Property Management: A Pocket History – PART I

Earth’s first tenants—Adam and Eve—were tragically evicted from the Garden of Eden, unleashing no shortage of pain and suffering for mankind. But think about it: Perhaps if God had a good property manager he would have found better tenants and avoided this original tragedy. That’s a bit silly, of course. But our point is that there’s a lot that property managers can learn from history that has everyday implications.

A Look Back

Landlords and tenants go back a long way—medieval feudalism was based on the relationship, for example—and property managers are for the most part a very recent development. But the evolution of the profession is interesting—and revealing.

How did it start? The Garden of Eden aside, the job of property manager in the U.S evolved from owner-managers in the 19th century, to caretaker managers in the early 20th, and then to professional managers and, finally, to the “income maximizer” that every modern manager must be, or think about being, today. (And, of course, the property management fees that go along with all that.)

Economic research has shown that management quality is one of the biggest drivers in residents’ apartment choices, and it is clearly critical to a property owner’s income and asset preservation. So a brief look at the evolution of property management—and its four major eras—is almost required reading. As the saying goes, you can’t know where you’re going until you know where you’ve been.

Briefly, the evolution of the property manager’s role, responsibilities and requisite skills was driven by and large by urbanization that led to demand for rental housing. After that? Demand for regulations grew and real estate assets became more complex according to professors Rosemary Carucci Goss of Virginia Tech University and Howard Campbell of Ball State University.

Now, sit back and enjoy the first part of our history lesson.

Owner Managers: The 19th Century

Because of urbanization and immigration that accelerated in the mid-19th century, there was suddenly enormous demand for housing in cities and not enough supply, so managers, who usually owned the property—merely had to collect rent and do only the most crucial repairs necessary. They had no incentive to make tenants happy–and tenants who found the service wanting could just hit the road. After all, there were plenty of others to replace them.

Think of tenements on New York City’s Lower East Side and in San Francisco around 1900, buildings that had once been single-family dwellings but were quickly subdivided into multiple apartments to keep up with the demand. They were cramped, poorly lit, and lacking plumbing or ventilation. (Of course, like many areas in the East Bay now, there was a feeding frenzy for these places because the demand was overwhelming. Who needs ventilation?)

But the awful conditions led to better things for tenants before World War I: new regulations emerged to improve living conditions and guarantee them some minimum level of livability. At the same time, there was a period of rapid residential construction from around 1900 until World War I—and again in the 1920s. That significantly increased the number of apartment buildings and even created rentals for middle-income and wealthy families. Such apartments needed to be marketed as places of comfort and quality if they had any hope of attracting tenants. Slowly, it dawned on these owner-managers that they had to make a few changes.

Ladies and Gentlemen: Introducing the Caretaker Manager

Over time, many owners had purchased enough properties that it was impossible to self-manage them. Enter the caretaker manager, who could collect the rent from tenants, do repairs to the property and serve as liaison between the owner and tenants. Often this person was a tenant himself and performed these services in lieu of rent. (You know, the guy in the basement apartment.)

Due to the Great Depression, many apartment owners defaulted and banks—who held the loans—suddenly had large rental property portfolios owners. They weren’t capable of managing these new assets on their own. They needed pros who specialized in haggling with renters and contractors and plumbers and the oil delivery guys.

Thus, in 1933, the Institute of Real Estate Management was born. In addition, the federal government, which was building affordable housing through the new Public Works Administration, needed trained housing managers. Many historians—and there are historians who study such things—date the birth of the professional property manager to this era.

With the growth of automobiles after the war, garden apartments emerged in suburbs as a very popular type of rental. But their complexity—with modern kitchens and appliances, air conditioners and landscaping—required managers and substantial maintenance staff. These managers had to do much more than just collect rent.

And with the societal changes of the 1960s and 1970s, as people moved around more and rented apartments for shorter periods, property managers gradually had to take on the additional jobs of marketing and leasing new apartments.

NEXT UP: Sales and Marketing Managers grow into Income Maximizers…

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