Location: Shelby County, KY | Metro: Louisville, KY-IN 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 | $990 |
| 1 Bedroom | $1,080 |
| 2 Bedrooms | $1,300 |
| 3 Bedrooms | $1,650 |
| 4 Bedrooms | $1,910 |
| 5 Bedrooms | $2,216 |
| 6 Bedrooms | $2,482 |
| 7 Bedrooms | $2,681 |
| 8 Bedrooms | $2,815 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 3BR | $1,650 | $373,189 | 0.44% | F |
| 4BR | $1,910 | $507,793 | 0.38% | F |
U.S. Census Bureau data (2024)
The analysis of the Section 8 cap-rate scenario for ZIP code 40068 reveals distinct outcomes when comparing the Federal Market Rent (FMR) to the actual market rent. For a two-bedroom unit, the annualized FMR for FY 2024 is set at $1220, while the Census ACS reports an average market rent of $1,036 per month.
To determine the gross yield, we must first calculate the annual rental income. Using the FMR, the annual rental income would be $1220 multiplied by 12, equating to $14,640. In contrast, the market rent translates to an annual income of $1,036 times 12, resulting in $12,432. Given the median home value of $408,454 in this ZIP code, the gross yields can be calculated as follows:
For the FMR scenario, the gross yield is approximately 3.58%, calculated by dividing the annual FMR ($14,640) by the median home value ($408,454). On the other hand, the gross yield based on market rent is around 3.04%, derived from the annual market rent ($12,432) divided by the median home value ($408,454).
The higher gross yield under the FMR scenario suggests that participating in the Section 8 program could potentially offer better returns compared to the current market conditions. However, it's important to consider the renter density and the days on market (DOM) data. With a renter density of only 10.6%, the pool of potential tenants is relatively small, which might affect the stability of the rental income stream. The N/A-day DOM indicates incomplete data, which could imply either a very quick or slow leasing process, adding uncertainty to the investment.
In light of these factors, while the FMR scenario provides a higher gross yield, the market rent scenario is more reflective of the current rental environment. Landlords and small-portfolio investors should weigh the benefits of the higher FMR against the lower likelihood of finding eligible tenants in a ZIP code with such low renter density. The decision ultimately hinges on the investor's risk tolerance and the availability of qualified Section 8 participants in the area.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-07-31). 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.