Section 8 Fair Market Rent (FMR) for ZIP 95037 - 2027

Investment Score for ZIP 95037

Based on 1% Rule: A+ (≥1.5%) | A (≥1.2%) | B (≥1.0%) | C (≥0.8%) | D (≥0.6%) | F (<0.6%)

FY 2027 Fair Market Rent Rates

Unit Size	Monthly FMR
Studio	$2,070
1 Bedroom	$2,340
2 Bedrooms	$2,750
3 Bedrooms	$3,690
4 Bedrooms	$3,940
5 Bedrooms	$4,570
6 Bedrooms	$5,118
7 Bedrooms	$5,527
8 Bedrooms	$5,803

Investment Analysis by Bedroom Size

Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)

Bedrooms	Monthly FMR	Median Price	1% Rule	Grade
1BR	$2,340	$578,229	0.4%	F
2BR	$2,750	$766,729	0.36%	F
3BR	$3,690	$1,103,990	0.33%	F
4BR	$3,940	$1,475,590	0.27%	F
5BR	$4,570	$1,861,282	0.25%	F

Demographics & Housing Statistics

U.S. Census Bureau data (2024)

### Market Analysis for ZIP Code 95037 (Morgan Hill, CA) #### Section 8 Voucher Dynamics The Federal Market Rent (FMR) for ZIP code 95037 in Morgan Hill, California, is set at $2820 for a two-bedroom unit in 2026. This represents 20.7% of the median household income in the area, which is $163,182. However, the actual rental market in Morgan Hill is significantly higher. The Zillow median price for a two-bedroom unit is $776,445, which translates to a monthly rent of approximately $3235 based on typical mortgage payments. This means that the actual rent is about 1.15 times the FMR, creating a significant gap between what voucher holders can afford and what landlords are charging. Voucher holders face strict constraints due to the high cost of living in Morgan Hill. The FMR for a three-bedroom unit is $3730, but if we consider the same price-to-FMR ratio, the actual rent would be around $4350, making it challenging for families to find suitable housing. Additionally, the occupancy rate of 95.3% suggests that there is little vacancy, further tightening the market for affordable housing. #### Affordability & Renter Profile Given the median household income of $163,182, the high rental prices in Morgan Hill are a significant challenge for renters. The 29.4% of the population that rents faces substantial financial pressure, especially when considering the high cost of living and the limited supply of affordable units. The average renter in this ZIP code likely has a relatively high income to afford the current rental rates, but even then, the disparity between FMR and actual rents is considerable. The market is tight, with very few vacant units available. This makes it difficult for voucher holders to find properties that meet their budgetary constraints. The high occupancy rate also indicates that there is strong demand for rental properties, which could lead to further increases in rental prices if the supply does not keep pace with demand. #### Investor Angle From an investor perspective, the ZIP code 95037 offers mixed opportunities. While the FMRs provide a guideline for what the government will reimburse, the actual rental market is much higher. For instance, a two-bedroom unit with an FMR of $2820 would need to command a rent of $3235 to break even, assuming the property is priced at the Zillow median. This results in a price-to-FMR ratio of 22.9x, which is exceptionally high and indicates that the market is not aligned with the federal guidelines. To determine if this ZIP code is cash-flow positive at FMR, we must consider the actual rental rates versus the FMR. Given the high price-to-FMR ratio, it is unlikely that an investor would find the market cash-flow positive at FMR levels. Instead, they would need to charge significantly above the FMR to cover costs and generate a profit. The investment grade in this area is low for Section 8-focused investors due to the mismatch between FMR and market rents. #### Specific Actionable Insights 1. **Focus on Smaller Units**: Investors should focus on smaller units, such as one-bedroom or studio apartments, where the gap between FMR and market rent is less pronounced. For example, the FMR for a one-bedroom unit is $2410, while the actual rent might be closer to $2800, still a significant gap but more manageable than larger units. 2. **Consider Location-Specific Strategies**: Given the high occupancy rate, investors should consider renovating older properties or converting existing homes into rental units. This can help attract tenants who are willing to pay the higher market rates, while still offering some flexibility for voucher holders. 3. **Engage with Local Real Estate Agents**: To better understand the local rental market dynamics, investors should engage with local real estate agents who have firsthand knowledge of the rental landscape. This can provide insights into which neighborhoods are more affordable and where there might be a higher concentration of voucher holders. #### Bottom Line Based on the data provided, the recommendation for Section 8-focused investors in ZIP code 95037 is to **skip** this market. The high price-to-FMR ratio and tight rental market make it challenging to find properties that offer a reasonable return on investment while adhering to the FMR guidelines. Investors looking to enter this market should either consider alternative investment strategies that do not rely solely on Section 8 vouchers or look for areas with a lower price-to-FMR ratio and more affordable rental options.

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.