1. HUD-Office of Fair Housing & Equal Opportunity
Section 3
Presented by:
Kristina Miller
HUD-Office of Fair Housing & Equal Opportunity

2. What is Section 3?
Provision of the Housing and Urban Development (HUD) Act of 1968 that promotes local economic development, neighborhood economic improvement, and individual self-sufficiency.
Section 3 is a provision of the Housing and Urban Development (HUD) Act of 1968 that promotes local economic development, neighborhood economic improvement, and individual self-sufficiency.

3. History of Section 3 Kerner Commission Report 60 ‘s Urban Conflicts
Section 3 of Housing and Urban Development of 1968
Housing and Community Development Act of 1992
As a result of the 1960’s Urban Disturbances, the Kerner Commission called for legislation that would stimulate jobs and business opportunities for residents of assisted housing in distressed urban areas. The result was Section 3. Unfortunately, it did little until civil disturbances in LA in 1992 focused renewed public attention on the same issues of the 1960’s. The Housing and Community Development Act of 1992 overhauled Section 3 by clarifying the types of HUD financial assistance, activities and recipients that are subject to Section 3.

4. The Intent of Section 3
Harness the economic power of HUD investments and expand economic opportunity for low-income families in the neighborhoods where they live.
HUD funded activities represent one of the largest sources of economic activity in many distressed areas. The economic benefit to these areas multiplies to the extent that HUD’s investment circulates throughout the neighborhood economy-as wages to residents, as contracts to businesses, as sales for others in the neighborhood from whom these residents and business buy goods and services.

5. Harnessing HUD’s Economic Power
Help more families move toward economic empowerment and self sufficiency by directing economic opportunity to low income persons
Set the stage for long term economic growth by developing the skills and capacities of the work force

6. Section 3 Business Concerns
Rev. 2/2012
The Goal of Section 3
When there’s a need to employ additional personnel, Recipients of HUD funds and their Contractors should direct employment and other economic opportunities, to the greatest extent feasible, to
Section 3 Residents and
Section 3 Business Concerns
The focus is on HUD assisted residents

7. NEW!!!! Section 3 Proposed Rule
The Section 3 Proposed Rule was published March 27, 2015-the proposed rule seeks to:
clarify obligations for PHAs and other grantees
incorporate HUD programs that have been created since the publication of the current Regulation
codify “best practices” that have proven successful for providing employment and contracting opportunities.

8. NEW!!!! Section 3 Proposed Rule
60 Day Public Comment Period from date published
HUD plans to host a series of webinars to solicit input from stakeholders
**Until this Rule is finalized, however, the existing Section 3 Regulations are still in effect**

9. UNDERSTANDING SECTION 3
Who does Section 3 help?
Who must comply with Section 3?
What are the Section 3 requirements?
How to comply with Section 3

10. Who does Section 3 Help? Section 3 Residents
Rev. 2/2012
Who does Section 3 Help? Section 3 Residents
A Section 3 Resident is a:
Public Housing resident; or
Low or very low income person residing in the metro area or non metro County in which the Section 3 covered assistance is expended
42 USC 1437a(b)(2) of the 1937 Act defines low income to be families (including single persons) whose income does not exceed 80% of the median income of the area; same section defines very low income to be families (including single persons) whose income does not exceed 50% of the median family income for the area

11. Who does Section 3 Help? Section 3 Businesses
Rev. 2/2012
Who does Section 3 Help? Section 3 Businesses
A Section 3 Business is a:
Business that can provide evidence that it meets one of the following:
51% + owned by Section 3 residents; or
30%+ full time employees are Section3 residents; or
Commitment to subcontract 25% + of the dollar award of all subcontracts to business concerns that meet the above qualifications

12. NEW!!! Section 3 Business Registry
Rev. 2/2012
NEW!!! Section 3 Business Registry
A searchable, online database that lists firms that have self-certified that they meet one of the regulatory definitions of a Section 3 business
To search the database for self-certified Section 3 businesses, register your business for inclusion, or for more information on the Business Registry, please visit

13. Who must comply with Section 3? HUD Recipients and Sub-Recipients
Rev. 2/2012
Who must comply with Section 3? HUD Recipients and Sub-Recipients
What is a Recipient and Sub Recipient?
Any entity which receives Section 3 covered assistance, directly from HUD or from another recipient

14. Who must comply with Section 3? Contractors and Sub-Contractors
Rev. 2/2012
Who must comply with Section 3? Contractors and Sub-Contractors
What is a Contractor and Sub Contractor?
Any entity which contracts to perform the work or a portion of the work generated by the expenditure of Section 3 covered assistance, or for work in connection with a Section 3 covered project.

15. Covered Recipients Public and Indian Housing
Rev. 2/2012
Public and Indian Housing
Housing and Community Development

16. Public and Indian Housing (PIH)
Rev. 2/2012
Public and Indian Housing (PIH)
Section 3 applies to all Public and Indian Housing (PIH) programs and all contractors who receive awards from PIH funds. Section 8 only PHAs are exempt

17. Public and Indian Housing
Rev. 2/2012
Give preference to Section 3 Persons and Businesses in training, employment, contracting, economic opportunities
Use development, operating and modernization assistance…
Applies regardless of size or number of units
Applies to contractors awarded with PIH funds regardless of contract amount No
Threshold
PIH –Section 3 covers training, employment, contracting and other economic opportunities when development (New construction), operation (Day to day business) and modernization assistance (rehabilitation) funds are used; doesn’t matter how much money is used by the recipient; Section 3 still applies. Basically, Section 3 applies to nearly all aspects of PIH funding. Also, all contracts (and subcontracts) funded with PIH assistance (regardless of dollar amount) is subject to Section 3 requirements.

18. Housing and Community Development Assistance
Rev. 2/2012
Housing and Community Development Assistance
Section 3 applies to Recipients of Housing and Community Development Assistance, such as:
CDBG Funding (incl. for Indian Tribes and Alaska Native Villages)
Housing Opportunity for Persons with AIDS (HOPWA)
Section 202 Supportive Housing for the Elderly
Section 811 Supportive Housing for the Disabled
HOPE VI Funds
HOME Funds
Continuum of Care Homeless Assistance Programs
Self-Help Homeownership Opportunity Programs
Point out that Section 3 does apply to CDBG funds for the Single Family Home Rehabilitation Program. The Department acknowledges that the homeowner chooses the contractor to perform the rehabilitation work, however, the City, in its role of assisting the homeowner in finding contractors, should maintain a list of Section 3 businesses that can effectively complete such work and should solicit bids from Section 3 businesses, from which the homeowner can choose.

19. Housing and Community Development Assistance
Rev. 2/2012
Housing and Community Development Assistance
Section 3 applies to recipients of Indian Housing Block Grant (IHBG) funds under the Native American Housing Assistance and Self Determination Act (NAHASDA)
NAHASDA allows IHBG recipients to give preference to Native Americans
IHBG Grantees should provide employment opportunities to low- and very low-income Native Americans and to businesses that are either owned by or substantially employ low- and very low-income Native Americans

