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 | $950 |
| 1 Bedroom | $960 |
| 2 Bedrooms | $1,200 |
| 3 Bedrooms | $1,500 |
| 4 Bedrooms | $1,730 |
| 5 Bedrooms | $2,007 |
| 6 Bedrooms | $2,248 |
| 7 Bedrooms | $2,428 |
| 8 Bedrooms | $2,549 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,200 | $240,824 | 0.5% | F |
| 3BR | $1,500 | $350,947 | 0.43% | F |
| 4BR | $1,730 | $432,905 | 0.4% | F |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP 37716 (Clinton, TN) reveals some interesting insights into potential investment returns. To start, let's annualize the Federal Market Rent (FMR) for a two-bedroom unit, which is set at $1050 per month for FY 2024. This translates to an annual rental income of $12,600. Given the median home value in Clinton, TN, is $334,794, the implied gross yield from the Section 8 FMR is approximately 3.76%. This is calculated by dividing the annual rental income by the median home value.
In contrast, the market rent for a two-bedroom unit is $951 per month, according to the Census ACS data. Annualizing this figure gives us an annual rental income of $11,412. Using the same median home value, the implied gross yield from market rent is about 3.41%. This is lower than the gross yield derived from the Section 8 FMR, indicating that Section 8 properties could potentially offer a higher return on investment compared to market-rate rentals.
However, the reality of the situation must be considered. The renter density in Clinton, TN, is 24.3%, suggesting a moderate demand for rental housing. Additionally, the Days on Market (DOM) for rentals is 30 days, which implies that units are typically occupied quickly once they become available. While these factors point towards a stable rental market, it is important to note that Section 8 properties come with their own set of challenges, such as stricter regulations and slower lease-up times due to the need for tenant approval through the program.
Given these conditions, the gross yield of 3.76% from the Section 8 FMR seems more theoretical than practical. In practice, landlords should expect a gross yield closer to the market rate of 3.41%, as the market reflects actual rental behaviors and demands. However, the stability and guaranteed income from the Section 8 program can offset the slightly lower gross yield, making it a viable option for risk-averse investors.
To summarize, while the Section 8 FMR suggests a gross yield of 3.76%, the market rent indicates a gross yield of 3.41%. Considering the local rental market dynamics, the latter is likely a more accurate reflection of what landlords can realistically expect. Nevertheless, the benefits of the Section 8 program, such as reduced vacancy risk and steady income, make it a compelling choice for certain investors.
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.