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 | $1,560 |
| 1 Bedroom | $1,760 |
| 2 Bedrooms | $2,140 |
| 3 Bedrooms | $2,790 |
| 4 Bedrooms | $3,130 |
| 5 Bedrooms | $3,631 |
| 6 Bedrooms | $4,067 |
| 7 Bedrooms | $4,392 |
| 8 Bedrooms | $4,612 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $2,140 | $285,902 | 0.75% | D |
| 3BR | $2,790 | $414,476 | 0.67% | D |
| 4BR | $3,130 | $535,456 | 0.58% | F |
| 5BR | $3,631 | $601,127 | 0.6% | D |
U.S. Census Bureau data (2024)
The ZIP code 55038, located in Hugo, Minnesota, within the Minneapolis-St. Paul-Bloomington, MN-WI HUD Metro FMR Area, presents a unique opportunity for inclusion in a Section 8 portfolio strategy. This area is best suited as an appreciation play due to its low price-cut share and relatively short days on market.
To understand why this is an appreciation play, let's examine the numbers. The Fair Market Rent (FMR) for ZIP 55038 in fiscal year 2024 is set at $2130. Meanwhile, the market rent stands at $2299, indicating a modest spread of $169. This spread suggests that there is room for rental rate adjustments without significantly impacting occupancy rates, especially given the market conditions.
The median home value in ZIP 55038 is $448,909, which is indicative of a stable housing market. However, the key factor here is the 0.2% price-cut share and a days on market (DOM) of 56 days. These figures point to a market where homes sell quickly and without significant discounts, implying strong demand and potential for property value appreciation over time.
In contrast, the renter share of 8.6% and median income of $130,931 do not strongly suggest that this area is a prime candidate for being a cash-flow anchor or a diversifier. While the renter share is relatively low, the median income is quite high, which could indicate that tenants are financially stable and likely to maintain timely payments. But the primary driver for this ZIP code is the potential for capital appreciation rather than immediate cash flow or diversification benefits.
A prudent strategy for landlords and small-portfolio investors would be to focus on properties that can appreciate in value over time, given the current economic environment. ZIP 55038 fits well into such a strategy, offering a balance between stability and growth potential.
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.