Location: Erie, PA | Metro: Erie, PA MSA
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 | $880 |
| 1 Bedroom | $1,000 |
| 2 Bedrooms | $1,270 |
| 3 Bedrooms | $1,580 |
| 4 Bedrooms | $1,860 |
| 5 Bedrooms | $2,158 |
| 6 Bedrooms | $2,417 |
| 7 Bedrooms | $2,610 |
| 8 Bedrooms | $2,741 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,270 | $212,609 | 0.6% | F |
| 3BR | $1,580 | $261,823 | 0.6% | D |
| 4BR | $1,860 | $343,400 | 0.54% | F |
| 5BR | $2,158 | $428,991 | 0.5% | F |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 16509 in Erie, Pennsylvania, reveals an interesting scenario when comparing the Fair Market Rent (FMR) to the market rent. For a two-bedroom property, the FMR set by HUD for fiscal year 2024 is $1,120 per month, while the Zillow Observed Rental Index (ZORI) indicates a market rent of $1,250 per month.
To calculate the gross yield, we annualize these figures and compare them to the median home value of $261,960. The annualized FMR for a two-bedroom unit would be $13,440 ($1,120 x 12), resulting in a gross yield of approximately 5.13%. This is derived by dividing the annual rent by the median home value: $13,440 / $261,960 = 0.0513 or 5.13%. On the other hand, the annualized market rent of $1,250 per month amounts to $15,000 annually, leading to a gross yield of about 5.72%: $15,000 / $261,960 = 0.0572 or 5.72%.
The gross yield comparison clearly shows that renting to Section 8 tenants at the FMR rate yields a lower return compared to renting at the market rate. However, the decision between the two rates should also consider the local rental market dynamics, particularly the high renter density of 31.3% in ZIP 16509. This suggests a robust demand for rental properties, potentially favoring the market rent rate. Additionally, the N/A-day DOM (Days on Market) implies either very quick turnover or a lack of comprehensive data on how long properties typically remain unsold, which could indicate a highly competitive rental market.
Given the higher renter density, it is reasonable to assume that market rents are more likely to be achieved in practice, leading to a more favorable gross yield of 5.72%. Landlords and small-portfolio investors should weigh the benefits of the slightly higher yield against the potential administrative burdens and income stability provided by Section 8 tenancy. However, the data supports a stronger case for achieving the market rent, thus providing a higher gross yield.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-08-31). 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.