Section 8 Fair Market Rent (FMR) for ZIP 95125 - 2027

Investment Score for ZIP 95125

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	$2,270
1 Bedroom	$2,560
2 Bedrooms	$3,020
3 Bedrooms	$4,060
4 Bedrooms	$4,330
5 Bedrooms	$5,023
6 Bedrooms	$5,626
7 Bedrooms	$6,076
8 Bedrooms	$6,380

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	$2,560	$659,646	0.39%	F
2BR	$3,020	$1,144,214	0.26%	F
3BR	$4,060	$1,810,127	0.22%	F
4BR	$4,330	$2,301,793	0.19%	F
5BR	$5,023	$2,887,077	0.17%	F

Demographics & Housing Statistics

U.S. Census Bureau data (2024)

### Market Analysis for ZIP Code 95125 (San Jose, CA) #### Section 8 Voucher Dynamics The Fair Market Rent (FMR) for ZIP code 95125, as set by HUD for 2026, is $3,160 for a two-bedroom apartment. However, the Zillow median price for a two-bedroom home in this area is significantly higher at $1,193,631. This results in a price-to-FMR ratio of 31.5x, indicating that the actual market rent far exceeds the FMR. For example, a typical two-bedroom apartment would likely cost around $3,160 per month, but the actual rental market could be much higher due to the high median home value. Given that the FMR represents only 23.6% of the median household income ($160,738), it is clear that the FMR is substantially lower than what most residents can afford. This creates significant constraints for voucher holders, who may struggle to find suitable housing within the FMR limits. The gap between the FMR and actual market rents means that landlords accepting Section 8 vouchers must accept a rate that is well below market levels, which could impact their willingness to participate in the program. #### Affordability & Renter Profile ZIP code 95125 has a population of 54,419, with 38.9% being renters. The occupancy rate is quite high at 94.5%, suggesting a tight rental market. Given the median household income of $160,738, the majority of residents are likely employed in high-paying jobs, possibly in tech or other professional sectors. The high median home value indicates that this is a desirable and affluent neighborhood, where the average renter might also have a relatively high income compared to national standards. However, the disparity between the FMR and the actual market rent suggests that affordability is a significant issue. While the median household income is high, the cost of living, particularly housing, is extremely high as well. This makes it challenging for low-income families to find affordable housing, even with Section 8 assistance. The 38.9% renter percentage implies that there is a substantial demand for rental properties, but the supply is limited, especially when considering affordable options. #### Investor Angle From an investor perspective, the ZIP code 95125 presents a mixed picture. The FMR for a two-bedroom unit is $3,160, which is significantly lower than the market rent. If an investor were to purchase a property in this area, they would need to consider whether the FMR is sufficient to cover the costs of ownership, including mortgage payments, property taxes, insurance, and maintenance. Given the high median home value of $1,193,631, the potential rental income at FMR levels would likely not generate positive cash flow. For instance, if we assume a conservative mortgage payment of $5,000 per month (based on a 30-year fixed-rate mortgage at 4.5%), property taxes of $1,500 per month, and insurance and maintenance costs of $500 per month, the total monthly expenses would be around $7,000. At the FMR of $3,160, this would result in a negative cash flow of approximately $3,840 per month. Therefore, the investment grade for this ZIP code from a Section 8-focused perspective is low. Investors should be cautious about relying solely on Section 8 vouchers to cover their expenses, as the FMR is unlikely to provide adequate returns. #### Specific Actionable Insights 1. **Focus on Larger Units**: Given the high FMR for larger units (e.g., 3BR at $4,180 and 4BR at $4,550), investors might consider focusing on properties with three or four bedrooms. These units are closer to the market rent, making them more financially viable. For example, a three-bedroom unit at $4,180 might still result in a negative cash flow, but it would be less severe than for a two-bedroom unit. 2. **Consider Alternative Rental Programs**: Due to the tight rental market and the significant gap between FMR and market rent, investors might want to explore alternative rental programs that offer higher subsidies. For instance, some local government programs or non-profit organizations might provide additional financial support to make up for the shortfall between FMR and actual market rent. #### Bottom Line For Section 8-focused investors, the recommendation for ZIP code 95125 is to **skip** this market. The high median home values and the significant gap between FMR and actual market rents make it difficult to achieve positive cash flow. Additionally, the tight rental market and high occupancy rates suggest that there is little room for maneuvering or negotiating higher rents. Investors looking to enter this market should carefully evaluate the financial viability of their investments and consider alternative strategies or markets that better align with their goals.

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.