Location: Waseca 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 | $710 |
| 1 Bedroom | $790 |
| 2 Bedrooms | $1,030 |
| 3 Bedrooms | $1,400 |
| 4 Bedrooms | $1,640 |
| 5 Bedrooms | $1,902 |
| 6 Bedrooms | $2,130 |
| 7 Bedrooms | $2,300 |
| 8 Bedrooms | $2,415 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 3BR | $1,400 | $233,811 | 0.6% | F |
U.S. Census Bureau data (2024)
The analysis for the Section 8 program in ZIP code 56042 reveals a significant gap between the Fair Market Rent (FMR) set at $970 and the actual market rent of $546, based on Census ACS data. This discrepancy amounts to a difference of $424, or approximately 77.7%, which highlights the potential challenges and opportunities for landlords and small-portfolio investors.
Given that the FMR exceeds the market rent, it positions voucher tenants as a yield play. Landlords can capitalize on the higher subsidy rate by attracting tenants who receive Section 8 vouchers. This allows them to charge closer to the FMR of $970 rather than the lower market rent of $546, thereby increasing their rental income per unit. The higher subsidy rate effectively reduces the financial risk associated with renting to low-income individuals, making it an attractive option for those looking to maximize returns.
In the broader context of ZIP 56042, where only 16.1% of residents are renters and the median home value stands at $247,367, the opportunity to leverage Section 8 vouchers becomes even more pronounced. With a median income of $89,750, many homeowners might find it difficult to transition into the rental market, further solidifying the demand for affordable housing options. This scenario presents a unique situation where landlords can benefit from both the government subsidies and the limited supply of rental properties.
However, it's crucial to recognize the implications of housing voucher tenants below open-market rates. While the FMR provides a benchmark for rental pricing, landlords must ensure that they are compliant with local regulations and the terms of the Section 8 program. Failure to do so could result in penalties or loss of eligibility for future voucher holders. Therefore, landlords should carefully review their lease agreements and property management practices to align with the requirements of the Section 8 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.