Section 8 Fair Market Rent (FMR) for ZIP 90223 - 2027

FY 2027 Fair Market Rent Rates

The analysis of the Section 8 cap-rate scenario for ZIP code 90223 reveals some critical insights for landlords and small-portfolio investors. With the Fair Market Rent (FMR) for a 2-bedroom apartment set at $2540 annually, and the median home value being unavailable, we must rely on the available rental data to form our conclusions.

To calculate the implied gross yield based on the FMR, we need to annualize the 2BR FMR. Given that the FMR is $2540 per month, the annual FMR comes to $30,480. This figure represents the maximum allowable rent for a property under the Section 8 program. However, without the specific market rent data, we can only estimate the gross yield using the FMR as a benchmark. The implied gross yield would be the annual FMR divided by the median home value. Since the median home value is not provided, we cannot calculate an exact gross yield percentage here.

In a typical scenario where market rent is higher than the FMR, the gross yield would be lower when compared to the FMR-based yield. For instance, if the market rent were significantly above $2540 per month, the gross yield calculated using the FMR would overstate the actual income potential of the property. Conversely, if the market rent is close to or below the FMR, the gross yield derived from the FMR would be more reflective of the actual returns.

The lack of precise market rent figures and median home values makes it challenging to determine which scenario is more realistic. Additionally, without knowing the renter density and days on market (DOM), we cannot accurately gauge how quickly a property might be rented out or the competition faced by landlords. However, assuming a standard market where Section 8 rents are typically lower than market rates, the gross yield based on the FMR would likely be less favorable than what could be achieved through market renting.

Investors should also consider the administrative aspects of participating in the Section 8 program, such as the time and effort required to manage the properties and the potential for longer-term tenancies. These factors can influence the decision-making process beyond just the gross yield calculation.

Ultimately, the decision to participate in Section 8 or pursue market rentals should be based on a comprehensive evaluation of the local housing market, including vacancy rates, tenant preferences, and the overall demand for subsidized housing in ZIP 90223.

Data Sources: FMR data from HUD (2027).

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.