Section 8 Fair Market Rent (FMR) for ZIP 98042 - 2027

Investment Score for ZIP 98042

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	$2,170
1 Bedroom	$2,260
2 Bedrooms	$2,640
3 Bedrooms	$3,440
4 Bedrooms	$4,100
5 Bedrooms	$4,756
6 Bedrooms	$5,327
7 Bedrooms	$5,753
8 Bedrooms	$6,041

Investment Analysis by Bedroom Size

Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)

Bedrooms	Monthly FMR	Median Price	1% Rule	Grade
1BR	$2,260	$529,210	0.43%	F
2BR	$2,640	$482,189	0.55%	F
3BR	$3,440	$610,880	0.56%	F
4BR	$4,100	$746,541	0.55%	F
5BR	$4,756	$823,781	0.58%	F

Demographics & Housing Statistics

U.S. Census Bureau data (2024)

### Market Analysis for ZIP Code 98042 (Covington, WA) #### Section 8 Voucher Dynamics The Fair Market Rent (FMR) for ZIP code 98042 is set by HUD for 2026 as follows: - 0BR: $2140 - 1BR: $2210 - 2BR: $2580 - 3BR: $3380 - 4BR: $3970 These figures represent the maximum amount that a Section 8 voucher holder can pay for rent. However, it is important to note that the actual rental market in Covington, WA, significantly exceeds these FMRs. For instance, the Zillow median price for a 2BR unit is $498,764, which translates to a monthly mortgage payment of approximately $2,475 based on typical financing terms. This implies that the price-to-FMR ratio for a 2BR unit is 16.1x, meaning that the actual cost of renting a 2BR unit is likely much higher than the FMR. Given the high actual rental costs compared to the FMR, voucher holders face significant constraints. They may struggle to find units that fit within their budget, particularly for larger units like 3BR and 4BR. The FMR for a 2BR unit is only $2580, which is less than half of what the median home price suggests. This makes it challenging for voucher holders to secure housing in the area without substantial out-of-pocket expenses. #### Affordability & Renter Profile Covington, WA, has a population of 50,216, with 17.7% of residents being renters. The median household income is $127,552, indicating a relatively affluent community. The occupancy rate of 97.2% suggests a tight rental market with limited availability. For voucher holders, affordability is a major concern. A 2BR unit at the FMR level represents 24.3% of the median income, which is already a considerable portion. Given that the actual rental costs are likely much higher, the financial burden on voucher holders would be even greater. This tight market means that there is little room for negotiation on rental prices, making it difficult for voucher holders to find suitable housing. #### Investor Angle From an investor perspective, the ZIP code 98042 presents a mixed picture. The FMRs are lower than the actual rental market rates, but they still offer some potential for cash flow. For example, a 2BR unit at the FMR of $2580 could generate a positive cash flow if the investor can manage to keep operating costs below this figure. However, given the high actual rental prices, it is unlikely that many landlords will accept FMR levels as competitive. The investment grade for this ZIP code is moderate. While the demand for rental properties is strong due to the high occupancy rate, the supply of affordable units is limited. Investors should carefully consider the balance between FMR and actual rental prices when evaluating potential returns. Additionally, the high median income suggests that there is a significant number of residents who can afford higher rents, which might make it challenging to attract tenants relying solely on vouchers. #### Specific Actionable Insights 1. **Focus on Smaller Units**: Given the high price-to-FMR ratio, investors should focus on smaller units such as 0BR and 1BR apartments. These units have FMRs of $2140 and $2210 respectively, which are closer to the actual rental market rates. This strategy can help maximize the chances of finding tenants who can afford the rent with their vouchers. 2. **Consider Mixed-Income Developments**: Developing mixed-income properties where a portion of units are designated for voucher holders while others cater to market-rate tenants can provide a balanced approach. This allows investors to leverage the higher rental rates from market-rate tenants to offset the lower FMR-based rents from voucher holders. 3. **Target Areas with Lower Rental Prices**: Within ZIP code 98042, there might be pockets or neighborhoods where rental prices are slightly lower than the overall median. Identifying these areas could provide opportunities for investors to offer units at or near FMR levels while still attracting tenants. #### Bottom Line For Section 8-focused investors, the recommendation for ZIP code 98042 is to **Hold**. The high actual rental prices relative to FMRs make it challenging to find suitable tenants who can fully cover the rent with their vouchers. However, there are opportunities in smaller units and potentially in areas with lower rental prices. Investors should proceed cautiously and consider a mixed-income strategy to ensure financial viability.

Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-08-31). 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.