Location: Freeborn County, MN | Metro: Freeborn County, MN
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 | $750 |
| 1 Bedroom | $820 |
| 2 Bedrooms | $1,070 |
| 3 Bedrooms | $1,400 |
| 4 Bedrooms | $1,610 |
| 5 Bedrooms | $1,868 |
| 6 Bedrooms | $2,092 |
| 7 Bedrooms | $2,259 |
| 8 Bedrooms | $2,372 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 3BR | $1,400 | $241,308 | 0.58% | F |
U.S. Census Bureau data (2024)
The analysis of the Section 8 cap-rate scenario for ZIP code 56016 reveals a significant gap between the federally mandated Fair Market Rent (FMR) and the actual market rents. For a two-bedroom unit, the annualized FMR set at $1,050 per month (for fiscal year 2026, based on metropolitan standards) translates into an implied gross yield of approximately 4.8%. This calculation is derived by multiplying the monthly FMR by 12 months and dividing by the median home value of $216,936.
In contrast, using the market rent figure of $865 per month (as reported by the Census ACS), the implied gross yield drops significantly to about 3.9%. This lower yield reflects the current market conditions where landlords might be receiving less than the federally set FMR.
The gross yield comparison clearly shows that the Section 8 scenario offers a higher return compared to the general market rent. However, the decision on which scenario is more realistic depends heavily on the local rental market dynamics and the willingness of tenants to participate in the Section 8 program.
ZIP 56016 has a renter density of 15.0%, indicating that a relatively small portion of the population is renting. This could imply limited demand for rental properties, including those participating in the Section 8 program. Additionally, the lack of data on days on market (DOM) suggests either a stable market with quick property turnover or a scarcity of available data to accurately gauge market activity.
Given these factors, while the Section 8 program provides a higher gross yield at 4.8%, the actual market conditions with a lower gross yield of 3.9% might be more reflective of the reality faced by landlords and small-portfolio investors. The higher yield under Section 8 is attractive, but it must be balanced against the administrative complexities and potential limitations in tenant availability.
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.