Location Externalities and Residential Tenants Decisions in Nairobi, Kenya

Externalities cover the impacts that one party’s activities have on the welfare of others. They arise whenever the actions of one economic agent directly affect another economic agent outside the market mechanism. Externalities affect the quality of residential neighbourhoods either positively or negatively and have a profound effect on residents’ locational decisions. This study investigates significant location externalities that influence tenants’ locational decisions in Nairobi City, Kenya. Data were obtained from primary and secondary sources. A questionnaire survey on a sample of 347 residential tenants in Nairobi city was carried out and data was analysed using quantitative methods. Findings reveal that environmental, social, and economic factors are the most significant location externalities in the case study area. In particular, anthropogenic noise pollution, crime and insecurity, air pollution, development of shopping malls and urban traffic congestion play a dominant role in influencing tenants’ location decisions in Nairobi. The study recommends that the government should develop and implement zoning regulations that separate incompatible land uses. There should be strict enforcement of environmental standards and regulations to control pollution and protect natural resources. Implementing and enforcing strict emission standards for vehicles, industrial facilities, and power plants can significantly reduce the release of pollutants into the air. Shopping mall development should contribute to sustainable urban growth and enhance the overall wellbeing of residents. There is a need to address vehicular traffic in urban areas by investing in and expanding public transportation networks, implementing dedicated bus lanes and priority signalling, and developing safe and well-maintained pedestrian and cycling infrastructure, including sidewalks, bike lanes, and bike-sharing programs to encourage walking and cycling as viable commuting options. The establishment of a strong relationship between the police force and the community can help build trust, improve communication, and create a collaborative approach to addressing social and environmental hazards in residential neighbourhoods in Nairobi. The study contributes to the overall debate towards improving policy on residential real estate development, environmental protection, and social wellbeing within residential communities in urban areas in Kenya