Why is the role of the property manager evolving so quickly?

Throughout 2019, property managers have been at the front line of the changes between rising rental demand, declining profitability, changing regulations, and the nationwide housing shortage. The property managers that have embraced new technology has fundamentally transformed their interactions with residents, owners, and employees. The demographics of the real estate cycle has reshaped their local markets and their clients’ portfolios.

Any one of these things alone would be a big change. Combined, these forces—along with the immediate demands of their owners and residents—are reshaping the role of the property manager.

Let’s take a look at the 4 forces that are changing property management in 2020, and what property managers can do to survive (and thrive) in the year to come.

1. Property managers will take on a more consultative role for their clients as new regulations put immense pressure on profitability.

Housing affordability made headlines all throughout the past year. As housing costs burden a troubling number of residents, policies are being pushed to more strictly regulate rental markets and may be on the table in cities and states across the country in 2020. This year, property managers may face the challenge of balancing the profit margin of their clients’ investments with rent prices that keep units filled with qualified residents, all while adhering to any new fair housing laws that get passed.

It remains to be seen which cities and states will be next to pass regulations to address housing affordability; but so far, rent control policies have been passed into law in California, New York, and Oregon. Property managers operating in cities where rent growth has outpaced income growth have the highest potential of getting targeted by these laws.

How Should Property Managers Respond?

Many property managers fear that regulatory changes will damage the appeal of investing in rental properties at a time when profitability is already a battle. But in all of this complexity, there’s an opportunity for property managers: Despite the problems this may cause landlords in general, we think this will open the door for property managers to be more valued as a consultant in this legal landscape for rental owners. By staying on top of changes in their local market, property managers can market their expertise as a must-have resource for their clients’ businesses, helping them determine how to operate their properties legally and profitably no matter what the future holds.

2. Property managers’ local market expertise will be coveted by investors as high-yield markets shift rapidly.

Investment top picks are changing more as we reach the end of the current real estate cycle. As cap rates get smaller and regulations get pushed in large, primary markets, investors are discovering higher yields and faster growth in mid-sized cities and suburbs. However, as investors have rushed into thriving cities, prices have begun to balloon and cap rates are beginning to reduce. This has split investors’ interest between safe bets and each New Year’s latest and greatest new investing alternatives.

We expect that the escalating housing shortage and slowing population growth in traditionally popular cities will continue to drive real estate investors’ interest toward secondary markets in 2020. Cities that are thriving at this point in the cycle share favorable characteristics: strong job growth across multiple industries; housing costs that balance affordability for residents with price growth for investors; and population growth that eclipses that of primary markets.

What Should Property Managers do?

For property managers, awareness of local trends matters more than ever as profitability and affordability evolves in all cities. A good property manager can be an invaluable asset to local and remote investors alike by keeping a finger on their area’s pulse and ensuring that their properties are positioned to attract and retain high-quality residents. Property managers who are skilled in asset management and market analysis will be in high demand for investors looking for partners who are prepared and ready to adapt their portfolios to the changing rental market.

3. Property managers will need to balance the role of technology with the human touch in their customer experiences.

As technology continues its radical transformation of the real estate industry, innovations like automated showings, Bluetooth door locks, and online payments have saved property managers’ a lot of time each month. This time saving technology does come with a price of impersonal service and computer hacked properties that get rented by scam artists. Good property managers know that relationships are still at the heart of being a professional landlord —it just takes some extra thought to ensure that technology doesn’t interfere with the human connection that used to be an inherent aspect of a property managers’ job.

This issue is on property managers’ minds now more than ever as landlords have begun to discover these new technologies for themselves. Property managers are working harder to win over potential clients who believe that this new technology is all they need to manage their own rentals remotely. Still, so much of what property managers do requires a flesh and blood person: Their personal expertise makes a quantifiable difference through keeping units filled with great residents, handling expensive maintenance emergencies, improving properties’ profitability, and freeing up property owners’ time.

Across all industries, it’s never been more important for businesses to reinvent their strategies to account for their customers’ concerns and preferences. Technology has become a way of life and having so much information, so easily accessible, drastically changes the expectations of consumers. Today’s renters (and owners) expect real-time responses and solutions, and are dissatisfied when property managers don’t provide the personalized level of service they’ve grown accustomed to in other areas of their lives.

What Should Property Managers do?

The property managers who succeed in this new decade will be those who provide an empathy-driven, tech-enabled experience to their clients. Automation frees up property manager to deal with higher priority concerns, like improving the amount and quality of the interactions they have with their customers, and providing personalized services to reinforce the importance of relationships to their business. Property managers know that the human element of their jobs is key —the trick in 2020 will be to let technology enhance, not replace, relationships in the right proportion.

4. A softening housing market will create a surge of interest in renting and the property management profession.

In 2020, we expect the housing market to slow and the rental market to thrive—but the picture is more complicated than a shift in demand from owning to renting, and could have some unexpected impacts for property managers.

Here’s what’s going on:

For years, there’s been a mismatch between the housing that a majority of renters and buyers need, and the type and amount of housing that’s actually being built. Markets across the country are seeing a surplus of luxury housing, which is more profitable for developers in the face of rising construction costs. At the same time, there’s an estimated shortfall of 1 million low- and mid-priced units, which has caused prices to rise on the limited supply of affordable homes.

Housing affordability shows no signs of getting better, even with a recession predicted by 2021. As the economy softens, strong demand for the limited supply of homes could continue to drive prices up. In another scenario, demand for homes could drop as a recession stops even more Americans from being able to afford rising prices—causing home sales and prices to flatten or fall, but failing to impact the relative affordability of housing for the average American. In addition, a recession could slow the rate of construction on non-luxury housing even further.

A recession won’t damage renting’s popularity. More Americans are renting their homes than ever before, both because of the flexibility it provides, and financial realities that prevent many from becoming homeowners. Economic uncertainty could cause even more Americans to hold off on buying a home. All in all, 1 million new rental households are expected to form each year over the next decade.

A recession will worsen the housing shortage, causing problems for property managers, owners, and renters alike. Half of renter households are already struggling to afford housing costs, and the shortage of low- and middle-income units under construction will continue to push up prices, potentially worsening when a recession hits. Rental demand is stronger than ever—for a very specific kind of housing. Property managers whose units warrant rents higher than the average resident can afford may have a hard time finding qualified tenants.

Rental demand is stronger than ever—for a very specific kind of housing.

How Should Property Managers Respond?

As interest in renting continues to rise, two things could happen. First, property managers whose portfolios focus on affordable and workforce housing will see a steady stream of income and strong occupancy rates as they give millions of Americans a place to call home. Property managers who go a step further to create an empathy-driven, tech-enabled experience for residents will see the benefits in the form of lease renewals and referrals in the years to come, helping to ease profitability concerns.

Second, the thriving rental market could attract new professionals to the property management industry. Many small-business property managers are already concerned about the onslaught of industry consolidation and DIY landlords managing their rentals with apps; so the potential for new property managers entering the field at this point in time can feel like a threat.

However, it’s important to remember that today’s property managers know the opportunities and challenges of this industry inside and out. In 2020, the property managers who win will be those who are at the forefront of these changes, leveraging their hard-won expertise to help their clients to stay profitable in a shifting market, and approaching customer service with equal parts technology and empathy.