Location: Louisville, 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 | $1,110 |
| 1 Bedroom | $1,200 |
| 2 Bedrooms | $1,450 |
| 3 Bedrooms | $1,850 |
| 4 Bedrooms | $2,130 |
| 5 Bedrooms | $2,471 |
| 6 Bedrooms | $2,768 |
| 7 Bedrooms | $2,989 |
| 8 Bedrooms | $3,138 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,450 | $323,352 | 0.45% | F |
| 3BR | $1,850 | $314,343 | 0.59% | F |
| 4BR | $2,130 | $427,669 | 0.5% | F |
U.S. Census Bureau data (2024)
The economics of Section 8 housing in ZIP code 40242, located in Louisville, Kentucky, within Jefferson County, revolve around the SAFMR (Small Area Fair Market Rent) rates set by the U.S. Department of Housing and Urban Development (HUD). For a two-bedroom apartment in FY 2024, the SAFMR is $1560, which is the maximum amount that HUD will reimburse landlords for rent. However, it's important to note that this rate is set specifically for this ZIP code, reflecting local rental conditions.
The local market rent, as measured by ZORI (Zillow Observed Rent Index), stands at $1279 for a two-bedroom unit. This figure represents the average rent that tenants might pay in the open market without a voucher. Landlords participating in the Section 8 program should be aware that the voucher payment does not cover the entire SAFMR; rather, it covers the difference between the tenant's portion and the SAFMR.
To break down the actual payment, consider the following: Tenants are typically required to contribute 30% of their adjusted income towards rent. If we assume an average adjusted income for a tenant eligible for Section 8, the calculation would look like this:
In addition to the rent subsidy, Section 8 also provides utility allowances. These allowances vary but generally cover a portion of heating, cooling, electricity, and water costs. The exact amount depends on the individual case and can range widely, so landlords must consult with the local housing authority for precise figures applicable to their property.
Given these factors, the typical reimbursement for a landlord in ZIP 40242 for a two-bedroom unit would be around $1260, assuming the tenant's portion is $300. Since the local market rent is $1279, this means that landlords participating in the Section 8 program in this ZIP code would face a $19 shortfall per month if they were to charge the market rate. Alternatively, landlords could adjust their rent slightly below the market rate to avoid any shortfall, making the program financially viable.
Landlords should also be aware that the SAFMR can change annually based on HUD assessments of local rental markets. It is crucial to stay informed about these changes to manage expectations and financial planning effectively.
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.