The effects of property taxes and local public spending on property value

Abstract

Although various researches have been done on the effects of property taxes and local public spending, very little has been done in City Council of Nairobi hence creating agency and a research gap. Therefore this study aims at providing an understanding on the effects of property taxes and local public spending on property values in City Council of Nairobi to bridge the knowledge gap that exists. The study adopted descriptive research; this design was used to obtain information concerning the current status of the phenomena to describe what exists with respect to variables or conditions in a situation. The study took top management, middle management and lower management staff of City Council of Nairobi for study population; this as well doubled up as the target population with a total population of 105 employees. Stratified random sampling design was applied. Primary data was collected through the use of questionnaires administered to the respondents. The secondary data was collected through the use of both theoretical and empirical literature available and from various documents at the city council of Nairobi. The data was analyzed using qualitative and quantitative techniques. The results of this study show that there is a negative relationship between local government spending on housing and local property rates. This attributed to poor service delivery, mismanagement of funds and corruption at the CCN. The regression model explains 85% of the variability in property values. Hence the model fits very well on the data. The Durbin-Watson statistic indicates that the problem of multi-colinearity is not severe. It also shows that local government spending, housing expenditure, LATF and property rates are statistically significant at 5% level. The model explains 99.8% of the variability in property values. Hence the model fits perfectly to the data. The conclusions that was drawn from the findings of this study shows that property taxes have a negative impact on property values especially where service delivery is poor and mismanagement and corruption abounds. Housing expenditure is negatively related to property values. This is attributed to the refusal by posh estates like Karen and Lang’ata refusing to pay CCN rates citing poor service delivery, inefficient and corruption at the CCN and local government spending and LATF have a positive impact on housing values since they increase revenue to provide the basic service in the city and its neighborhoods.