Vancouver Property Management and Affordability

If you are a residential property manager you must be aware of energy use. This applies to heating and lighting. However, there is also the issue of financial sustainability, and a residential property manager must know about that as well.

Canadian homeowners know about sustainability. For many years homeowners have taken the initiative in adopting measures to reduce heating costs. This has been motivated by rising energy costs. Cost is the motivation.

Homes built in the last half century have become more and more energy efficient. They use less energy than older homes. This occurs even though the homes are bigger as a rule.

Sustainable home ownership includes more than energy costs, however. Real estate must be financially sustainable. The term often used is "affordable housing".

Affordability in housing is a complex challenge. As the value of the house rises, the return on it drops. This occurs because purchases can be financed while rent cannot be.

This creates a conflict between the cash flow generated by tenant paid rent and the purchase price of the underlying asset. Real estate can command more than it's rental income justifies. Rents don't rise enough to keep up with the increase in purchase prices, so the cash flow on rental properties becomes unrealistic.

The people who invest in rental real estate accept these lower returns because the price of the asset keeps rising. They also hold because of emotion. Of course, tax and transaction costs also make it worthwhile to hold the property.

Classic economic theory holds that this should not occur. If rents do not justify purchase prices, rents should increase. When they cannot increase further, property prices should drop. Prices don't fall.

The result is an apparently unsustainable situation where tenants pay high rents. At the same time tenants pay huge rents. Still, tenants get a great deal when compared with what it would cost them to own.