Section 8 Fair Market Rent (FMR) for ZIP 78501 - 2027

Investment Score for ZIP 78501

Based on 1% Rule: A+ (≥1.5%) | A (≥1.2%) | B (≥1.0%) | C (≥0.8%) | D (≥0.6%) | F (<0.6%)

FY 2027 Fair Market Rent Rates

Unit Size	Monthly FMR
Studio	$870
1 Bedroom	$870
2 Bedrooms	$1,100
3 Bedrooms	$1,410
4 Bedrooms	$1,560
5 Bedrooms	$1,810
6 Bedrooms	$2,027
7 Bedrooms	$2,189
8 Bedrooms	$2,298

Investment Analysis by Bedroom Size

Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)

Bedrooms	Monthly FMR	Median Price	1% Rule	Grade
1BR	$870	$86,767	1%	B
2BR	$1,100	$134,285	0.82%	C
3BR	$1,410	$200,792	0.7%	D
4BR	$1,560	$284,198	0.55%	F
5BR	$1,810	$406,627	0.45%	F

Demographics & Housing Statistics

U.S. Census Bureau data (2024)

### Market Analysis for ZIP Code 78501 (McAllen, TX) #### Section 8 Voucher Dynamics The Fair Market Rent (FMR) figures for ZIP code 78501 in McAllen, Texas, for 2026 indicate that the rent for a two-bedroom unit is set at $1160. This figure represents 29.0% of the median household income in the area, which stands at $48,071. However, the actual rental market price for a two-bedroom unit, according to Zillow, is $134,001, which translates to a monthly rent of approximately $1,116.76 when considering a typical mortgage scenario. The price-to-FMR ratio of 9.6x suggests that the actual market prices are significantly higher than the FMR, creating a challenging environment for voucher holders who are constrained by the maximum allowable rent under their vouchers. Given these dynamics, voucher holders in ZIP 78501 face significant challenges in finding suitable housing. The FMR of $1160 for a two-bedroom unit is very close to the actual market rent of around $1,116.76, leaving little room for negotiation or flexibility. Moreover, the higher FMRs for larger units (e.g., $1510 for three-bedroom and $1670 for four-bedroom) may still be below the market rates, making it difficult for families needing larger spaces to find affordable options. #### Affordability & Renter Profile ZIP code 78501 has a population of 58,935, with 50.7% of residents being renters. This indicates a substantial demand for rental properties, suggesting that the market is likely to be competitive. The occupancy rate of 86.5% further supports this notion, implying that there is a high level of demand relative to supply, potentially leading to a tight rental market. The median household income of $48,071 suggests that many residents are in lower-middle-income brackets. With half of the population renting, affordability is a critical issue. The fact that the FMR for a two-bedroom unit is 29.0% of the median income highlights the financial strain on renters, especially those relying on Section 8 vouchers. Given the high price-to-FMR ratio, it is clear that the market is not aligned with the affordability needs of many residents, particularly those who are economically disadvantaged. #### Investor Angle From an investor perspective, the ZIP code 78501 presents a mixed picture. While the FMR for a two-bedroom unit is $1160, the actual market rent is slightly lower at around $1,116.76. This means that investors focusing solely on Section 8 vouchers could potentially achieve a positive cash flow if they manage to keep operating costs below the FMR. However, the high price-to-FMR ratio of 9.6x implies that the overall market is expensive, and investors would need to carefully consider the cost of acquiring properties in this area. The investment grade for this ZIP code would depend on several factors, including the ability to attract and retain tenants, the stability of rental income, and the potential for property appreciation. Given the high rent-to-income ratio and the significant number of renters, there is a strong demand for affordable housing. However, the tight market conditions and the high acquisition costs might make it challenging for investors to enter the market profitably without careful planning and management. #### Specific Actionable Insights 1. **Focus on Smaller Units**: Investors should consider focusing on one-bedroom and two-bedroom units, as these are more likely to align with the FMR and the needs of Section 8 voucher holders. For example, a one-bedroom unit with an FMR of $930 is closer to the actual market rent, providing a better chance for positive cash flow. 2. **Target Affordable Neighborhoods**: Within ZIP 78501, there may be pockets where rental prices are closer to the FMR. Investors should conduct detailed neighborhood analyses to identify areas where the gap between market rent and FMR is smaller, thereby increasing the likelihood of attracting and retaining Section 8 tenants. 3. **Operate Below FMR**: To maximize the chances of securing Section 8 tenants, landlords should aim to operate below the FMR. For instance, setting the rent for a two-bedroom unit at $1100 instead of $1160 could make the property more attractive to voucher holders while still maintaining profitability. #### Bottom Line For Section 8-focused investors, the recommendation for ZIP code 78501 is to **Hold**. While there is a strong demand for affordable housing, the high price-to-FMR ratio and tight market conditions suggest that entry-level investors may struggle to find profitable opportunities. Experienced investors who can navigate the complexities of the local market and target smaller units or more affordable neighborhoods may find success. However, given the current dynamics, new investors looking to enter the market should proceed with caution and thorough due diligence before committing capital.

Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-07-31). 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.