Location: San Francisco, CA | Metro: San Francisco, 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 | $2,470 |
| 1 Bedroom | $2,930 |
| 2 Bedrooms | $3,560 |
| 3 Bedrooms | $4,650 |
| 4 Bedrooms | $5,230 |
| 5 Bedrooms | $6,067 |
| 6 Bedrooms | $6,795 |
| 7 Bedrooms | $7,339 |
| 8 Bedrooms | $7,706 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $3,560 | $1,549,442 | 0.23% | F |
| 3BR | $4,650 | $2,011,640 | 0.23% | F |
| 4BR | $5,230 | $2,626,822 | 0.2% | F |
| 5BR | $6,067 | $3,166,824 | 0.19% | F |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 94127 in San Francisco, CA, reveals two distinct gross-yield scenarios based on the Fair Market Rent (FMR) and the market rent (ZORI).
Annualizing the 2BR FMR of $4780 for FY 2024, the annual rental income would be $57,360. Given the median home value of $1,926,409, this scenario implies a gross yield of approximately 2.98%. This calculation is derived from the formula: Gross Yield = (Annual Rental Income / Median Home Value) * 100.
In contrast, using the market rent (ZORI) of $4,833, the annual rental income would be $57,996, leading to a gross yield of about 3.01%. The formula remains consistent: Gross Yield = (Annual Rental Income / Median Home Value) * 100.
The difference between these two yields is minimal, at just over 0.03 percentage points. However, the implications for investment strategy are significant when considering the 17.1% renter density and the 12-day days on market (DOM) for ZIP 94127.
A 17.1% renter density suggests that a substantial portion of the housing market in this area is occupied by homeowners rather than renters. This could indicate a less robust demand for rental properties, making the lower gross yield scenario more realistic. Additionally, a 12-day DOM reflects a highly competitive rental market where units are likely to be rented quickly, but the rental rates may be pressured downwards towards the FMR.
Given these factors, the gross yield based on the FMR of 2.98% appears to be the more accurate representation of potential returns for landlords and small-portfolio investors in ZIP 94127. This figure aligns better with the reality of a market where rental demand is not overwhelming and where competition among landlords can drive down rental rates closer to government-set levels.
While the ZORI-based gross yield of 3.01% might seem more attractive, it does not account for the realities of the local rental market as reflected in the renter density and DOM. Investors should focus on the lower gross yield when evaluating the viability of Section 8 investments in this ZIP code.
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.