Location: Houston-The Woodlands-Sugar Land, TX | Metro: Houston-The Woodlands-Sugar Land, TX 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 | $1,220 |
| 1 Bedroom | $1,250 |
| 2 Bedrooms | $1,480 |
| 3 Bedrooms | $1,990 |
| 4 Bedrooms | $2,470 |
| 5 Bedrooms | $2,865 |
| 6 Bedrooms | $3,209 |
| 7 Bedrooms | $3,466 |
| 8 Bedrooms | $3,639 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 3BR | $1,990 | $303,799 | 0.66% | D |
| 4BR | $2,470 | $404,764 | 0.61% | D |
| 5BR | $2,865 | $540,602 | 0.53% | F |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 77423 reveals a stark contrast between government rental assistance and market rents. With the Fair Market Rent (FMR) for a two-bedroom apartment set at $1200 per month under Section 8 for FY 2024, the annualized income would be $14,400. Given the median home value of $369,017, this translates into an implied gross yield of approximately 3.9%. This figure is calculated by dividing the annual income ($14,400) by the median home value ($369,017).
In comparison, the Zillow Observed Rent Index (ZORI) for a two-bedroom apartment in ZIP 77423 stands at $1,919 monthly, equating to an annualized market rent of $23,028. When we use the same median home value to calculate the gross yield, it comes out to about 6.25%. This represents a significantly higher potential return compared to the Section 8 scenario.
The reality of the situation is influenced by the 20.6% renter density and the 109-day days-on-market (DOM) average. The lower renter density suggests that the pool of potential tenants who can qualify for Section 8 might be smaller, making the higher market rent scenario more feasible. Additionally, a longer DOM indicates that properties may take longer to rent, which could affect cash flow and investment returns. However, the stability of Section 8 tenants, who have their rent subsidized by the government, can offset some of these concerns.
While the market rent scenario offers a higher gross yield, the predictability and security of Section 8 tenancy cannot be ignored. For landlords and small-portfolio investors considering Section 8 participation, the lower gross yield of 3.9% must be weighed against the reduced risk of vacancy and non-payment. Conversely, those opting for market rates can expect a gross yield closer to 6.25%, but they should be prepared for the challenges associated with finding and retaining market-rate tenants.
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.