Externalities of Neighbor's Trash

Living with a group of friends in a house is generally a good time. However, most student houses, including mine, belong to a neighborhood of other student homes. In these houses, areas such as the kitchen, living room, and yard are not "owned" by any one resident, leading residents to free ride on the cleaning actions of their roommates, or wait longer to address issues than they would if the house was entirely theirs, in hopes that someone else will take care of the issue. This behavior is typically not that bad in areas such as the kitchen, where it results in dishes piling up, but not much else. However, for the neighbors of my house, this problem manifests itself in their backyard; they have trash overflowing from their bins. Because of this, I have seen rats more than once around my house, which is a negative production externality of their trash generation. Charlottesville's downtown mall seems to have an underreported rat problem, which likely effects the corner as well.

In this negative production externality, the generation of trash has a lower private marginal cost than the social marginal cost (there's a high cost for seeing rats). I've drawn the SMC equal to the PMC for when trash is contained in the bin, but once trash is outside of the bin, costs go up for all, especially others in the area, hence the higher SMC. The demand curve (Private Marginal Benefit) in my graph is for trash removal - the price willing to be paid decreases the more trash has been removed. The simplest solution to reach qae in my mind is to have stricter regulations on all trash being contained in sealed bins, reducing the number of rats present. Although, if transaction costs were zero, I would accept being paid by the neighbors for their rat problem.