20. Housing and Community Development Assistance
Rev. 2/2012
Housing and Community Development Assistance
Recipients of HUD HCD Funds-$200,000 +
Contractors/subcontractors of HUD HCD Funds-$100,000+
Perform Development, Renovation, Rehabilitation, Modernization
Trigger Section 3 Responsibilities:
Training, employment, contracting, economic opportunities with preference to Section 3 Residents and Section 3 Business Concerns
The monetary thresholds tell us who has to comply with Section 3.  All direct recipients of $200k or more in housing and community development funding,  and contractors/sub-contractors that receive awards of $100k or more in covered funding are required to comply with Section 3.  Section 3 requirements are then triggered when any of the covered funds are used for housing construction, rehabilitation, or other public construction.  If no contractor receives an award in excess of $100k, responsibility for compliance stays with the direct recipient. 
Section 3 is NOT triggered on a per-project basis.  It’s based on the receipt of covered funding.   If the recipient receives $200k in covered funds all of their construction and rehab activities are subject to the requirements.  This responsibility is shared with contractors that receive awards in excess of $100k.  If the individual project doesn’t exceed $100k, the responsibility stays with the recipient.  Funding that is provided solely for acquisition, operations, etc. typically is exempt—unless it is used to finance a covered activity like rehab. 
Section 3 does apply to HUD Assisted Housing (project based funding) that receives $200k or more in HUD funds of any type.  When portions of these funds are used to finance building renovations, Section 3 applies.  If the property owner is going to use federal housing assistance to finance renovations/rehabilitation of their property, we encourage them to provide preference to Section 3 persons and Section 3 business concerns.  In other words, if the property owner is receiving more than $200k from HUD (even if it’s only for the operation and subsidy of the property) then they are going to be covered under Section 3.  Whether they have to give preference to low income individuals will depend on whether any HUD money goes toward renovations or  rehabilitation. Section 3 would not necessarily apply to the hiring of a regular maintenance person performing day to day maintenance, but could apply to a maintenance staff person hired specifically to perform rehab and/or renovation work at the property.

21. Section 3 Requirements (24 CFR Part 135.32)
Rev. 2/2012
Section 3 Requirements (24 CFR Part )
Notify Section 3 Residents about availability of training and/or employment opportunities
Notify Section 3 Business Concerns about availability of contracting opportunities
Notify contractors about Section 3 requirements
Incorporate a Section 3 clause in contracts
Train and employ Section 3 Residents

22. Section 3 Requirements (24 CFR Part 135.32)
Rev. 2/2012
Section 3 Requirements (24 CFR Part )
Give preference to Section 3 Residents (A Section 3 resident must meet the qualifications of the position to be filled)
Give preference to and award contracts to Section 3 Business Concerns (A Section 3 business concern must have the ability and capacity to perform successfully under the terms and conditions of the proposed contract)
Document actions to comply with Section 3 and submit annual Section 3 Summary Report

23. Compliance with Section 3
Rev. 2/2012
Compliance with Section 3
Greatest Extent Feasible
Numerical Goals
Best Efforts

24. Numerical Goals 30% of total number of new hires
Rev. 2/2012
Numerical Goals
Training and Employment of
Section 3 Residents at all job levels
30% of total number of new hires
At least 30% of new hires, which is defined as full time employees for permanent, temporary or seasonal employment, in any given fiscal year are Section 3 residents. To encourage long term employment, recipients and contractors may count a Section 3 resident for 3 fiscal years.
What types of new employment opportunities are covered by Section 3?
For Public and Indian housing (PIH) programs, all employment opportunities generated by the expenditure of operating, capital, and modernization assistance, including management and administrative jobs, technical, professional, construction and maintenance jobs, at all levels. For Housing and Community Development programs, all employment opportunities arising in connection with housing rehabilitation (including reduction and abatement of lead-based paint hazards); housing construction; or other public construction, including management and administrative jobs, technical, professional, building trades and non-construction jobs, at all levels.
Does Section 3 apply to new hiring by a CDBG-Entitlement recipient?
Yes. If the recipient intends to use its HUD allocation to hire additional staff person(s) to perform work related to housing construction, rehabilitation, or other public construction, then the position(s) is covered by Section 3. However, if the local municipality uses a civil servant applicant process to hire new employees, compliance with the requirements of Section 3 may not be feasible.

25. Contracts to Section 3 Businesses
Rev. 2/2012
Numerical Goals
Contracts to Section 3 Businesses
At least 10% of the total dollar amount of all Section 3 contracts for building trades work
At least 3% of the total dollar amount of all Section 3 contracts for non-construction work
The minimum goals for contracting are:
- 10% of the total dollar amount of all Section 3 covered contracts for building trades work for maintenance, repair, modernization or development of public or Indian housing or building trades work arising in connection with housing rehabilitation, housing construction and other public construction, shall be awarded to Section 3 businesses; and
3% of the total dollar amount of all non-construction Section 3 covered contracts shall be awarded to Section 3 businesses
What is considered a Section 3 covered non-construction project?
Section 3 covered non-construction projects include maintenance contracts, including lawn care, re-painting, routine maintenance, HVAC servicing, and professional service contracts associated with construction ( ex.: architectural, engineering, legal services, accounting, marketing, etc.).
What is considered "other" public construction?
Other public construction includes infrastructure work, such as extending water and sewage lines, sidewalk repairs, site preparation, installing conduits for utility services, etc.

