Influence of Location Externalities on Residential Rental Values: Evidence from Nairobi City, Kenya

Abstract

Location externalities refer to the effects of a particular location on the value, desirability, or quality of neighbouring properties and the well-being of residents in the area. This study investigates the influence of significant location externalities on residential rental values in Nairobi City, Kenya. The methodology employed is a questionnaire survey on a sample of 347 residential tenants within 36 suburbs in Nairobi city. The data are analysed using quantitative methods and presented in tables. According to the study results, residential rental value is significantly influenced by clusters of factors related to the environment, social as well as economic aspects. Specifically, air pollution, crime and insecurity, anthropogenic noise pollution, access to internet connectivity, urban traffic congestion, and inappropriate domestic solid waste disposal are significant location externalities influencing residential rental values in Nairobi City, Kenya. The study recommends regulation and enforcement as well as pricing mechanisms as strategies for managing location externalities in urban areas in Kenya