The occupancy rate for Section 8 housing is 91%. On average, tenants have lived in their current home for more than eight years. This stability is one reason becoming a Section 8 landlord may be a smart decision.
The U.S. Department of Housing and Urban Development (HUD) administers Section 8, which provides housing opportunities for low-income households. HUD sets the rate you can charge for rent.
Learn more about the rent assessment criteria for Section 8 so you can decide if it's a good fit for your property.
What Is Reasonable Rent for Section 8?
HUD uses the Fair Market Rent (FMR) value to determine if the rent for Section 8 housing is reasonable. The FMR is the amount that would cover rent and utilities for 40% of comparable housing units in the area. Put another way, it's the value at which around 60% of units in the area cost more to rent and 40% cost less.
The FMR varies based on each local housing market. Murfreesboro is grouped with Nashville, Davidson, and Franklin for this calculation. HUD considers each zip code separately instead of making one FMR for the entire metropolitan area.
Types of Housing Used to Calculate Fair Market Rent
HUD only includes units that rented in the area in the previous 15 months when calculating the Fair Market Rent. Some types of housing are not included no matter when they were rented, such as:
- Units less than two years old
- Assisted living units
- Units rented at below-market rates
- Luxury units
This helps ensure a more accurate assessment of the FMR.
Reasonable Rent Factors for Section 8
The rent assessment criteria for Fair Market Rent for your investment property involves several factors. HUD can account for variables like inflation and rental trends.
Base Rent
The base rent price comes from the American Community Survey. It's based on the adjusted 2-bedroom rent in each area. HUD checks to be sure the base rent is statistically reliable before using it.
Recent Move Data
HUD adjusts the base rent to account for people who recently moved. The recent move data compares how much people paid to move compared to rent for other renters in the area.
Inflation
Adjustments for inflation help ensure that the FMR reflects current pricing. HUD uses a weighted average of data from private sources and the Consumer Price Index. It shows the local change in gross rent inflation.
Rental Market Trends
HUD may increase the FMR further if market trends show that rent is likely to increase. The agency uses the Consumer Price Index forecast for the coming year.
Comparisons
HUD multiplies the base rent by these factors. If the FMR falls below the state minimum, HUD will raise it. HUD will also raise the FMR if it's less than 90% of the prior year's amount.
Understanding Murfreesboro Rent Guidelines for Section 8
Before deciding whether to rent to Section 8 tenants, you need to understand how the Fair Market Rent is calculated. The amount you can charge is likely to be slightly below the median rent for the neighborhood. You could benefit from a more stable rent income and less tenant turnover, though.
The team at PMI Professionals specializes in the Murfreesboro-area market. We'll help you evaluate whether Section 8 is the right strategy for your investment property.
Schedule a consultation with PMI Professionals today to discuss the Section 8 evaluation process.