26. Failure to Meet Numerical Goals
Rev. 2/2012
Failure to Meet Numerical Goals
Does not equate to non-compliance with Section 3
HUD will consider the following:
Why was it not feasible to meet the numerical goals?
What impediments were encountered despite actions taken?
What best efforts were taken to comply?

27. Best Efforts Section 3 Residents
Rev. 2/2012
Best Efforts Section 3 Residents
Did you post notices and flyers in the common areas or other areas of low income housing, such as HUD assisted or Housing Authority complexes?
Did you contact resident councils, resident management corporations and other resident organizations in low income housing, such as HUD assisted or Housing Authority complexes?

28. Best Efforts Section 3 Residents
Rev. 2/2012
Best Efforts Section 3 Residents
Did you allow for job applications to be delivered/collected at and allow for job interviews to be conducted in the complexes where the Section 3 Residents reside (allowing for ease of applying)?
Did you contact agencies administering the Youthbuild programs?
Did you contact Worksource or other Unemployment Agency programs?

29. Best Efforts Section 3 Businesses
Rev. 2/2012
Best Efforts Section 3 Businesses
Did you contact business assistance agencies, minority contractor associations and community organizations?
Did you provide notice to all known Section 3 Businesses of the contracting opportunities?
Did you post notices in the common areas or other areas of HUD assisted or Housing Authority housing facilities?

30. Best Efforts Section 3 Businesses
Rev. 2/2012
Best Efforts Section 3 Businesses
What steps did you take to give preference to Section 3 Businesses?
Did you have a qualified Section 3 Business bid within 10% of the lowest qualified bid (if award based on lowest price)?
Did you provide for a range of 15-25% of the total rating points for Section 3 preference (if bids are based on other factors beyond price)?
See Appendix to Part 135 in 24 CFR Section 135 for additional examples of ways to comply with and demonstrate best efforts to comply with Section 3

31. HUD 60002 Section 3 Summary Report
Rev. 2/2012
Submitted to HUD by Recipients of HUD funding
Submit one form for each major program funding source
Submit annually by January 10th or in accordance with the Annual Report (e.g. CAPER) submission to HUD
Recipient agencies must still submit Section 3 Reports even if the Section 3 requirements were not triggered during that fiscal year. Sub recipients do not submit to HUD; they submit to their recipients.

32. HUD 60002 Section 3 Summary Report
Rev. 2/2012
Sub-recipients, contractors and sub-contractors should provide the direct recipient documentation of compliance with Section 3
Recipients should obtain certification forms from Section 3 Businesses and Section 3 Residents (see sample forms at:

33. HUD 60002 Section 3 Summary Report
Rev. 2/2012
HUD Section 3 Summary Report
Official Submission goes to the HUD’s Office of Fair Housing and Equal Opportunity Economic Opportunities Division in HQ, using the Online Form

34. HUD 60002 Section 3 Summary Report – Online System
SPECIAL NOTE: In January 2014, HUD’s enhanced Section 3 Summary Reporting System that replaced the previous online system went down due to unanticipated technical problems. The Section 3 Summary Reporting System remains unavailable. No recipients will be held in noncompliance for failing to submit 2013 or 2014 Section 3 reports on time. HUD hopes to resolve the technical problems soon.

35. For additional information and questions…
Sign up for the Section 3 listserv at to receive updates about the status of the Section 3 Proposed Rule, the Section 3 reporting system and other relevant information. Also visit HUD’s Section 3 website at: Feel free to also contact me with questions: Kristina Miller

36. QUESTIONS????