Location: Santa Ana-Anaheim-Irvine, CA | Metro: Santa Ana-Anaheim-Irvine, 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 | $3,470 |
| 1 Bedroom | $3,540 |
| 2 Bedrooms | $4,170 |
| 3 Bedrooms | $5,660 |
| 4 Bedrooms | $6,760 |
| 5 Bedrooms | $7,842 |
| 6 Bedrooms | $8,783 |
| 7 Bedrooms | $9,486 |
| 8 Bedrooms | $9,960 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $4,170 | $1,660,443 | 0.25% | F |
| 3BR | $5,660 | $3,331,354 | 0.17% | F |
| 4BR | $6,760 | $5,754,009 | 0.12% | F |
| 5BR | $7,842 | $11,708,064 | 0.07% | F |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP 92657, Newport Beach, CA, reveals an interesting contrast between government-subsidized rental income and market-driven rents. The Fair Market Rent (FMR) for a two-bedroom property in FY 2024 is set at $3860 annually, while the market rent, as indicated by ZORI (Zillow Observed Rent Index), stands at $7,519 per year.
To derive the gross yield, we first annualize these figures. For the Section 8 scenario, the annual rent of $3860 implies a gross yield of approximately 0.07% when compared to the median home value of $5,593,956. This is calculated by dividing the annual rent by the median home value: $3860 / $5,593,956 = 0.00069 or 0.07%. In stark contrast, the market rent of $7,519 suggests a gross yield of about 0.13%, computed similarly: $7,519 / $5,593,956 = 0.00134 or 0.13%.
The disparity between these yields highlights the financial reality faced by landlords in Newport Beach who opt for Section 8 tenancy. At 0.07%, the gross yield is significantly lower than what can be achieved through market rents, which offer nearly double the yield at 0.13%. However, it's important to consider the stability that comes with Section 8 tenants, who are guaranteed by the federal government to meet their rental obligations, unlike market renters whose ability to pay can fluctuate with economic conditions.
Given the 31.5% renter density in ZIP 92657, it's clear that a substantial portion of the housing stock is already dedicated to rental purposes. However, the N/A-day DOM (Days on Market) indicates either a very efficient rental market or a lack of comprehensive data on rental listings. This makes it difficult to assess how quickly properties can be rented out, but it also suggests that there might be a high demand for rentals, potentially favoring higher market yields.
In conclusion, while the Section 8 program offers a steady stream of income, the gross yield is considerably lower than what can be expected from market rents. Landlords and small-portfolio investors should weigh the benefits of guaranteed payments against the lower returns when considering participation in the Section 8 program in ZIP 92657.
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.