Section 8 Rent Calculation: How to Find Fair Market Rent for Your Property

You found a property that looks like a solid rental, but you're wondering if Section 8 tenants could work. The first question everyone asks: how much will they actually pay?

The answer starts with understanding Fair Market Rent and how housing authorities calculate payment standards. Get this wrong, and you'll either price yourself out of the program or leave money on the table.

What Fair Market Rent Actually Means

Fair Market Rent (FMR) is the amount HUD determines a property should rent for in a given area, including utilities. HUD publishes these figures annually for every county and metropolitan area in the country.

FMR represents the 40th percentile of rents in an area. That means 40% of units rent for less than the FMR, and 60% rent for more. HUD uses this benchmark because it balances two competing goals: giving voucher holders enough options while keeping program costs manageable.

The FMRs are set by bedroom count:

For anything larger than four bedrooms, housing authorities add a percentage to the 4-BR FMR.

How to Find Your Area's Fair Market Rent

HUD publishes FMR data on their official lookup tool. You can search by state, county, or metropolitan area.

Here's what the 2025 FMRs look like for a few markets to give you a sense of the range:

These numbers update every October 1st. If you're analyzing a deal in September, check whether the new FMRs have been announced because they could significantly change your projections.

FMR vs. Payment Standards: The Part Most Landlords Miss

Here's where it gets confusing. The FMR is a HUD number, but your local housing authority sets its own payment standard based on the FMR. The payment standard is what actually determines the maximum rent they'll approve.

Housing authorities can set payment standards between 90% and 110% of the FMR. Some authorities with HUD approval can go even higher in expensive markets.

This means two properties in the same metro area might have different maximum rents if they fall under different housing authorities. A property in the city limits of Indianapolis has a different payment standard than one in Carmel, even though they're in the same metro area.

Payment Standard = FMR × Housing Authority Percentage (90-110%)

Always call your local housing authority to confirm their current payment standard. Don't assume it matches the FMR.

How Section 8 Rent Gets Split

The tenant pays a portion, and the housing authority pays the rest directly to you. The split works like this:

The tenant's portion is typically 30% of their adjusted income. If a family earns $24,000 per year (that's $2,000 per month), their portion would be around $600 per month.

The housing authority pays the difference between the tenant's portion and the rent, up to the payment standard.

Example:

If you list above the payment standard, the tenant has to pay the difference out of pocket (on top of their 30%). Most voucher holders can't afford that, so you'll have fewer applicants.

What Happens If You Price Above the Payment Standard

Technically, voucher holders can rent units priced above the payment standard. The catch: they're responsible for the entire overage.

Let's say the payment standard is $1,400 and you list at $1,550. The tenant doesn't just pay $150 more. Their math looks like this:

That's a 25% increase in what they owe each month. Most families on vouchers can't absorb that, which limits your applicant pool significantly.

I've found that pricing at or slightly below the payment standard attracts the most qualified Section 8 applicants. The families who can afford to pay over the standard often don't need vouchers in the first place.

Rent Reasonableness: The Second Approval Hurdle

Even if you price at the payment standard, the housing authority has to approve your rent as "reasonable" compared to similar unsubsidized units in the area.

The housing authority inspector will compare your property to similar rentals considering:

If comparable 3-bedroom houses in your neighborhood rent for $1,200, and you're asking $1,400 (even if that's within the payment standard), the inspector might require you to lower the rent.

This is why knowing your local market rent is just as important as knowing the FMR. Run a rental analysis on your property using actual market data before assuming you'll get the maximum payment standard.

Small Area Fair Market Rents: A Newer Wrinkle

In 2017, HUD started rolling out Small Area FMRs (SAFMRs) in some metropolitan areas. Instead of one FMR for the entire metro, SAFMRs set different rates by ZIP code.

The goal was addressing the reality that rent in downtown Dallas is nothing like rent in the outer suburbs. With metro-wide FMRs, voucher holders were priced out of higher-rent areas and concentrated in lower-income neighborhoods.

As of 2025, SAFMRs apply in about 25 metropolitan areas. If you're investing in a major metro, check whether your ZIP code has its own rate or uses the metro-wide FMR.

A Complete Rent Calculation Example

Let's walk through a real scenario. You're looking at a 3-bedroom single-family home in Franklin County, Ohio (Columbus metro).

Step 1: Find the FMR

The 2025 FMR for a 3-bedroom in the Columbus metro is $1,461.

Step 2: Confirm the payment standard

You call the Columbus Metropolitan Housing Authority. They tell you their payment standard is 100% of FMR, so $1,461 for a 3-bedroom.

Step 3: Research market rent

You check comparable rentals on Zillow, Apartments.com, and local property managers. Similar 3-bedroom homes in the neighborhood rent for $1,350 to $1,500.

Step 4: Set your asking rent

Your property is in average condition with no major upgrades. Comparable analysis suggests $1,400 is realistic. That's below the payment standard, so you're in good shape for rent reasonableness approval.

Step 5: Calculate expected income

The beauty of Section 8 is that the housing authority portion (typically 50-70% of rent) arrives reliably on the first of every month. You're not chasing anyone for $800 of that $1,400.

Common Mistakes When Calculating Section 8 Rent

Using last year's FMR

FMRs change every October. I've seen investors run projections in November using the previous year's numbers because that's what came up in their Google search. In markets with 5-8% annual rent growth, that's a meaningful difference.

Assuming one housing authority covers your area

Metro areas often have multiple housing authorities with different payment standards. The City of Atlanta Housing Authority has different rates than DeKalb County or Fulton County. Your property's location determines which authority applies.

Ignoring utility allowances

If the tenant pays utilities, the housing authority deducts a utility allowance from the rent. A $1,400 payment standard might only mean $1,280 going to you if the tenant is responsible for gas and electric.

Rent to Landlord = Payment Standard - Utility Allowance

This trips up landlords who include all utilities (which eliminates the deduction) versus those who don't.

Expecting maximum rent for below-average properties

Payment standards represent what the housing authority will pay for a quality unit. If your property needs work, has a bad layout, or sits in a less desirable location, rent reasonableness will knock you down regardless of what the FMR says.

When Section 8 Makes Financial Sense

Section 8 tenants work well for certain properties and strategies:

Lower-end properties in B and C neighborhoods often hit or exceed payment standards because FMRs represent the 40th percentile. If market rent would be $1,100 but the payment standard is $1,200, Section 8 actually pays a premium.

Long-term hold strategies benefit from Section 8 because turnover tends to be lower. Voucher holders have strong incentive to stay put since finding another landlord who accepts vouchers takes time. I've had Section 8 tenants stay 6+ years when market-rate tenants averaged 18-24 months.

Markets with limited rental housing stock often have payment standards at 110% of FMR because authorities need to compete for available units. Check if your housing authority uses exception payment standards for harder-to-serve areas.

Running Your Section 8 Numbers

Before committing to a Section 8 strategy, model both scenarios: market rent and Section 8 rent. Sometimes they're identical. Sometimes market rent is higher (especially in rapidly appreciating areas where FMRs lag behind). Sometimes Section 8 pays more.

Pull the FMR for your target area, confirm the payment standard with the housing authority, and subtract any utility allowance. That's your realistic Section 8 rent ceiling.

Then run the analysis. Does the property cash flow at that rent level? What's the cap rate? The cash-on-cash return? Use a rental property calculator to stress test the numbers before making an offer.

The Section 8 program isn't complicated once you understand how the pieces fit together. FMR sets the baseline, payment standards adjust for local conditions, and rent reasonableness keeps prices honest. Know all three numbers for your market, and you'll underwrite Section 8 deals with confidence.