Section 8 Fair Market Rent (FMR) for ZIP 37421 - 2027

Investment Score for ZIP 37421

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	$1,520
1 Bedroom	$1,590
2 Bedrooms	$1,730
3 Bedrooms	$2,140
4 Bedrooms	$2,270
5 Bedrooms	$2,633
6 Bedrooms	$2,949
7 Bedrooms	$3,185
8 Bedrooms	$3,344

Investment Analysis by Bedroom Size

Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)

Bedrooms	Monthly FMR	Median Price	1% Rule	Grade
2BR	$1,730	$273,258	0.63%	D
3BR	$2,140	$343,465	0.62%	D
4BR	$2,270	$439,686	0.52%	F
5BR	$2,633	$598,841	0.44%	F

Demographics & Housing Statistics

U.S. Census Bureau data (2024)

### Market Analysis for ZIP Code 37421 (Chattanooga, TN) #### Section 8 Voucher Dynamics The Fair Market Rent (FMR) for Chattanooga, TN, as defined by HUD for 2026, is set at $1830 for a two-bedroom unit. This amount represents 26.6% of the median household income in the area, which stands at $82,517. However, the actual rental market dynamics paint a different picture. The Zillow median price for a two-bedroom home in ZIP code 37421 is $275,334, which translates to a price-to-FMR ratio of 12.5x. This indicates that the actual market rent for a two-bedroom unit is likely much higher than the FMR, potentially creating significant constraints for Section 8 voucher holders. For instance, if the average market rent for a two-bedroom unit is $1830 * 12.5 = $22,875 per year, or approximately $1906 per month, voucher holders would struggle to find units that accept their vouchers due to the disparity between the FMR and market rates. #### Affordability & Renter Profile In ZIP code 37421, 39.8% of the population are renters, indicating a substantial demand for rental properties. With a high occupancy rate of 92.6%, the market appears to be relatively tight, suggesting limited availability of rental units. Given that the FMR for a two-bedroom unit is only 26.6% of the median household income, it implies that the majority of residents can afford market-rate housing, but there is still a significant portion who rely on affordable housing options such as Section 8 vouchers. This tight market could make it challenging for low-income renters to find suitable housing, especially since landlords might prefer higher-paying tenants over those using vouchers. #### Investor Angle From an investor perspective, the ZIP code 37421 offers mixed opportunities. The FMR for a two-bedroom unit is $1830, but the actual market rent is estimated to be around $1906 per month. To determine whether this ZIP code is cash-flow positive at FMR, we need to consider the typical expenses associated with rental properties, including mortgage payments, property taxes, insurance, maintenance, and other operational costs. Assuming a conservative estimate of 75% of the FMR being allocated to cover these expenses, the net cash flow would be $1830 - ($1830 * 0.75) = $457.50 per month. This suggests that while the FMR might provide some level of profitability, it is not particularly robust given the high market rent. The investment grade for this ZIP code can be assessed based on the demand for rental properties and the potential for long-term stability. With a high occupancy rate and a significant percentage of renters, the demand for rental properties is strong. However, the challenge lies in finding units that will accept Section 8 vouchers, given the high market rent. Investors should be prepared to compete with market-rate rentals and possibly offer amenities or services that attract voucher holders. #### Specific Actionable Insights 1. **Target Affordable Units**: Investors should focus on acquiring units that are priced closer to the FMR rather than market rates. This means looking for properties that are older or in less desirable locations where the rent is more likely to be accepted by voucher holders. For example, a one-bedroom unit at $1660 per month has a better chance of attracting Section 8 tenants compared to a two-bedroom unit at $1906 per month. 2. **Consider Property Enhancements**: Since the market rent is significantly higher than the FMR, investors might consider enhancing properties to increase their attractiveness to voucher holders. This could include basic renovations or improvements that do not drastically increase the cost but make the units more appealing. For instance, adding energy-efficient appliances or updating the kitchen and bathrooms could make a unit more competitive without pushing the rent above the FMR threshold. #### Bottom Line Given the high market rent and the tight rental market, the ZIP code 37421 presents a challenging environment for Section 8-focused investors. While there is a significant demand for rental properties, the gap between FMR and market rates makes it difficult to find units that will accept vouchers. Therefore, the recommendation for investors is to **Hold**. Investors should wait for changes in the market or policy adjustments that might narrow the gap between FMR and market rates, making it easier to find units that accept Section 8 vouchers. Alternatively, they could consider investing in areas with lower market rents or where the FMR is a larger proportion of the median household income, ensuring a more stable and profitable investment. --- This analysis provides a detailed overview of the rental market dynamics in ZIP code 37421, focusing specifically on how Section 8 vouchers fit into the broader context of affordability and investment potential. It highlights the challenges faced by both voucher holders and investors, offering practical insights and a clear recommendation based on the provided data.

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.