First, why presume that the property manager didn't simply rent to someone who offered him more money? Large conference, expensive hotels and so on. Somebody who rented there before may have dealt directly with him, he rented to the other people and bumped OP. Has nothing to do with VRBO. This is the problem in dealing with any third-party you don't know. And there's nothing VRBO can really do other than maybe give the guy the boot.
Second, The property manager likely had no legal obligation to cover OP's consequential damages, but chose to. So, that is to the good. In most situations, OP would be out the $823 in extra costs.
Third, but having covered the extra costs, OP is definitely due the prepaid rental of $1,340. For whatever reason, the property manager went through PayPal for part of it. OP has an obligation to notify his CC issuer of that payment and thereby reduce his chargeback request to the balance.
Fourth, OP has a temporary credit in place and there is no sign that after investigation he won't get his permanent credit (although he really does make sure that there isn't a double credit in order to avoid the property manager screaming fraud).
Fifth, Who cares what the property manager says? The decision will be made by the CC issuer and they withold plenty from vendors such as this.
If OP does lose the chargeback, then he can consider a small claims action, but it's a hard case to make unless the OP can show a contractual obligation by the property manager to pick up the consequential additional costs. But, that's an "if" so quit worrying. Nothing bad has happened yet (beyond the original issue).