Guest post from Tim Ballering – justalandlord.com
From a Fair Housing perspective, you probably must account in some manner for the value of the Section 8 payment when calculating an income multiplier guideline.
I’ve read of the argument made in other jurisdictions that if an owner is using a rent multiplier, that it should be on net rent to the tenant. This is probably not a workable answer for either tenant nor the owner. If the net payment by the tenant is $20 with a three times multiplier, a $60 per month income is not going to cover living expenses like heat and lights. A good discussion of this issue from a while ago is at: Bigger Pockets
In WI you must include the value of child support, food stamps and perhaps* Rent Assistance Vouchers in income calculations. So if the gross rent is $800 and the tenant receives $700 RA, $500 in food stamps, they would need to earn $1200 additional to meet the three times multiplier.
*Wisconsin Lawful Source of Income definition:
Wis Admin Code DWD 220.02(8) “Lawful source of income” includes, but is not limited to, lawful compensation or lawful remuneration in exchange for goods or services provided; profit from financial investments; any negotiable draft, coupon or voucher representing monetary value such as food stamps; social security; public assistance; unemployment compensation or worker’s compensation payments.
There is a 1995 federal case, Knapp v. Eagle Property Management Corp, that found the value of Section 8 vouchers are not required to be included as income.
But that was nearly 25 years ago. Sentiments have changed over that time. I believe that if Knapp was tried today the court would find against the owner on this question as concepts like disparate impact were not widely argued then. Today we are restricted by HUD in using criminal records in screening because of the disparate impact on members of protected classes.
The plain language reading of the WI code makes not including the voucher value in the rent multiplier calculation open to expensive litigation, which the Knapp court determined that their insurer had no duty to defend.
To form your own opinion on this and other WI fair housing standards, a good starting point is: