Location: Lexington-Fayette, 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 | $830 |
| 1 Bedroom | $1,010 |
| 2 Bedrooms | $1,190 |
| 3 Bedrooms | $1,640 |
| 4 Bedrooms | $1,770 |
| 5 Bedrooms | $2,053 |
| 6 Bedrooms | $2,299 |
| 7 Bedrooms | $2,483 |
| 8 Bedrooms | $2,607 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $1,010 | $142,715 | 0.71% | D |
| 2BR | $1,190 | $197,210 | 0.6% | D |
| 3BR | $1,640 | $277,305 | 0.59% | F |
| 4BR | $1,770 | $335,273 | 0.53% | F |
| 5BR | $2,053 | $480,456 | 0.43% | F |
U.S. Census Bureau data (2024)
The economics of Section 8 housing in ZIP code 40504, located in Lexington, KY, Fayette County, are straightforward. The SAFMR (Small Area Fair Market Rent) for a two-bedroom apartment in this specific ZIP code for FY 2024 is set at $1070. This figure represents the maximum amount that the government will reimburse landlords for participating in the Section 8 Housing Choice Voucher program.
In contrast, the local market rent for a similar two-bedroom unit is higher, at $1,329, according to ZORI (Zillow Observed Rent Index). This difference highlights the potential financial considerations for landlords when deciding whether to accept Section 8 tenants.
To understand the actual payment structure, it's important to break down the components. Landlords receive the SAFMR minus the tenant's portion of the rent, which is typically 30% of their income. For example, if a tenant's income is $1,500 per month, they would pay $450 towards rent. The government then covers the remaining balance up to the SAFMR of $1070. If the total rent required exceeds the SAFMR, the landlord must absorb the additional cost beyond the government subsidy.
Beyond the base rent, utility allowances can vary but are generally around $300 for a two-bedroom apartment. These allowances are meant to cover the costs of utilities such as electricity, gas, water, and sewage. However, these allowances do not directly affect the monthly rental income; they are paid separately to the tenant.
The reimbursement gap in ZIP 40504 for a two-bedroom apartment is the difference between the local market rent and the SAFMR. In this case, the gap is $259 per month ($1,329 - $1070). This means landlords accepting Section 8 vouchers for a two-bedroom unit in this ZIP code will receive less than the market rate by this amount.
For landlords, the decision to participate in Section 8 should be weighed against the potential benefits, such as guaranteed government payments and reduced risk of non-payment. However, the economic reality is that you will receive a lower net rental income compared to the local market rate. This gap should be considered when setting your expectations and planning your finances.
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.