Location: Duluth, MN | Metro: Duluth, MN-WI 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 | $770 |
| 1 Bedroom | $890 |
| 2 Bedrooms | $1,110 |
| 3 Bedrooms | $1,530 |
| 4 Bedrooms | $1,870 |
| 5 Bedrooms | $2,169 |
| 6 Bedrooms | $2,429 |
| 7 Bedrooms | $2,623 |
| 8 Bedrooms | $2,754 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,110 | $138,546 | 0.8% | C |
| 3BR | $1,530 | $161,592 | 0.95% | C |
U.S. Census Bureau data (2024)
The potential pitfalls of investing in Section 8 housing in ZIP code 55706, located in Babbitt, Minnesota, must be carefully considered. First, the market rent stands at $737, while the Fair Market Rent (FMR) for fiscal year 2024 is set at $980. This discrepancy suggests that landlords might face higher-than-average tenant turnover as tenants seek to maximize their subsidy benefits. A high turnover rate can lead to increased administrative costs and vacancies.
Vacancy exposure is another concern. The days on market (DOM) for properties in this area is not available, which makes it difficult to predict how long a unit might remain vacant between tenancies. In areas with limited rental data, landlords often find themselves with prolonged vacancies, increasing the financial burden on the property.
Deferred maintenance is a significant risk factor, especially considering the typical home value of $140,484 and the median household income of $56,750. These figures suggest that many homeowners and landlords in Babbitt may struggle to keep up with necessary repairs and maintenance due to the relatively low income levels. Over time, this can lead to costly property issues that diminish the overall value and appeal of the rental units.
Despite these challenges, there are mitigating factors that make the investment more attractive. The renter share in Babbitt is 10.3%, indicating a high concentration of renters in the area. High renter density typically translates into greater demand for rental properties, including those accepting Section 8 vouchers. This demand can help stabilize occupancy rates and reduce the likelihood of extended vacancies.
Verdict: Moderate risk for a first-time Section 8 landlord.
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.