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 | $910 |
| 1 Bedroom | $1,040 |
| 2 Bedrooms | $1,300 |
| 3 Bedrooms | $1,800 |
| 4 Bedrooms | $2,170 |
| 5 Bedrooms | $2,517 |
| 6 Bedrooms | $2,819 |
| 7 Bedrooms | $3,045 |
| 8 Bedrooms | $3,197 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,300 | $519,627 | 0.25% | F |
| 3BR | $1,800 | $601,506 | 0.3% | F |
U.S. Census Bureau data (2024)
A skeptical investor looking at ZIP code 55802 in Duluth, MN, might have several concerns regarding the feasibility of investing in properties through the Section 8 program. Here are three common objections, along with a detailed analysis based on the available data.
Objection 1: Will Fair Market Rent (FMR) of $1170 (for zip FY 2024) cover the mortgage on a $457,074 home?
The FMR of $1170 is intended to reflect the average rental cost for a modest home in the area. To determine if it can cover the mortgage, we must consider the typical interest rates and loan terms. Assuming a 30-year fixed-rate mortgage at an average rate of 5%, the monthly payment on a $457,074 home would be approximately $2,400. This amount significantly exceeds the FMR of $1170. Therefore, relying solely on Section 8 payments would not cover the mortgage. However, investors can mitigate this risk by ensuring that the property's value and mortgage costs align with the long-term stability and appreciation potential of the ZIP code.
Objection 2: Is there enough renter demand at 66.8%?
The 66.8% occupancy rate suggests that there is substantial demand for rental housing in ZIP 55802. While this figure is below the ideal 100%, it still indicates a healthy market for landlords. With a vacancy rate of 33.2%, there is room for improvement, but it also means that landlords can potentially negotiate better terms with tenants. Additionally, the demand for affordable housing in Duluth could be met by targeting specific segments of the market, such as low-income families or students, which often rely on Section 8 assistance.
Objection 3: Will vouchers keep pace with $1,736 market rents?
The current market rent of $1,736 is notably higher than the FMR of $1170. This discrepancy raises questions about whether voucher amounts will adjust to meet rising market rents. The Housing Choice Voucher Program aims to cover a portion of the market rent, typically up to the FMR. As such, landlords accepting Section 8 tenants should expect to receive only the FMR amount, which in this case is significantly lower than the market rent. This implies that landlords may need to accept a lower profit margin or seek ways to reduce operational costs to remain financially viable.
In conclusion, while the data presents challenges, particularly in covering mortgage costs and keeping pace with market rents, there is a solid foundation for investment in ZIP 55802. The occupancy rate supports a viable rental market, but investors must carefully consider their financial models and possibly diversify their portfolio to include other income sources or types of housing.
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.