Location: Houston-The Woodlands-Sugar Land, TX | Metro: Houston-The Woodlands-Sugar Land, TX HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,090 |
| 1 Bedroom | $1,110 |
| 2 Bedrooms | $1,320 |
| 3 Bedrooms | $1,780 |
| 4 Bedrooms | $2,210 |
| 5 Bedrooms | $2,564 |
| 6 Bedrooms | $2,872 |
| 7 Bedrooms | $3,102 |
| 8 Bedrooms | $3,257 |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 77590 in Texas City, TX, reveals important insights into the potential returns for landlords and small-portfolio investors. Using the Fair Market Rent (FMR) for a 2-bedroom apartment set at $1,180 per month for fiscal year 2024, and the Zillow Observed Rent Index (ZORI) of $1,434 per month, we can derive two distinct gross yields based on the median home value of $181,628.
First, let's consider the FMR scenario. At $1,180 per month, the annualized rent would be $14,160. This translates to a gross yield of approximately 7.8% when divided by the median home value. The calculation is straightforward: $14,160 / $181,628 = 0.0779 or 7.8%. This figure represents the rental income as a percentage of the property's value without accounting for expenses.
Second, using the ZORI market rent of $1,434 per month, the annualized rent would be $17,208. This results in a gross yield of about 9.5% when compared to the median home value: $17,208 / $181,628 = 0.0947 or 9.5%. Again, this is the raw rental income expressed as a percentage of the property's value, excluding any costs.
Given the 47.6% renter density in ZIP 77590, it is evident that there is a significant portion of the population seeking rental accommodation. However, the 70-day Days on Market (DOM) suggests that properties may take longer to lease out, especially under Section 8 contracts which often have additional administrative requirements. This extended leasing period could affect cash flow and should be factored into investment decisions.
In terms of realism, the ZORI-based gross yield of 9.5% is more reflective of what landlords might expect in the open market. While the FMR-based yield of 7.8% provides a baseline for Section 8 rents, it is lower due to government-set rates being typically below market levels. Therefore, for an accurate assessment, investors should use the higher market rent yield as a benchmark and adjust for the specifics of Section 8 participation, such as tenant selection criteria and potential delays in leasing.
To summarize, the gross yields calculated are 7.8% for FMR and 9.5% for ZORI. Given the context of the market conditions and the time required to secure tenants, the latter is likely a more practical expectation for landlords and investors considering Section 8 participation in ZIP 77590.
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.