

11. We have assumed that the time spent by administrative staff and licensing officers (excluding time spent dealing with complaints, queries or committees, or responding to the applicant with licensing information and updating the short-term let register, or notifying residents of application/renewal by administrative staff) increases by 50% in scenario 2 to reflect the extra time taken to liaise with applicants to correct information.

12. It is assumed that monitoring and enforcement activity (including handling complaints) is split evenly between officer and administrative staff. We have allowed for 1 hour of time to undertake monitoring and enforcement activity in scenario 1, and 2 hours in scenario 2. Additionally, we have included time at officer level for carrying out inspections of licensed short-term lets during the licence period. These inspections would be in response to complaints, and also as part of a proportionate, and intelligence led inspection regime to ensure compliance with mandatory safety conditions, and any other conditions added by licensing authorities. We have assumed that 5% of properties would be inspected for monitoring and enforcement purposes in scenarios 1, and 10% in scenario 2.

13. We have assumed in both scenarios that applications and renewals are submitted by post and not submitted digitally. Local authorities might adapt existing IT systems, introduce new IT systems or use administrative staff to process incoming paper licence applications and renewals. The cost implications of these options would vary significantly. We have assumed that administrative staff process incoming paper licence applications and renewals; however, it is likely that larger local authorities, or those with a large number of short-term lets in their area, may be able to substitute this for IT systems that perform the same role as administrative staff more cheaply (so utilise less administrative staff).

Summary of cost and time elements

14. Table A1 below summarises the time and cost elements under scenarios 1 and 2.

Note:

• Hours are rounded to the nearest one decimal place and may not necessarily sum.
• Total cost is rounded to the nearest £1 and may not necessarily sum.