Location: San Diego-Chula Vista-Carlsbad, 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 | $2,640 |
| 1 Bedroom | $2,680 |
| 2 Bedrooms | $3,140 |
| 3 Bedrooms | $4,260 |
| 4 Bedrooms | $5,100 |
| 5 Bedrooms | $5,916 |
| 6 Bedrooms | $6,626 |
| 7 Bedrooms | $7,156 |
| 8 Bedrooms | $7,514 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $2,680 | $694,889 | 0.39% | F |
| 2BR | $3,140 | $1,244,089 | 0.25% | F |
| 3BR | $4,260 | $1,729,941 | 0.25% | F |
| 4BR | $5,100 | $2,267,194 | 0.22% | F |
| 5BR | $5,916 | $3,345,581 | 0.18% | F |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP 92672 (San Clemente, CA) reveals a stark contrast between government-subsidized rental income and market rents. For a two-bedroom unit, the Fair Market Rent (FMR) for fiscal year 2024 is set at $2810 per month. This translates into an annualized rental income of $33,720. Given the median home value in the area is $1,699,808, the implied gross yield for a Section 8 property would be approximately 1.98%. This is calculated by dividing the annual rental income by the median home value.
In comparison, the Zillow Observed Rental Index (ZORI) indicates a market rent of $3,261 per month for a similar unit. When annualized, this results in a rental income of $39,132. The gross yield based on market rents, therefore, stands at about 2.30%, significantly higher than the Section 8 scenario.
The gross yield difference highlights the financial disparity between accepting Section 8 tenants versus market-rate renters. With a renter density of 45.9%, it's evident that a substantial portion of the population relies on rental assistance programs. However, the 17-day Days on Market (DOM) suggests that properties can be leased quickly, indicating strong demand for rental units in San Clemente.
Given these factors, while the Section 8 scenario provides a more stable and predictable cash flow due to government backing, the lower gross yield might dissuade some investors. On the other hand, the higher gross yield from market rents comes with the risk of tenant variability and potential vacancy periods, though the quick leasing period mitigates some of this risk.
For landlords and small-portfolio investors, the decision hinges on whether they prioritize the security of government-backed rental payments or are willing to accept the slightly higher risk for a better gross yield. The data clearly shows that market-rate rentals offer a superior return compared to Section 8, but the choice should also consider the local housing dynamics and investor preference for stability over yield.
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.