Question

Agent Alice is a property manager at A-1 apartments. She is creating an operating budget for the following year and should do which of the following to deal with renovation or modernization of the units?

a) Allocate a fixed percentage of income.

b) Ignore these costs for budgeting simplicity.

c) Seek additional funding from property owners.

d) Pass all costs to the tenants.

Answer 1

Agent Alice should allocate a fixed percentage of income in the operating budget for renovations or modernization to ensure sustainable property maintenance and avoid lower housing quality due to insufficient maintenance spending.

Step-by-step explanation:

Agent Alice, the property manager of A-1 apartments, should address the need for renovations or modernization in the following year's operating budget. The most appropriate option among the choices provided would be to allocate a fixed percentage of income for these expenses. This method ensures that the funds for renovations are included in the budget, aligns with sound financial practices, and provides for sustainable property maintenance. By doing this, the negative effects that may come with price ceilings, such as poorer housing conditions due to landlords spending less on maintenance, can be mitigated.

Ignoring these costs for budget simplicity, seeking additional funding from property owners, or passing all costs to the tenants, can create financial strain, reduce housing quality, and may not be sustainable or equitable solutions. Additionally, renter-friendly policies such as price ceilings often result in unintended consequences, such as lower quality housing due to decreased investment in maintenance, so having a responsible budget that includes renovation costs is crucial.