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 | $2,400 |
| 1 Bedroom | $2,710 |
| 2 Bedrooms | $3,190 |
| 3 Bedrooms | $4,290 |
| 4 Bedrooms | $4,570 |
| 5 Bedrooms | $5,301 |
| 6 Bedrooms | $5,937 |
| 7 Bedrooms | $6,412 |
| 8 Bedrooms | $6,733 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $3,190 | $778,019 | 0.41% | F |
| 3BR | $4,290 | $1,262,594 | 0.34% | F |
| 4BR | $4,570 | $1,894,910 | 0.24% | F |
| 5BR | $5,301 | $3,415,572 | 0.16% | F |
U.S. Census Bureau data (2024)
A skeptical investor might question whether the Fair Market Rent (FMR) of $3,390 for ZIP code 95138 in California can sufficiently cover the mortgage on a home valued at $1,842,447. This concern is valid, but it's important to note that the FMR represents the median rent for a two-bedroom apartment in the area. To determine if this FMR can cover a mortgage, one must consider the mortgage rate and term. Assuming a typical 30-year fixed-rate mortgage at an average interest rate, the monthly payment on a home priced at $1,842,447 could be significantly higher than the FMR. However, the FMR does provide a benchmark for rental income potential.
The second objection is whether there is sufficient renter demand at 19.1%. The percentage indicates that nearly one-fifth of households in the area are renters. While this figure is relatively low compared to other regions, it still suggests a notable rental market presence. For context, a lower percentage of renters could mean fewer potential tenants, but it also implies a higher likelihood of stable occupancy rates due to the competitive nature of the market for those seeking rentals.
Lastly, an investor might wonder if Housing Choice Vouchers will keep up with the market rents of $3,480. The voucher program aims to ensure that eligible families pay only 30% of their adjusted income towards housing costs. Whether these vouchers can meet the market rents depends on the income levels of voucher recipients and the local administration's ability to adjust payments. Current data does not provide a direct comparison between voucher amounts and market rents, so this remains an open question requiring further investigation into the specific voucher policies and income levels in ZIP 95138.
In summary, while the FMR of $3,390 may not cover the mortgage on a high-priced home, it offers insight into the rental market's capabilities. The 19.1% rental rate indicates a smaller but potentially stable tenant pool. And regarding the Housing Choice Vouchers, their adequacy against market rents of $3,480 is uncertain without additional analysis.
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.