Section 8 Fair Market Rent (FMR) for ZIP 02203 - 2027

FY 2027 Fair Market Rent Rates

The analysis for ZIP code 02203, located in Cambridge, Massachusetts, reveals some key insights into the potential returns for landlords and small-portfolio investors interested in Section 8 properties. The Fair Market Rent (FMR) for a two-bedroom apartment in this area, as determined by HUD for fiscal year 2024, is set at $3560 annually.

Given that the median home value for ZIP 02203 is not available, we cannot directly calculate the cap rate based on property values. However, we can still derive an implied gross yield using the annualized FMR figure. Assuming a typical two-bedroom property could be purchased for a price reflective of the local market, the $3560 annual rental income would provide a baseline for calculating potential yields.

In the absence of market rent data, it's important to consider the broader housing market dynamics. Cambridge, known for its high cost of living and limited housing stock, often sees rental rates above the FMR. This suggests that landlords might achieve higher gross yields if they can secure market rents rather than relying solely on Section 8 rates.

The implied gross yield from the Section 8 FMR can be estimated by dividing the annual rental income by the hypothetical purchase price. For example, if a property were to be bought for $500,000, the implied gross yield would be 0.71% ($3560 / $500,000). This figure is purely illustrative without the actual median home value.

Regarding the realism of these scenarios, the lack of specific data on renter density and days on market (DOM) makes it challenging to provide a precise assessment. However, historically, Cambridge has had a strong rental market due to its proximity to universities and high employment opportunities, suggesting that achieving market rents over time is feasible for many landlords.

In conclusion, while the Section 8 cap rate for ZIP 02203 cannot be definitively calculated due to missing data points, the implied gross yield based on the FMR provides a conservative estimate for potential returns. Investors should also consider the possibility of achieving higher market rents, which would significantly improve the gross yield and overall investment performance.

Data Sources: FMR data from HUD (2027).

About FMR: Fair Market Rent (FMR) is used to determine payment standards for the Section 8 Housing Choice Voucher program, initial renewal rents for some expiring project-based Section 8 contracts, and rent ceilings for HOME Investment Partnerships.