Section 8 Fair Market Rent (FMR) for ZIP 35405 - 2027

Investment Score for ZIP 35405

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	$1,070
1 Bedroom	$1,070
2 Bedrooms	$1,280
3 Bedrooms	$1,610
4 Bedrooms	$1,680
5 Bedrooms	$1,949
6 Bedrooms	$2,183
7 Bedrooms	$2,358
8 Bedrooms	$2,476

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	$1,280	$178,297	0.72%	D
3BR	$1,610	$242,617	0.66%	D
4BR	$1,680	$323,664	0.52%	F
5BR	$1,949	$388,922	0.5%	F

Demographics & Housing Statistics

U.S. Census Bureau data (2024)

### Market Analysis for ZIP Code 35405 (Tuscaloosa, AL) #### Section 8 Voucher Dynamics The Fair Market Rent (FMR) for ZIP code 35405 in Tuscaloosa, AL, is set at $1300 for a two-bedroom unit in 2026. This figure represents 25.0% of the median household income in the area, which is $62,301. However, the actual rental market dynamics suggest that the price-to-FMR ratio for a two-bedroom unit is approximately 11.2x the Zillow median home value of $175,030. This implies that the average rent for a two-bedroom unit is likely much higher than the FMR, potentially around $14,600 annually ($1300 x 11.2). Given these figures, there is a significant gap between the FMR and the actual rents. For voucher holders, this means they would face substantial out-of-pocket expenses to cover the difference between the FMR and the actual rent. The constraints for voucher holders are thus quite high, as they would need to find landlords willing to accept the lower FMR rates or have additional financial resources to supplement their voucher amount. #### Affordability & Renter Profile ZIP code 35405 has a population of 49,420, with 45.6% of households being renters. This indicates a substantial demand for rental properties in the area. The occupancy rate of 90.4% suggests that the rental market is relatively tight, with few vacant units available. Given the median household income of $62,301, the majority of renters are likely to be individuals and families who rely on the FMR to manage their housing costs. However, the high price-to-FMR ratio of 11.2x for a two-bedroom unit implies that the market is not particularly affordable for low-income renters. The average rent for a two-bedroom unit, estimated at $14,600 annually, would require a significant portion of a household’s income, especially if they are already paying 25.0% of their income towards rent. This tight market dynamic could lead to increased competition among renters, driving up rents further. #### Investor Angle From an investor perspective, the ZIP code 35405 presents a mixed picture. The FMR for a two-bedroom unit is $1300, but the actual rents are likely much higher due to the price-to-FMR ratio. If we assume that investors aim to achieve cash flow positive properties, they would need to ensure that the rental income exceeds the total cost of ownership, including mortgage payments, property taxes, insurance, maintenance, and other expenses. Given the Zillow median home value of $175,030 for a two-bedroom unit, an investor might consider purchasing a property in this range. However, the actual rent would need to be significantly higher than the FMR to generate positive cash flow. Assuming a conservative estimate of 1.5x the FMR for rental income, the monthly rent would be around $1950, which is still below the likely actual market rent of $14,600 annually. Therefore, the potential for positive cash flow exists, but it depends heavily on the ability to secure higher rents. The investment grade for this ZIP code can be considered moderate. While there is a strong demand for rental properties, the high price-to-FMR ratio indicates that affordability is a challenge. Investors should carefully evaluate the local rental market conditions and the willingness of landlords to accept Section 8 vouchers before making any investment decisions. #### Specific Actionable Insights 1. **Target Properties Below FMR**: Investors should focus on acquiring properties that can be rented at or slightly above the FMR levels. For example, targeting a two-bedroom unit at $1300-$1400 per month could make the property more attractive to voucher holders and reduce the risk of vacancy. 2. **Understand Local Rental Market Conditions**: Conduct a thorough analysis of the local rental market to understand the supply and demand dynamics. This includes identifying the number of vacant units, the average rental duration, and the types of properties that are most sought after by renters. 3. **Engage with Local Landlords and Property Managers**: Building relationships with local landlords and property managers can provide valuable insights into the acceptance of Section 8 vouchers. Engaging with them can also help in understanding the challenges and opportunities associated with renting to voucher holders. #### Bottom Line For Section 8-focused investors, the recommendation for ZIP code 35405 is to **Hold**. The market is tight, with a high occupancy rate and significant demand for rental properties. However, the high price-to-FMR ratio poses challenges for affordability, and securing tenants who can only pay the FMR may be difficult. Investors should proceed cautiously, focusing on properties that can be rented at or near the FMR levels and building a network of local landlords and property managers to navigate the complexities of the rental market.

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.