Location: San Jose-Sunnyvale-Santa Clara, CA | Metro: San Jose-Sunnyvale-Santa Clara, 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 | $2,500 |
| 1 Bedroom | $2,830 |
| 2 Bedrooms | $3,330 |
| 3 Bedrooms | $4,470 |
| 4 Bedrooms | $4,770 |
| 5 Bedrooms | $5,533 |
| 6 Bedrooms | $6,197 |
| 7 Bedrooms | $6,693 |
| 8 Bedrooms | $7,028 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $2,830 | $1,339,023 | 0.21% | F |
| 2BR | $3,330 | $2,005,078 | 0.17% | F |
| 3BR | $4,470 | $2,936,805 | 0.15% | F |
| 4BR | $4,770 | $3,931,809 | 0.12% | F |
| 5BR | $5,533 | $5,150,548 | 0.11% | F |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP 95030, located in Los Gatos, California, reveals some interesting insights into the potential returns for landlords and small-portfolio investors. To begin, let's consider the Fair Market Rent (FMR) for a two-bedroom apartment, which is set at $3180 annually for fiscal year 2024. This translates to a monthly rent of approximately $265. Given the median home value in the area is $3,611,560, we can calculate the implied gross yield for a property rented under the Section 8 program.
The implied gross yield for a Section 8 rental is calculated by dividing the annualized rental income by the median home value. In this case, the annual rental income would be $3180, leading to an implied gross yield of about 0.09%. This calculation is based on the assumption that the home value represents the cost of acquiring the property. However, it's important to note that this figure does not account for operating expenses or vacancy rates, which are critical factors in determining net operating income (NOI).
Next, let's examine the market rent scenario. The Zillow Observed Rent Index (ZORI) indicates a market rent of $3,615 per month for a similar two-bedroom unit. This equates to an annual rental income of $43,380. When we compare this to the median home value, the implied gross yield increases significantly to about 1.20%. This higher yield reflects the premium that market rents command over government-subsidized Section 8 rents.
In evaluating these two scenarios, it becomes clear that the market rent yield is far more realistic for most investors. The 21.0% renter density suggests a moderate demand for rentals, while the 10-day Days on Market (DOM) indicates strong competition among renters. These factors combined imply that landlords in ZIP 95030 can likely achieve closer to market rents than the lower Section 8 rates, making the 1.20% gross yield a more practical benchmark for investment decisions.
To summarize, the Section 8 cap-rate for ZIP 95030 yields an implied gross return of 0.09%, whereas the market rent scenario implies a gross yield of 1.20%. Given the local rental market conditions, the latter provides a more accurate reflection of potential returns for landlords and small- portfolio investors.
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.