Location: Powell County, KY | Metro: Lexington-Fayette, KY MSA
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 | $800 |
| 1 Bedroom | $980 |
| 2 Bedrooms | $1,150 |
| 3 Bedrooms | $1,570 |
| 4 Bedrooms | $1,750 |
| 5 Bedrooms | $2,030 |
| 6 Bedrooms | $2,274 |
| 7 Bedrooms | $2,456 |
| 8 Bedrooms | $2,579 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,150 | $118,485 | 0.97% | C |
| 3BR | $1,570 | $166,172 | 0.94% | C |
| 4BR | $1,750 | $249,498 | 0.7% | D |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP 40312, Clay City, KY, reveals a clear disparity between the federally determined Fair Market Rent (FMR) and the local market rental rates. For a two-bedroom unit, the FMR set by the government for fiscal year 2024 is $1000 per month. In contrast, the Census ACS data indicates that the average market rent for a similar unit is $711 per month.
To calculate the gross yield, we use the median home value of $140,087 as the basis. The annualized FMR of $1000 translates into an annual income of $12,000. Dividing this by the median home value gives us a gross yield of approximately 8.57%. On the other hand, using the market rent of $711 yields an annual income of $8,532, translating into a gross yield of about 6.10%.
The higher gross yield based on the FMR suggests a potentially attractive investment scenario for landlords participating in the Section 8 program. However, the reality of the local housing market, where only 31.0% of residents are renters, indicates that the actual market rent of $711 is more reflective of the demand and supply dynamics in Clay City.
The N/A-day Days on Market (DOM) data implies that there might be a lack of recent sales activity to provide a reliable measure of how quickly properties are being sold. This could mean that the median home value might not fully represent the current market conditions, but it remains the best available figure for our calculations.
In conclusion, while the theoretical gross yield based on FMR is 8.57%, the practical yield based on the actual market rent is 6.10%. Given the lower renter density and the absence of recent sales data, the latter is likely to be more realistic for landlords and small-portfolio investors considering Section 8 participation in Clay City, KY.
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.