Location: Rochester, MN | Metro: Rochester, MN 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 | $1,170 |
| 1 Bedroom | $1,220 |
| 2 Bedrooms | $1,410 |
| 3 Bedrooms | $1,950 |
| 4 Bedrooms | $2,360 |
| 5 Bedrooms | $2,738 |
| 6 Bedrooms | $3,067 |
| 7 Bedrooms | $3,312 |
| 8 Bedrooms | $3,478 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $1,220 | $170,290 | 0.72% | D |
| 2BR | $1,410 | $239,404 | 0.59% | F |
| 3BR | $1,950 | $281,548 | 0.69% | D |
| 4BR | $2,360 | $365,515 | 0.65% | D |
| 5BR | $2,738 | $483,951 | 0.57% | F |
U.S. Census Bureau data (2024)
The economics of Section 8 housing in ZIP code 55904, located in Rochester, Minnesota, within Olmsted County, are straightforward when you understand the key components involved. For a two-bedroom apartment, the SAFMR (Small Area Fair Market Rent) for FY 2024 is set at $1110. This SAFMR is specifically tailored for this ZIP code, reflecting the unique rental market conditions in the area.
However, the local market rent, as indicated by ZORI (Zillow Observed Rent Index), is significantly higher at $1678. This discrepancy is crucial for landlords and small-portfolio investors to grasp because it directly affects the amount they can expect to receive from a Section 8 voucher program.
A landlord participating in the Section 8 program receives payments from the Housing Choice Voucher program, which covers the difference between the tenant's portion of the rent and the SAFMR. Here’s how it works:
Note that utility allowances are also factored into the total compensation package, but these are typically modest and do not significantly alter the base payment structure described above. The exact utility allowance varies based on individual circumstances and cannot be generalized without specific tenant details.
Given the local market rent of $1678, the typical reimbursement gap for a two-bedroom unit in ZIP 55904 is substantial. Landlords would have to absorb the difference between the SAFMR and the ZORI, which is $1678 - $1110 = $568. This means that landlords could potentially lose out on $568 per month if they rely solely on Section 8 vouchers to fill their units, compared to renting at the market rate.
In conclusion, while Section 8 vouchers provide a reliable source of income, the reimbursement gap in ZIP 55904 is significant, leading to a potential loss of over $568 monthly for a two-bedroom unit. This must be carefully considered by landlords and small-portfolio investors when deciding whether to participate in the program.
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.