Location: Minneapolis-St. Paul-Bloomington, MN | Metro: Minneapolis-St. Paul-Bloomington, MN-WI 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 | $1,270 |
| 1 Bedroom | $1,430 |
| 2 Bedrooms | $1,740 |
| 3 Bedrooms | $2,270 |
| 4 Bedrooms | $2,550 |
| 5 Bedrooms | $2,958 |
| 6 Bedrooms | $3,313 |
| 7 Bedrooms | $3,578 |
| 8 Bedrooms | $3,757 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,740 | $263,572 | 0.66% | D |
| 3BR | $2,270 | $367,578 | 0.62% | D |
| 4BR | $2,550 | $453,931 | 0.56% | F |
| 5BR | $2,958 | $515,666 | 0.57% | F |
U.S. Census Bureau data (2024)
The Section 8 thesis in ZIP code 55024, located in Farmington, Minnesota, is centered around the discrepancy between the Fair Market Rent (FMR) and the actual market rent. The FMR for ZIP 55024 in fiscal year 2024 is set at $1720, whereas the market rent, measured by the Zillow Observed Rent Index (ZORI), stands at $2152. This creates a gap of $432, which represents approximately 25% below the market rate.
In Farmington, where only 11.3% of residents are renters, landlords can leverage this gap to attract tenants through the Section 8 program. However, the cost of housing voucher tenants below open-market rates must be considered. With a median home value of $400,248 and a median income of $127,280, landlords might find that renting properties at the lower FMR rate could reduce their potential rental income by nearly a quarter.
The implications of this gap are significant for small-portfolio investors. While the FMR provides a guaranteed income stream from the government, it also means that they will not capture the full market value of their properties. In a market where rents are higher due to demand exceeding supply, this can lead to missed opportunities for maximizing returns. Landlords should carefully weigh the benefits of guaranteed payments against the opportunity cost of renting below market rates.
Furthermore, the lower FMR rate compared to the market rent suggests that there is a strong local rental market. The high median income and home values indicate a generally affluent area, which could support higher rents. Therefore, landlords who do not rely on Section 8 vouchers may find it advantageous to charge closer to the market rate of $2152 per month, rather than the FMR rate of $1720.
To summarize, the Section 8 program in ZIP 55024 offers a stable but potentially lower rental income. Landlords and investors need to consider the trade-offs between the security of government-backed payments and the opportunity to earn more by renting at market rates. Given the context of Farmington's economic conditions, the decision to participate in the Section 8 program should be made with a clear understanding of the financial implications.
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.