Section 8 Fair Market Rent (FMR) for ZIP 35242 - 2027

Investment Score for ZIP 35242

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	$1,440
1 Bedroom	$1,540
2 Bedrooms	$1,680
3 Bedrooms	$2,110
4 Bedrooms	$2,370
5 Bedrooms	$2,749
6 Bedrooms	$3,079
7 Bedrooms	$3,325
8 Bedrooms	$3,491

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
2BR	$1,680	$277,115	0.61%	D
3BR	$2,110	$408,228	0.52%	F
4BR	$2,370	$635,212	0.37%	F
5BR	$2,749	$863,525	0.32%	F

Demographics & Housing Statistics

U.S. Census Bureau data (2024)

### Market Analysis for ZIP Code 35242 (Birmingham, AL) #### Section 8 Voucher Dynamics The Fair Market Rent (FMR) for ZIP code 35242 in Shelby County, Birmingham, AL, is set by HUD for 2026. For a two-bedroom apartment, the FMR is $1800 per month. This represents 18.5% of the median household income of $117,047 in the area. However, the actual rental market in ZIP 35242 is significantly higher. The Zillow median price for a two-bedroom home is $274,742, which translates to a monthly mortgage payment of approximately $1,374 based on a 4.5% interest rate over 30 years. Adding property taxes, insurance, and maintenance costs can easily push the total monthly cost above the FMR. Given that the price-to-FMR ratio is 12.7x, it suggests that the actual market rent for a two-bedroom unit is around $22,860 annually, or roughly $1,905 per month. This is substantially higher than the FMR, indicating that Section 8 voucher holders face significant constraints in finding affordable housing within their budget. They would likely need to look outside the ZIP code or consider smaller units where the FMR is lower. #### Affordability & Renter Profile ZIP 35242 has a population of 57,374, with 26.8% being renters. The occupancy rate stands at 94.3%, suggesting a relatively tight rental market with limited availability. Given the high median household income of $117,047, most residents have the financial means to afford market-rate housing. However, the 26.8% of renters might include individuals or families who rely on Section 8 vouchers to manage their housing expenses. The high median household income and low percentage of renters indicate that the ZIP code is primarily occupied by homeowners. This makes it challenging for Section 8 voucher holders to find suitable rental properties within the FMR limits. The high occupancy rate also implies that there is little room for new rentals to enter the market, further tightening the supply. #### Investor Angle From an investor perspective, the ZIP code presents a mixed picture. The actual market rent for a two-bedroom unit is estimated to be around $1,905 per month, while the FMR is only $1800. This difference suggests that landlords who accept Section 8 vouchers could potentially see reduced cash flow compared to those renting at market rates. However, the demand for affordable housing is still present, given the 26.8% of renters. Investors should consider the long-term stability and predictability of rental income from Section 8 tenants, who typically have reliable sources of income and are less likely to default on rent payments due to the government subsidy. The investment grade for this ZIP code would be moderate to low, considering the high price-to-FMR ratio and the tight rental market. Investors looking to maximize returns might find better opportunities in areas with a lower price-to-FMR ratio or higher vacancy rates. #### Specific Actionable Insights 1. **Focus on Smaller Units**: Given the high price-to-FMR ratio, investors should focus on developing or acquiring smaller units such as one-bedroom apartments. The FMR for a one-bedroom unit is $1640, which is closer to the actual market rent. This would provide better cash flow and a higher likelihood of finding tenants willing to pay the FMR. 2. **Consider Adjacent ZIP Codes**: Since the rental market in ZIP 35242 is tight, investors might want to explore adjacent ZIP codes with similar demographics but a lower price-to-FMR ratio. This would allow them to offer affordable housing while still maintaining a reasonable profit margin. 3. **Government Subsidies**: Investors should leverage any available government subsidies or programs aimed at increasing affordable housing stock. This could help offset some of the financial constraints associated with accepting Section 8 vouchers. #### Bottom Line For investors focusing on Section 8 properties, the recommendation for ZIP 35242 is to **Skip**. The high price-to-FMR ratio and tight rental market make it difficult to achieve positive cash flow while adhering to FMR guidelines. Instead, investors should consider ZIP codes with a lower price-to-FMR ratio and higher vacancy rates to ensure better financial outcomes.

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.