Section 8 Fair Market Rent (FMR) for ZIP 35401 - 2027

Investment Score for ZIP 35401

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	$930
1 Bedroom	$940
2 Bedrooms	$1,120
3 Bedrooms	$1,410
4 Bedrooms	$1,470
5 Bedrooms	$1,705
6 Bedrooms	$1,910
7 Bedrooms	$2,063
8 Bedrooms	$2,166

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	$940	$218,786	0.43%	F
2BR	$1,120	$231,434	0.48%	F
3BR	$1,410	$212,140	0.66%	D
4BR	$1,470	$312,287	0.47%	F
5BR	$1,705	$870,657	0.2%	F

Demographics & Housing Statistics

U.S. Census Bureau data (2024)

### Market Analysis for ZIP Code 35401 (Tuscaloosa, AL) #### Section 8 Voucher Dynamics The Fair Market Rent (FMR) for ZIP code 35401 is set by HUD for the year 2026. For a two-bedroom unit, the FMR is $1130, which represents 46.5% of the median household income of $29,152. This suggests that the rent is relatively affordable for the average resident. However, the actual rental market in Tuscaloosa can be quite different. The FMR is designed to ensure that voucher holders can find suitable housing, but it often falls short of covering the true cost of renting in many areas. In ZIP 35401, the actual rents are significantly higher than the FMR. For instance, the Zillow median price for a two-bedroom home is $229,106, which translates into a monthly rental cost of approximately $16.9 times the FMR. This means that the actual rent for a two-bedroom unit could be around $19,161 per month, which is far beyond what a typical Section 8 voucher holder can afford. Consequently, voucher holders face significant constraints in finding housing that fits within their budget. They must either settle for lower-quality units or seek assistance through other programs to bridge the gap between the FMR and actual market rates. #### Affordability & Renter Profile ZIP 35401 has a high percentage of renters at 73%, indicating a strong demand for rental properties. The occupancy rate of 72.8% suggests that while there is a good amount of housing stock, it is not entirely filled, leaving some room for new rentals. Given the median household income of $29,152, the majority of residents are likely to be low-income families, students, or individuals who rely on government assistance such as Section 8 vouchers. The tight market conditions, combined with the high proportion of renters, create a challenging environment for those seeking affordable housing. With the FMR being only a fraction of the actual rental costs, the affordability gap is substantial. The high renter percentage also implies that there is a significant portion of the population that is already struggling to find suitable housing, making it even harder for voucher holders to secure a place to live. #### Investor Angle From an investor's perspective, the ZIP code 35401 presents both opportunities and challenges. The FMR for a two-bedroom unit is $1130, but the actual rental price is much higher, around $19,161 per month based on the Zillow median price. This means that if an investor were to purchase a property and rent it out at the FMR, they would likely not achieve positive cash flow due to the high acquisition costs. However, the high demand for rental properties and the large number of renters could still make this area attractive for investors willing to cater to the broader market. If an investor focuses on properties that are slightly above the FMR but still within reach of middle-income renters, they might find a balance between affordability and profitability. Given the high price-to-FMR ratio of 16.9x, the investment grade for properties in this ZIP code is likely to be moderate to low, especially for those targeting Section 8 voucher holders. The primary challenge is the significant difference between the FMR and the actual market value, which can make it difficult to find a profitable niche solely within the Section 8 program. #### Specific Actionable Insights 1. **Target Middle-Income Renters**: Since the FMR is significantly lower than the actual market rent, investors should consider targeting middle-income renters who can afford higher rents but still need affordable options. This could involve purchasing properties at a price point where the monthly rental income is closer to the actual market rate but still offers a competitive advantage over luxury rentals. 2. **Focus on Property Quality**: Given the high demand and limited supply, investors should focus on improving the quality of their rental properties to attract tenants who are willing to pay more than the FMR. This could include renovations, upgrades, and ensuring that the property meets modern living standards, which can justify a higher rent. #### Bottom Line For Section 8-focused investors, the recommendation is to **skip** ZIP 35401. The high price-to-FMR ratio indicates that the actual rental costs far exceed the FMR, making it difficult to find properties that offer positive cash flow when rented exclusively to voucher holders. Instead, investors should consider areas with a lower price-to-FMR ratio or explore strategies that target middle-income renters who can afford higher rents but still benefit from more affordable options. Overall, while there is a strong rental market in Tuscaloosa, the current dynamics make it less favorable for investors looking to capitalize specifically on the Section 8 program.

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.