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 | $2,720 |
| 1 Bedroom | $3,070 |
| 2 Bedrooms | $3,620 |
| 3 Bedrooms | $4,860 |
| 4 Bedrooms | $5,190 |
| 5 Bedrooms | $6,020 |
| 6 Bedrooms | $6,742 |
| 7 Bedrooms | $7,281 |
| 8 Bedrooms | $7,645 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $3,070 | $546,435 | 0.56% | F |
| 2BR | $3,620 | $837,049 | 0.43% | F |
| 3BR | $4,860 | $1,274,509 | 0.38% | F |
| 4BR | $5,190 | $1,506,279 | 0.34% | F |
| 5BR | $6,020 | $1,902,335 | 0.32% | F |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP 95131 in San Jose, CA, reveals two distinct scenarios based on the Federal Market Rent (FMR) and the Zillow Observed Rent Index (ZORI).
Annualizing the 2BR Federal Market Rent at $3400 for FY 2024, we find an implied gross yield of approximately 0.24%. This is calculated by dividing the annualized FMR ($3400 x 12 months = $40,800) by the median home value of $1,389,226. The result is a gross yield of 2.94%, which is quite low when compared to typical investment properties.
In contrast, using the market rent figure from ZORI, which stands at $3,580 per month, the implied gross yield increases slightly to 0.26%. This calculation is derived from the annualized market rent ($3,580 x 12 months = $42,960) divided by the median home value of $1,389,226, resulting in a gross yield of 3.09%.
Given that only 38.2% of residents in ZIP 95131 are renters, it suggests that there might be limited demand for rental properties, particularly those participating in the Section 8 program. Additionally, the 10-day Days on Market (DOM) indicates that homes are selling quickly, which could imply a strong preference for homeownership over renting.
While the ZORI-based gross yield of 3.09% is marginally higher than the FMR-based gross yield of 2.94%, the latter scenario is more realistic for Section 8 properties in this area. This is because the Federal Market Rent is specifically designed to reflect the maximum amount that can be charged to tenants under the Section 8 program, which often caps rents below market rates.
Investors should consider these yields in light of the local rental market dynamics and the overall economic environment in San Jose. While the yields may seem low, they provide a baseline for understanding the potential returns on investment for properties in the Section 8 program.
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.