1. Overview of Section 3 Requirements
Meeting with AAHRA
April 18, 2018

2. What is Section 3?
Section 3 of the Housing and Urban Development Act of 1968
12 USC 1701u
24 CFR Part 135 (June 1994)
Born out of the March on Washington for Jobs and Freedom

3. Purpose
Section 3 of the Housing and Urban Development Act of 1968 ensures that employment, training and contracting generated by certain HUD financial assistance shall, to the greatest extent feasible, be directed to low- and very low-income persons, particularly recipients of federal housing assistance, and to business concerns which provide economic opportunities to those persons.

4. Simply Put…
HUD funding is one of the largest sources of federal funding in distressed communities
Most HUD funds result in construction/ rehabilitation projects
Section 3 keeps HUD-funded jobs and contracts local
Multiplier effect for tax dollars

5. To the Greatest Extent Feasible
Grantees and their developers/contractors must make every effort to recruit, target, and direct economic opportunities to local low-income persons and businesses that substantially employ those persons.
Affirmative/Proactive measures—e.g., more than advertising in local newspapers
U.S. Department of Housing and Urban Development

6. U.S. Department of Housing and Urban Development
Scope of Section 3
Up to 40% of HUD’s annual budget is subject to Section 3 requirements.
More than 5,000 direct recipients of HUD funds (PHAs, municipalities, multifamily property owners, and other grantees) have obligations pursuant to Section 3
U.S. Department of Housing and Urban Development

7. Departmental Coordination
Program offices provide Section 3 covered HUD funding
FHEO has authority for Section 3 policy development, enforcement, TA and training
Inter-departmental coordination on instances of noncompliance and technical assistance

8. Section 3 Covered Funding
HUD Programs
PIH Capital Fund Program (CFP)
PIH Operating Subsidy
HOPE VI Grants
Choice Neighborhoods Grants
Community Development Block Grants (CDBG)
HOME Investment Partnership Grants
Disaster Recovery Grants
Section 202/811
Lead Abatement Grants
Certain NOFA Competitive Grants
U.S. Department of Housing and Urban Development

9. U.S. Department of Housing and Urban Development
Funding Thresholds
PIH Threshold: None (No threshold for Public Housing Authorities or their contractors)
HCD Threshold: Recipient - $200K Contractor/Subcontractor - $100K
U.S. Department of Housing and Urban Development

10. Beneficiaries
Low- and very-low income residents (particularly residents of public housing)of the neighborhood where the funds are spent—race and gender neutral
Businesses that are either:
51% or more owned by low-income persons
Substantially employ (30% or more) low-income persons
Provide evidence that they will subcontract 25% of work to a business that meets a. or b.
HUD’s income guidelines

11. Statewide Income Limits--Alabama

12. Birmingham MSA Income Limits

13. Huntsville MSA Income Limits

14. Recipient Responsibilities
Develop procedures to notify Section 3 residents and businesses about jobs, trainings, and contracts
Notify covered contractors about their obligations
Ensure that the Section 3 clause is included in contracts and hold contractors accountable
Meet minimum contracting and employment goals
Submit Section 3 reports (form HUD 60002) annually
U.S. Department of Housing and Urban Development

15. Minimum Numerical Goals
30% of new hires annually
10% of the total dollar amount of construction contracts
3% of the total dollar amount of non-construction contracts
If minimum numerical goals aren’t met, explanations for failing to meet them are required

16. Employment opportunities generated by Section 3 covered assistance
PIH assistance:
All employment opportunities with PHAs or contractors
Housing & Community Development:
Employment associated with building trades, including management and administrative support, architectural, engineering and professional services
U.S. Department of Housing and Urban Development

17. Professional Services
Architectural Services
Engineering
Finance/Accounting
Legal Counsel
Marketing
All activities associated with Construction (other than building trades)
U.S. Department of Housing and Urban Development

18. U.S. Department of Housing and Urban Development
Section 3 Clause
Work to be performed is covered by Section 3
Parties under contract certify that no impediment would prevent compliance
Contractor agrees to notify labor organizations of Section 3 commitments and post notice at work site
Noncompliance with Section 3 may result in termination of contract for default.
U.S. Department of Housing and Urban Development

19. Alabama Section 3 Outcomes 2017
HUD disbursed over $103 Million in Operating Funds to PHAs in Alabama in 2017 and nearly $37 Million in Capital Funds.
The expenditure of covered HUD funding generated approximately 310 new jobs.  Section 3 residents received over 180 (58.7%) of these new jobs.
Recipients of Section 3 covered HUD funding reported $17.1 Million in construction contracts, over $3 Million (17.5%) of these contracts were awarded to Section 3 businesses.
Recipients of Section 3 covered HUD funding reported $6.9 Million in non-construction contracts 3.4 percent, or $1.9 Million (28%) of all non-construction contracts were awarded to Section 3 businesses.

20. Section 3 Reporting System
Section 3 Annual Reports measure grantees efforts to meet the minimum numerical goals
More than 7,000 grantees submit about 20,000 reports each year
System launched December 2013
OIG audit recommendations
Outdated software
Reduce administrative burden

21. Section 3 Reporting Requirements
All PHAs regardless of size are required to submit reports
Reports due by January 10th of each year
Report should follow your PHAs Program Year
System extracts disbursements from HUD LOCCS
Streamlined Reporting Option

22. Section 3 Business Registry
Tool to help grantees notify Section 3 businesses about local HUD-funded contracts
2012 Pilot 5 Metropolitan Areas
Detroit, Miami, New Orleans, Miami, and DC
Launched Nationally in 2015
SBA and VA Registries

23. Pop Quiz! Section 3 requirements only apply to PHAs
PHAs, local units of government, contractors, and others are responsible for verifying the eligibility of Section 3 residents and businesses?

24. Pop Quiz!
Public Housing Agencies, local units of government, contractors, and others are responsible for verifying the eligibility of Section 3 residents and businesses?

25. Pop Quiz! Section 3 only applies to jobs at the housing authority?
A Section 3 resident can be any person in the metropolitan area whose household meets the definition of low- or very low-income?

26. Pop Quiz! Section 3 requires PHAs or contractors to hire employees?
There are no consequences for failing to comply with Section 3?

27. questions/Answers & Wrap-Up