Location: Chicago-Joliet-Naperville, IL | Metro: Chicago-Joliet-Naperville, IL 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 | $2,470 |
| 1 Bedroom | $2,620 |
| 2 Bedrooms | $2,960 |
| 3 Bedrooms | $3,810 |
| 4 Bedrooms | $4,350 |
| 5 Bedrooms | $5,046 |
| 6 Bedrooms | $5,652 |
| 7 Bedrooms | $6,104 |
| 8 Bedrooms | $6,409 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $2,620 | $290,395 | 0.9% | C |
| 2BR | $2,960 | $532,397 | 0.56% | F |
| 3BR | $3,810 | $1,195,800 | 0.32% | F |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 60603 in Chicago, IL, reveals an interesting scenario when comparing Federal Market Rent (FMR) and Zillow's Observed Rent Index (ZORI) against the median home value.
Firstly, annualizing the 2BR FMR of $2570 for fiscal year 2024 yields an annual rental income of $30,840. Given the median home value of $304,314, the implied gross yield for a property rented at the FMR would be approximately 10.1%. This calculation is based on the formula for gross yield: (Annual Rental Income / Median Home Value) * 100.
Secondly, annualizing the market rent of $2,319 using ZORI provides an annual rental income of $27,828. Using the same median home value, this translates into a gross yield of about 9.1%. The difference between the two gross yields highlights the premium that Section 8 can offer over market rates.
Considering the 42.4% renter density in ZIP 60603, it is important to note that while the FMR scenario offers a higher gross yield, the reality of securing and maintaining Section 8 tenants must also be factored in. The N/A-day DOM (Days on Market) indicates incomplete data, suggesting potential challenges in accurately predicting vacancy rates and tenant turnover. However, the higher gross yield of 10.1% under the FMR scenario is more attractive from a purely financial standpoint.
In conclusion, the FMR-based gross yield of 10.1% is more favorable compared to the market rent gross yield of 9.1%. Yet, the decision should balance this financial advantage with the practicalities of managing a Section 8 portfolio, including compliance and the dynamics of tenant selection and retention.
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.