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 | $850 |
| 1 Bedroom | $970 |
| 2 Bedrooms | $1,220 |
| 3 Bedrooms | $1,690 |
| 4 Bedrooms | $2,040 |
| 5 Bedrooms | $2,366 |
| 6 Bedrooms | $2,650 |
| 7 Bedrooms | $2,862 |
| 8 Bedrooms | $3,005 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,220 | $233,818 | 0.52% | F |
| 3BR | $1,690 | $300,899 | 0.56% | F |
| 4BR | $2,040 | $354,357 | 0.58% | F |
U.S. Census Bureau data (2024)
A decision tree for whether to invest in ZIP 55720 (Cloquet, MN) for Section 8 properties starts with an analysis of the Fair Market Rent (FMR) and its ability to cover debt service.
Step 1: The FMR for ZIP 55720 in fiscal year 2024 is $1,180. To determine if this clears the debt service on a property valued at $268,989, we need to calculate the expected monthly mortgage payment. Assuming a 30-year fixed-rate mortgage at a typical rate of 4.5%, the monthly payment would be approximately $1,340. Given that the FMR is lower than the estimated mortgage payment, the answer to the first question is No. FMR does not clear the debt service on a $268,989 property.
Step 2: Next, compare the FMR to the average market rent. The Census American Community Survey (ACS) reports the average market rent in Cloquet, MN, at $1,023. This figure is below the FMR of $1,180, indicating that the market rent is lower than what Section 8 tenants might pay. However, since the FMR already does not cover the debt service, this comparison further solidifies the initial negative assessment.
Step 3: Evaluate the rental demand. In ZIP 55720, 28.2% of the population are renters. Additionally, the days on the market (DOM) for rental listings is reported as N/A, which suggests either limited data or a stable rental market where units do not spend much time vacant. Despite a significant portion of the population being renters, the primary issue remains the inability of the FMR to cover the debt service. Therefore, even with sufficient demand, the answer to investing based on Section 8 alone is still No.
To summarize, the decision to buy in ZIP 55720 for Section 8 properties hinges on the financial feasibility of covering debt service with the FMR. Since the FMR of $1,180 does not cover the expected monthly mortgage payment of $1,340 for a property costing $268,989, and the market rent is below the FMR, there is insufficient evidence to recommend purchasing solely for Section 8 tenants. The percentage of renters and stability of the rental market do not outweigh the financial impracticality of the FMR.
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.