Location: Santa Cruz-Watsonville, 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 | $3,390 |
| 1 Bedroom | $3,650 |
| 2 Bedrooms | $4,480 |
| 3 Bedrooms | $5,890 |
| 4 Bedrooms | $6,180 |
| 5 Bedrooms | $7,169 |
| 6 Bedrooms | $8,029 |
| 7 Bedrooms | $8,671 |
| 8 Bedrooms | $9,105 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $3,650 | $700,087 | 0.52% | F |
| 2BR | $4,480 | $1,011,725 | 0.44% | F |
| 3BR | $5,890 | $1,413,761 | 0.42% | F |
| 4BR | $6,180 | $1,808,356 | 0.34% | F |
| 5BR | $7,169 | $2,290,418 | 0.31% | F |
U.S. Census Bureau data (2024)
The potential risks for investing in Section 8 properties in ZIP code 95033, Lexington Hills, CA, are significant and should be carefully considered before making any investment decisions. One major concern is tenant turnover, which can be high due to the disparity between the market rent of $3,501 and the Fair Market Rent (FMR) of $3,930 for FY 2024. This difference may lead to situations where tenants cannot afford the higher FMR rates when their vouchers do not cover the full amount, resulting in frequent moves.
Vacancy exposure is another issue. The Days on Market (DOM) data is currently unavailable, which makes it difficult to predict how long it might take to fill vacancies. However, given the typical home value of $1,455,409 and the median income of $189,118, there is a strong likelihood that landlords will face challenges in attracting and retaining tenants who can only pay through Section 8 vouchers. The high cost of living relative to income suggests that many residents may struggle financially, increasing the risk of non-payment or late payment of rent.
Deferred maintenance is also a risk factor. With a median income significantly lower than the average home value, it is possible that homeowners may delay necessary repairs and improvements, leading to higher costs and maintenance issues over time. This can be particularly problematic for rental properties, as maintaining a property in good condition is essential for attracting and keeping tenants.
Despite these risks, the high renter share of 23.3% in the area indicates a robust demand for rental housing, which often translates into higher demand for Section 8 vouchers. Landlords in this area can expect a steady pool of potential tenants looking for affordable housing options, which can help mitigate some of the risks associated with vacancy and turnover.
Verdict: Moderate risk for a first-time Section 8 landlord.
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.