Location: Newark, NJ | Metro: Newark, NJ HUD Metro FMR Area
Based on 1% Rule: A+ (≥1.5%) | A (≥1.2%) | B (≥1.0%) | C (≥0.8%) | D (≥0.6%) | F (<0.6%)
| Unit Size | Monthly FMR |
|---|---|
| Studio | $2,160 |
| 1 Bedroom | $2,440 |
| 2 Bedrooms | $2,940 |
| 3 Bedrooms | $3,670 |
| 4 Bedrooms | $4,200 |
| 5 Bedrooms | $4,872 |
| 6 Bedrooms | $5,457 |
| 7 Bedrooms | $5,894 |
| 8 Bedrooms | $6,189 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $2,440 | $365,515 | 0.67% | D |
| 2BR | $2,940 | $559,991 | 0.53% | F |
| 3BR | $3,670 | $799,638 | 0.46% | F |
| 4BR | $4,200 | $1,270,306 | 0.33% | F |
| 5BR | $4,872 | $1,860,680 | 0.26% | F |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP 07042 (Montclair, NJ) provides insight into the potential returns for landlords and small-portfolio investors considering participation in the program. To begin, let's look at the Fair Market Rent (FMR) for a 2-bedroom apartment, which is set at $2560 annually for Fiscal Year 2024. This translates to a monthly rental income of $213.33 under the Section 8 program. Using the median home value of $929,121, the implied gross yield for a Section 8 property would be approximately 2.7%. The calculation is straightforward: $213.33 multiplied by 12 months equals $2560, divided by $929,121, and then multiplied by 100 to get the percentage.
On the other hand, the market rent for a 2-bedroom apartment in Montclair, NJ, as indicated by Zillow's ZORI index, stands at $2,935 per month. This annualizes to $35,220, resulting in an implied gross yield of about 3.8%. This higher yield reflects the premium that landlords can potentially earn by renting out their properties at market rates instead of participating in the Section 8 program.
Given the 53.3% renter density in Montclair, it is evident that there is a substantial demand for rental housing, which supports the possibility of achieving market rents. However, the lack of data regarding the days on market (DOM) makes it challenging to assess how quickly properties might be leased at these rates. Despite this, the disparity between the two gross yields—2.7% for Section 8 versus 3.8% for market rent—is significant and suggests that landlords could achieve higher returns by renting at market rates.
However, it's important to consider that Section 8 offers guaranteed income through federal subsidies, reducing the risk associated with vacancy and delinquency. In contrast, market rent scenarios depend heavily on the local rental market conditions and tenant availability. For those who prioritize stability over maximizing gross yield, Section 8 may still present a compelling option.
In conclusion, while the market rent scenario offers a higher gross yield, the Section 8 program provides a more predictable income stream. Landlords should weigh these factors carefully when deciding whether to participate in the Section 8 program or seek higher returns through market-rate rentals.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-07-31). Demographics from U.S. Census (2024).
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.