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 | $2,280 |
| 1 Bedroom | $2,570 |
| 2 Bedrooms | $3,030 |
| 3 Bedrooms | $4,070 |
| 4 Bedrooms | $4,340 |
| 5 Bedrooms | $5,034 |
| 6 Bedrooms | $5,638 |
| 7 Bedrooms | $6,089 |
| 8 Bedrooms | $6,393 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $2,570 | $562,655 | 0.46% | F |
| 2BR | $3,030 | $793,628 | 0.38% | F |
| 3BR | $4,070 | $1,060,744 | 0.38% | F |
| 4BR | $4,340 | $1,165,167 | 0.37% | F |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 95110 in San Jose, CA, reveals a stark contrast between the federally determined Fair Market Rent (FMR) and the actual market rents. For a two-bedroom property, the FMR set by the government for fiscal year 2024 is $2860 annually, while the Zillow Observed Rent Index (ZORI) indicates a market rent of $3068 per month.
To calculate the implied gross yield, we first annualize these figures. The FMR of $2860 translates directly into an annual figure, whereas the market rent of $3068 per month amounts to an annual rent of $36,816. Given the median home value in ZIP 95110 is $849,388, the implied gross yield based on the FMR is approximately 0.34%, calculated as ($2860 / $849,388) * 100. In contrast, the implied gross yield based on the market rent is significantly higher at 4.34%, calculated as ($36,816 / $849,388) * 100.
The disparity between these yields highlights the reality that landlords participating in the Section 8 program can expect much lower returns compared to those who can command market rates. However, considering the local rental market dynamics, where 59.9% of residents are renters, it is evident that demand for affordable housing is substantial. This high renter density suggests a stable tenant pool for Section 8 properties, although the exact days-on-market (DOM) data is not available, which would typically provide insight into how quickly units can be leased.
Given the high median home value and the significant gap between FMR and market rents, the gross yield based on the FMR is more reflective of the realities faced by landlords in the Section 8 program. While the higher market rent yield might seem attractive, the practical considerations of maintaining eligibility for the Section 8 program and the associated administrative burdens mean that the lower FMR-based yield is the more realistic expectation for investment returns 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.