Location: Chattanooga, TN | Metro: Chattanooga, TN-GA 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 | $1,290 |
| 1 Bedroom | $1,340 |
| 2 Bedrooms | $1,460 |
| 3 Bedrooms | $1,810 |
| 4 Bedrooms | $1,920 |
| 5 Bedrooms | $2,227 |
| 6 Bedrooms | $2,494 |
| 7 Bedrooms | $2,694 |
| 8 Bedrooms | $2,829 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $1,340 | $247,734 | 0.54% | F |
U.S. Census Bureau data (2024)
The Section 8 thesis in ZIP code 37402 is centered around the significant gap between the Fair Market Rent (FMR) and the actual market rent. For fiscal year 2024, the FMR stands at $1160, while the market rent, as measured by ZORI, is $1,511. This means there is a gap of $351, or approximately 30%, between what the government considers fair rent and the prevailing market rate.
In ZIP 37402, where 95.0% of residents are renters, the median home value is $441,726, indicating a relatively high cost of living. However, the median income is only $24,214, which underscores the financial challenges faced by many renters in this area.
Given that the FMR is lower than the market rent, landlords who accept housing vouchers must be prepared to rent their properties below open-market rates. This discrepancy can lead to reduced rental income per unit, potentially affecting overall portfolio yields. The decision to participate in the Section 8 program should be carefully weighed against the potential for higher vacancy rates in the open market due to the high cost of living relative to the median income.
Despite the lower rental income, the stability provided by the Section 8 program can be attractive to landlords. Voucher tenants often have a reliable source of funding for their rent through the government, reducing the risk of unpaid rent and eviction. This makes it a strategic choice for landlords seeking steady cash flow over potentially higher but less certain rental income.
To summarize, the gap between FMR and market rent in ZIP 37402 presents both opportunities and challenges. Landlords must consider the trade-offs between accepting vouchers and renting at market rates, especially given the local economic context. The analysis reveals that landlords could see a reduction of $351 per month per unit if they choose to participate in the Section 8 program, which equates to a 23% discount off the market rent.
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.