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 | $970 |
| 1 Bedroom | $1,180 |
| 2 Bedrooms | $1,390 |
| 3 Bedrooms | $1,910 |
| 4 Bedrooms | $2,070 |
| 5 Bedrooms | $2,401 |
| 6 Bedrooms | $2,689 |
| 7 Bedrooms | $2,904 |
| 8 Bedrooms | $3,049 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $1,180 | $204,116 | 0.58% | F |
| 2BR | $1,390 | $259,988 | 0.53% | F |
| 3BR | $1,910 | $247,982 | 0.77% | D |
| 4BR | $2,070 | $313,005 | 0.66% | D |
U.S. Census Bureau data (2024)
A skeptical investor looking into ZIP 40508 in Lexington, KY, might raise several valid concerns regarding the financial viability of renting properties under the Section 8 program. Here's a detailed analysis addressing those concerns.
Objection 1: Will Fair Market Rent (FMR) of $1080 (for zip FY 2024) cover the mortgage on a $223,968 home?
The FMR of $1080 is designed to reflect the average rental cost in the area. However, it may not fully cover the mortgage on a home valued at $223,968. To determine if the FMR can sufficiently cover the mortgage, one must consider the interest rate and loan terms. Assuming a standard 30-year fixed-rate mortgage with an average interest rate of around 5%, the monthly payment on a $223,968 home would be approximately $1215. This means that the FMR falls short by about $135 per month. Landlords should prepare for additional expenses or seek ways to offset this shortfall, such as through property tax benefits or other government incentives.
Objection 2: Is there enough renter demand at 70.5%?
The occupancy rate of 70.5% suggests that there is moderate demand for rental properties in ZIP 40508. While this percentage indicates that nearly three-quarters of rental units are occupied, it also implies that a significant portion remains unoccupied. For small-portfolio investors, this could mean facing periods of vacancy. However, the demand for affordable housing, especially among low-income families who rely on Section 8 vouchers, is relatively stable. It's important to note that the occupancy rate alone does not provide a complete picture of the rental market dynamics. Factors such as the number of available units, local economic conditions, and population growth should also be considered to gauge the overall health of the rental market.
Objection 3: Will vouchers keep pace with $1,277 market rents?
The market rent of $1,277 is notably higher than the FMR of $1080. This discrepancy highlights a potential challenge for landlords participating in the Section 8 program. The voucher amount is determined based on the FMR, which may not always align with the actual market rents. In ZIP 40508, landlords might find themselves in a situation where the voucher amount does not fully cover the market rent. The Department of Housing and Urban Development (HUD) periodically adjusts the FMR to reflect changes in the local housing market. However, these adjustments do not always occur frequently enough to keep pace with rapid increases in market rents. Therefore, landlords should be prepared for fluctuations in the voucher amounts and consider the long-term trends in both FMR and market rents when making investment decisions.
In conclusion, while ZIP 40508 presents opportunities for landlords and small-portfolio investors interested in the Section 8 program, it also poses challenges. Careful consideration of mortgage coverage, renter demand, and voucher adequacy is necessary to make informed decisions. The data provided offers a snapshot of the current situation but does not predict future changes in the market or policy adjustments.
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.