Location: Los Angeles-Long Beach-Glendale, CA | Metro: Los Angeles-Long Beach-Glendale, CA 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 | $1,610 |
| 1 Bedroom | $1,800 |
| 2 Bedrooms | $2,220 |
| 3 Bedrooms | $2,820 |
| 4 Bedrooms | $3,150 |
| 5 Bedrooms | $3,654 |
| 6 Bedrooms | $4,092 |
| 7 Bedrooms | $4,419 |
| 8 Bedrooms | $4,640 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $1,800 | $545,249 | 0.33% | F |
| 2BR | $2,220 | $716,755 | 0.31% | F |
| 3BR | $2,820 | $869,756 | 0.32% | F |
| 4BR | $3,150 | $933,586 | 0.34% | F |
| 5BR | $3,654 | $1,080,540 | 0.34% | F |
U.S. Census Bureau data (2024)
The Section 8 cap rate scenario for ZIP code 90031 in Los Angeles, CA, reveals a challenging investment landscape when compared to market rents. To calculate the gross yield, we use the formula: Gross Yield = Annual Rent / Median Home Value.
First, let's consider the Federal Market Rent (FMR) for a two-bedroom unit under Section 8, which is set at $2,000 per month for fiscal year 2024. This translates to an annual rent of $24,000. Given the median home value of $799,433, the implied gross yield for a Section 8 rental property is approximately 3.00%. The calculation is as follows:
Next, we examine the Zillow Observed Rent Index (ZORI), which indicates a market rent of $2,161 per month for a two-bedroom unit. This amounts to an annual rent of $25,932. Using the same median home value, the implied gross yield for a market-rental property is about 3.24%. The calculation is:
The gross yield difference between the two scenarios is clear: a market-rental property offers a higher yield of 3.24% compared to the 3.00% yield offered by a Section 8 property. However, the decision on which scenario is more realistic hinges on several factors, including the high renter density of 68.6% and the lack of available data on days-on-market (DOM).
Despite the higher gross yield, the market-rental scenario may not be as straightforward due to the high competition for rental properties in the area. The Section 8 program provides a stable income stream, though at a slightly lower gross yield. The stability and guaranteed payment from the government can outweigh the slightly reduced yield for many investors.
In conclusion, while the market-rental scenario presents a marginally better gross yield, the Section 8 program offers a predictable and consistent income source, which is particularly valuable in a high-renter-density area like ZIP 90031. Investors should weigh these factors carefully before making a decision.
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.