Section 8 Fair Market Rent (FMR) for ZIP 38134 - 2027

Investment Score for ZIP 38134

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	$1,160
2 Bedrooms	$1,270
3 Bedrooms	$1,680
4 Bedrooms	$1,930
5 Bedrooms	$2,239
6 Bedrooms	$2,508
7 Bedrooms	$2,709
8 Bedrooms	$2,844

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	$1,270	$143,998	0.88%	C
3BR	$1,680	$217,448	0.77%	D
4BR	$1,930	$255,679	0.75%	D
5BR	$2,239	$290,693	0.77%	D

Demographics & Housing Statistics

U.S. Census Bureau data (2024)

### Market Analysis for ZIP Code 38134 (Memphis, TN) #### Section 8 Voucher Dynamics The Fair Market Rent (FMR) for ZIP code 38134 in Memphis, TN, is set by HUD for 2026. The FMR for a two-bedroom unit is $1270, which represents 25.1% of the median household income in the area ($60,622). This suggests that the FMR is reasonably aligned with the local economic conditions, ensuring that the majority of residents can afford to rent a two-bedroom unit without undue financial strain. However, the actual rental market in ZIP 38134 appears to be significantly higher than the FMR. According to Zillow, the median price for a two-bedroom home is $143,079, which translates to a monthly mortgage payment of approximately $1,200 assuming a 30-year fixed-rate mortgage at a 4.5% interest rate. When considering property taxes, insurance, and maintenance costs, the total monthly cost could easily exceed the FMR. For instance, if we assume an additional $200 per month for these expenses, the total monthly cost would be around $1,400, which is well above the FMR of $1270. This discrepancy between FMR and actual rents poses significant constraints for voucher holders. They may struggle to find units that accept their vouchers, especially for larger units like three-bedroom or four-bedroom homes, where the FMR is $1680 and $1950 respectively. Given that the occupancy rate is 95.4%, it indicates a tight rental market where landlords have the leverage to charge higher rents. Consequently, voucher holders might face challenges in securing housing that meets their needs and fits within the FMR limits. #### Affordability & Renter Profile ZIP code 38134 has a high renter population, with 52.6% of households being renters. This suggests a strong demand for rental properties, particularly in a city like Memphis where the cost of homeownership can be prohibitive for many. The median household income of $60,622 provides some context on the financial capabilities of residents. With a two-bedroom FMR of $1270, which is 25.1% of the median income, the majority of residents should be able to afford a two-bedroom unit. However, the higher actual rents indicate that affordability remains a concern for many. The occupancy rate of 95.4% further underscores the tightness of the rental market. It implies that there is little excess capacity, and any new rental units entering the market are likely to be quickly filled. This high occupancy rate also means that landlords can maintain higher rents due to the strong demand from tenants. #### Investor Angle From an investor perspective, the ZIP code 38134 presents a mixed picture. The FMR for a two-bedroom unit is $1270, but the actual median rent based on Zillow data is much higher, at $143,079 for a similar-sized home. This translates to a price-to-FMR ratio of 9.4x, indicating that the market value of homes is significantly higher than the FMR. To determine whether this ZIP code is cash-flow positive at FMR, we need to consider the typical rental rates and the associated costs of owning a rental property. Assuming a conservative estimate of $1,400 per month for a two-bedroom unit, the difference between the actual rent and the FMR is $130. This margin is relatively small and may not cover all the additional costs such as property taxes, insurance, and maintenance. Therefore, relying solely on FMR to generate cash flow would be challenging. The investment grade for this ZIP code can be assessed by looking at the overall demand and supply dynamics. Given the high renter percentage and occupancy rate, there is a strong demand for rental properties. However, the high price-to-FMR ratio suggests that the market is overpriced relative to the FMR, which could make it difficult for investors to find properties that offer a good return on investment when rented out at FMR levels. #### Specific Actionable Insights 1. **Focus on Smaller Units**: Investors should focus on acquiring smaller units, such as one-bedroom or studio apartments, where the FMR is lower ($1150 and $1060 respectively). These units are more likely to be rented out at FMR levels, providing a better chance of achieving positive cash flow. Additionally, the demand for smaller units is typically higher in areas with a large renter population. 2. **Consider Renovation Projects**: Investors might want to look into purchasing older, less expensive properties that can be renovated to meet modern standards. By doing so, they can potentially increase the rental value while still keeping it within the FMR range. This approach requires a careful assessment of renovation costs versus potential rental income. 3. **Explore Government Programs**: Investors should explore government programs designed to support affordable housing initiatives. These programs often provide subsidies or tax incentives that can help offset the higher costs of maintaining rental properties at FMR levels. For example, the Low-Income Housing Tax Credit (LIHTC) program could be beneficial for investors looking to develop affordable housing projects. #### Bottom Line Given the high price-to-FMR ratio and the tight rental market, the recommendation for Section 8-focused investors is to **Skip** this ZIP code. The actual rental prices far exceed the FMR, making it difficult to achieve positive cash flow when renting to voucher holders. While there is a strong demand for rental properties, the high costs associated with owning and maintaining a rental property at FMR levels suggest that the returns may not justify the investment. In conclusion, ZIP code 38134 in Memphis, TN, is not an ideal location for investors primarily interested in leveraging Section 8 vouchers for positive cash flow. The market is overpriced relative to the FMR, and the high renter population and occupancy rate indicate that landlords can charge premium rents, leaving little room for profit at FMR levels.

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.