Location: Knoxville, TN | Metro: Knoxville, TN HUD Metro FMR Area
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 | $1,240 |
| 1 Bedroom | $1,250 |
| 2 Bedrooms | $1,560 |
| 3 Bedrooms | $1,950 |
| 4 Bedrooms | $2,240 |
| 5 Bedrooms | $2,598 |
| 6 Bedrooms | $2,910 |
| 7 Bedrooms | $3,143 |
| 8 Bedrooms | $3,300 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,560 | $248,588 | 0.63% | D |
| 3BR | $1,950 | $326,595 | 0.6% | F |
| 4BR | $2,240 | $593,573 | 0.38% | F |
U.S. Census Bureau data (2024)
The Section 8 thesis in ZIP code 37701, which encompasses Alcoa, Tennessee, centers around the significant disparity between the Fair Market Rent (FMR) and the actual market rent. For fiscal year 2024, the FMR is set at $1150, whereas the Zillow Observed Rent Index (ZORI) indicates a market rent of $1697. This means there is a gap of $547, or approximately 47%, between what the government considers fair market rent and the prevailing market rates.
Given that the FMR is less than the market rent, landlords and small-portfolio investors must be aware of the potential costs associated with housing voucher tenants at rates below the open-market level. The lower reimbursement rate from the government can result in reduced cash flow compared to renting to non-voucher tenants who pay market rates. However, the stability and security of having a government-backed rental program can offset some of these financial drawbacks.
In the specific context of Alcoa, TN, where 32.0% of residents are renters, and the median home value stands at $304,946, the median income of $66,132 suggests that many residents may struggle to afford market rents without assistance. Therefore, the attractiveness of Section 8 tenants lies in their consistent ability to pay rent through the voucher system, even if it means accepting a lower rate. The key decision point for investors will be whether the benefits of guaranteed tenancy outweigh the reduced rental income.
To summarize, while the FMR of $1150 is significantly below the market rent of $1697, the decision to participate in the Section 8 program should be based on a careful assessment of the trade-offs between income and tenant stability. The local economic conditions, including the high proportion of renters and relatively low median income, underscore the importance of considering both the risks and rewards of this investment strategy.
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.