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 | $1,140 |
| 1 Bedroom | $1,280 |
| 2 Bedrooms | $1,560 |
| 3 Bedrooms | $2,040 |
| 4 Bedrooms | $2,280 |
| 5 Bedrooms | $2,645 |
| 6 Bedrooms | $2,962 |
| 7 Bedrooms | $3,199 |
| 8 Bedrooms | $3,359 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 3BR | $2,040 | $424,854 | 0.48% | F |
| 4BR | $2,280 | $480,094 | 0.47% | F |
| 5BR | $2,645 | $502,344 | 0.53% | F |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 55341 reveals an interesting dynamic between government-subsidized rental income and market rents. Using the annualized Fair Market Rent (FMR) for a 2-bedroom unit at $1440 and the market rent at $1,853, we can calculate the implied gross yields relative to the median home value of $446,311.
In the scenario where a landlord relies solely on Section 8 subsidies, the annual rent revenue would be $1440. This translates to an implied gross yield of approximately 0.32%. The calculation is straightforward: $1440 divided by $446,311 equals 0.0032, or 0.32%. In contrast, if the property were rented at market rates, the gross yield would be significantly higher at about 0.42%. This figure is derived from dividing the annual market rent of $1,853 by the median home value of $446,311.
The gross yield difference highlights the financial implications of choosing between Section 8 and market rent. However, the decision should also consider the local rental market conditions. With a renter density of only 7.2%, it suggests that the majority of homes in ZIP 55341 are owner-occupied, which could limit the pool of potential tenants interested in Section 8 properties. The N/A-day DOM (Days on Market) indicates incomplete data regarding how long it takes to lease out properties, which might imply either strong demand or a lack of transparency in the leasing process.
Given the low renter density, it is more realistic to expect that landlords in ZIP 55341 would aim for market rents rather than Section 8 subsidies. The higher gross yield from market rents provides a stronger financial incentive, especially when considering the relatively small number of renters in the area. While Section 8 can offer stability and a guaranteed tenant, the lower gross yield does not align well with the investment potential indicated by the higher market rents.
Investors should weigh these factors carefully when deciding whether to participate in the Section 8 program or pursue market rents. The gross yield comparison clearly favors market rents, offering a more lucrative return on investment for those willing to navigate the local rental market dynamics.
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.