Location: Dallas, TX | Metro: Dallas, TX HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,630 |
| 1 Bedroom | $1,680 |
| 2 Bedrooms | $1,980 |
| 3 Bedrooms | $2,490 |
| 4 Bedrooms | $3,170 |
| 5 Bedrooms | $3,677 |
| 6 Bedrooms | $4,118 |
| 7 Bedrooms | $4,447 |
| 8 Bedrooms | $4,669 |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 75134 in Lancaster, TX, provides a clear picture of the financial viability of participating in the program. To start, let's look at the annualized figures for a two-bedroom unit. The Fair Market Rent (FMR) for FY 2024 is set at $1690 per month, translating into an annual income of $20,280. In contrast, the market rent, as indicated by ZORI (Zillow Observed Rent Index), stands at $2,049 per month, resulting in an annual income of $24,588.
Given the median home value in the area is $262,014, we can calculate the implied gross yield for both scenarios. For the FMR scenario, the gross yield would be approximately 7.74%, calculated by dividing the annual income ($20,280) by the median home value ($262,014). When considering the market rent, the gross yield jumps to about 9.38%, derived from the annual income ($24,588) divided by the median home value ($262,014).
The 15.7% renter density in ZIP 75134 suggests that there is a significant portion of homeowners in the area, which could impact the demand for rental properties, including those under the Section 8 program. However, the exact number of days on market (DOM) is not available, making it challenging to predict how quickly a property might be leased. Despite this, the higher gross yield from market rent indicates a potentially better return for investors willing to navigate the complexities of the rental market outside of the Section 8 program.
While the Section 8 program offers a guaranteed source of income through government subsidies, the lower gross yield of 7.74% based on the FMR may not be as attractive compared to the market rent yield of 9.38%. This comparison highlights that landlords and small-portfolio investors could see a more substantial financial benefit by renting at market rates, assuming they can secure tenants promptly. Nonetheless, the decision should also consider the stability and administrative aspects of the Section 8 program versus the variability of market rents.
Data Sources: FMR data from HUD (2027). 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.