Section 8 Fair Market Rent (FMR) for ZIP 10940 - 2027

Investment Score for ZIP 10940

Based on 1% Rule: A+ (≥1.5%) | A (≥1.2%) | B (≥1.0%) | C (≥0.8%) | D (≥0.6%) | F (<0.6%)

FY 2027 Fair Market Rent Rates

Unit Size	Monthly FMR
Studio	$1,500
1 Bedroom	$1,680
2 Bedrooms	$2,160
3 Bedrooms	$2,720
4 Bedrooms	$2,860
5 Bedrooms	$3,318
6 Bedrooms	$3,716
7 Bedrooms	$4,013
8 Bedrooms	$4,214

Investment Analysis by Bedroom Size

Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)

Bedrooms	Monthly FMR	Median Price	1% Rule	Grade
1BR	$1,680	$210,823	0.8%	D
2BR	$2,160	$307,931	0.7%	D
3BR	$2,720	$402,499	0.68%	D
4BR	$2,860	$500,597	0.57%	F
5BR	$3,318	$492,666	0.67%	D

Demographics & Housing Statistics

U.S. Census Bureau data (2024)

### Market Analysis for ZIP Code 10940 (Middletown, NY) #### Section 8 Voucher Dynamics The Fair Market Rent (FMR) for ZIP code 10940 in Middletown, NY, is set by HUD for 2026. For a two-bedroom unit, the FMR is $2,050. This figure represents 28.2% of the median household income of $87,080, indicating that it is a reasonable rent amount relative to the local economy. However, the actual rental market in Middletown presents a different picture. The Zillow median price for a two-bedroom home is $300,682, which translates into a price-to-FMR ratio of 12.2 times. This means that the cost of purchasing a property is significantly higher compared to what the FMR suggests as a fair rental rate. Given the high price-to-FMR ratio, landlords who participate in the Section 8 program must carefully consider their costs. If they purchase a property at the median price, they would be renting it out for a fraction of its value, potentially leading to financial strain. Additionally, the voucher holders are constrained by the FMR limits, meaning they can only afford units up to $2,050 per month for a two-bedroom apartment. This could limit their housing options if many landlords do not accept vouchers due to the low rental rates compared to the high property values. #### Affordability & Renter Profile In Middletown, NY, 38.4% of the population are renters, indicating a significant portion of the community relies on rental housing. With a median household income of $87,080, the average renter in this area should theoretically be able to afford the FMR rates. However, the occupancy rate of 94.7% suggests that the rental market is relatively tight, with most available units being occupied. This tightness could drive up actual rental prices, making it difficult for voucher holders to find affordable housing options within the FMR limits. The median income of $87,080 implies that the typical resident has a decent standard of living, but the high price-to-FMR ratio indicates that the cost of homeownership is disproportionately high. This could lead to a situation where many residents choose to rent rather than buy, further tightening the rental market and increasing competition for units. For voucher holders, this means they might struggle to find suitable housing, especially since the FMR for a three-bedroom unit is $2,600, which is still below the median income but may not cover the actual rental costs in a competitive market. #### Investor Angle From an investor’s perspective, the ZIP code 10940 offers a mixed outlook. While the FMRs provide a guideline for rental rates, the actual market conditions suggest that properties are priced much higher than what the FMR would indicate as a fair rental rate. For instance, a two-bedroom unit priced at $300,682 would have a monthly mortgage payment of approximately $1,500 (assuming a 30-year fixed-rate mortgage at 4.5% interest). Adding property taxes, insurance, maintenance, and other expenses, the total cost of ownership could easily exceed the FMR of $2,050. However, the high occupancy rate of 94.7% suggests that there is strong demand for rental properties, which could support higher rental rates. But for investors focusing solely on Section 8 vouchers, the FMR caps present a challenge. They would need to ensure that their costs align with the FMR rates to avoid financial losses. Given the high price-to-FMR ratio, it is likely that many investors would find it difficult to achieve positive cash flow without charging above the FMR, which is not permissible under the Section 8 program. The investment grade for this ZIP code would be considered moderate to low for Section 8-focused investors. The high property values and tight rental market make it challenging to secure a positive cash flow while adhering to the FMR guidelines. Investors might find better opportunities in areas with lower property values and a higher proportion of units rented at or below the FMR. #### Specific Actionable Insights 1. **Focus on Smaller Units**: Given the high price-to-FMR ratio, investors should focus on smaller units such as one-bedroom apartments. The FMR for a one-bedroom unit is $1,600, which is lower than the median income but still within reach for many residents. This could help mitigate some of the financial risks associated with higher property values. 2. **Consider Rental Assistance Programs**: Investors should explore other rental assistance programs beyond Section 8. Some local programs may offer higher subsidies or fewer restrictions, allowing for better alignment between rental income and property costs. 3. **Evaluate Property Value Trends**: Before investing, it is crucial to analyze recent trends in property values. If property values continue to rise, the gap between FMR and actual rental prices will widen, making it even harder to achieve positive cash flow. Investors should look for signs of stabilization or decline in property values to improve their chances of success. #### Bottom Line For investors focused on the Section 8 program, the ZIP code 10940 (Middletown, NY) is a **Skip** recommendation. The high price-to-FMR ratio makes it challenging to achieve positive cash flow while adhering to the FMR guidelines. The tight rental market and high occupancy rate also suggest that finding tenants willing to accept Section 8 vouchers could be difficult. Investors should consider other ZIP codes with lower property values and a higher proportion of units rented at or below the FMR to maximize their chances of success.

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.