External Diseconomies of Business Improvement Districts: Negative Impact on Residential Property Values – Evidence from the City of Westminster

ABSTRACT

The study was conducted in the City of Westminster in the UK, in which eight BIDs have been established since the Business Improvement Districts Regulations were enacted in 2004. The purpose of this study is to examine whether the establishment of BIDs has had a negative impact on residential property values in response to criticism that BIDs disproportionately represent commercial interests, and hence while business and property owners benefit from BIDs, local residents are disadvantaged. Data used in this study were obtained from the Land Registry’s Price Paid Data (PPD) from 2005 to 2015, and the analysis was based on a hedonic pricing model and the difference in differences method. The findings indicate that BIDs have a statistically significant positive effect on the value of residential properties located within their “boundaries”, but a statistically significant negative effect on those in their “operating area”. In short, the results indicate that BIDs might depress residential property values in their operating areas.

KEYWORDS:

• Business improvement district
• residential property value
• public policy
• hedonic pricing approach
• difference in differences method

Acknowledgments

I would like to express my gratitude to Dr. G. Faggio, Research Associate from the London School of Economics, for her continuous advice on analytical design. I am also grateful to Prof. K. Takashima from Kobe University for his thoughtful guidance. This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.