What is Section 3?
Section 3 is a provision of the Housing and Urban Development Act of 1968 that helps foster local economic development, neighborhood economic improvement and individual self-sufficiency. The Section 3 program requires that recipients of certain U.S. Department of Housing and Urban Development (HUD) financial assistance, to the greatest extent feasible, provide job training, employment and contracting opportunities for low- or very low-income residents in connection with projects and activities in their neighborhoods.
Purpose of Section 3
Section 3 is meant to ensure that economic opportunities, most importantly employment, generated by certain HUD financial assistance shall be directed to low- and very low-income persons, particularly those who are recipients of government assistance for housing or residents of the communities in which Federal Assistance is spent.
History of Section 3
Section 3 is a provision of the Housing and Urban Development Act of 1968 and was amended by the Housing and Community Development Act of 1992. The Section 3 Final Rule published in 24 CFR Part 75 in 2020 updates HUD’s Section 3 regulations to create more effective incentives for employers to retain and invest in their low- and very low- income workers, streamline reporting requirements by aligning them with typical business practices, provide for program specific oversight and clarify the obligations of entities that are covered by Section 3.
What is Covered Under Section 3?
Section 3 Projects (HOME/CDBG/Housing Trust Funds, etc.)
- Assistance used for housing rehabilitation, housing construction and other public construction projects that exceed $200,000
Public Housing
- Operations and management
- Development, modernization and management assistance
- The entirety of a mixed-finance development, regardless of whether the project is fully or partially assisted with public housing financial assistance (including Rental Assistance Demonstration / Choice Neighborhoods)
Key Words, Terms and Guidelines
Section 3 Worker Definition
- A Section 3 worker is any worker who currently fits or when hired within the past five years fits at least one of the following, as documented:
- Worker’s income for the previous or annualized calendar year is below the low-income limit established by HUD
- Worker is employed by a Section 3 business concern
- Worker is a YouthBuild participant
- The status of a Section 3 worker shall not be negatively affected by a prior arrest or conviction
- Nothing in this part shall be construed to require the employment of a Section 3 worker. Section 3 workers are not exempt from meeting the qualifications of the position to be filled.
Section 3 Business Concern
- A Section 3 Business Concern meets at least one of the following within the last six-month period:
- At least 51% owned and controlled by low- or very low-income persons
- Over 75% of the labor hours performed for the business over the prior three-month period are performed by Section 3 workers
- A business at least 51% owned and controlled by current public housing residents or residents who currently live in Section 8 assisted housing
- The status of a Section 3 business concern shall not be negatively affected by a prior arrest or conviction of its owners or employees.
- Nothing in this part shall be construed to require the contracting or subcontracting of a Section 3 business concern. Section 3 business concerns are not exempt from meeting the specifications of a project.
Targeted Section 3 Worker
- A Targeted Section 3 Worker for Public Housing meets at least one of the following:A worker employed by a Section 3 Business Concern
- Worker who currently fits or when hired fit a least one of the following categories, as documented, within the last five yearsResident of public housing or Section 8-assisted housing
- Resident of other public projects or Section 8-assisted housing managed by the public housing agency (PHA) that is providing assistance
- YouthBuild participant
- A Targeted Section 3 Worker for Housing and Community Development meets at least one of the following:Section 3 workers residing within the service area or the neighborhood of the project
- YouthBuild participant
Section 3 Resources
Section 3 Requirements
Employment and Training
- MDHA, and their contractors and subcontractors, must make the best efforts to provide employment and training opportunities generated by public housing and housing and community development financial assistance to Section 3 workers.
- MDHA, and their contractors and subcontractors, must make their best efforts in the following order of priority:
- Housing And Community Development
- To Section 3 workers residing within a one-mile radius within the service area or the neighborhood of the project
- To participants in YouthBuild programs
- Public Housing
- To residents of public housing projects for which the public housing financial assistance is expended
- To residents of other public housing projects managed by the PHA that is providing the assistance or for residents of Section 8-assisted housing managed by the PHA
- To participants in YouthBuild programs
- To low- and very low-income persons residing within the metropolitan area in which the assistance is expended
- Housing And Community Development
Contracting
Housing And Community Development
- Business concerns that provide economic opportunities to Section 3 workers residing within the metropolitan area in which assistance is located in the following order of priority (where feasible):
- Section 3 business concerns that provide economic opportunities to Section 3 worker residing within the service area or the neighborhood of the project
- To participants in YouthBuild programs
Public Housing
- MDHA, and their contractors and subcontractors, must make the best efforts to award contracts and subcontracts to business concerns that provide economic opportunities to Section 3 workers.
- MDHA, and their contractors and subcontractors, must make their best efforts in the following order of priority:
- To Section 3 business concerns that provide economic opportunities for residents of the public housing projects for which the assistance is provided
- To Section 3 business concerns that provide economic opportunities for residents of other public housing projects or Section-8 assisted housing managed by the PHA providing the assistance
- To YouthBuild programs
- To Section 3 business concerns that provide economic opportunities to Section 3 workers residing within the metropolitan area in which the assistance is provided
Section 3 Benchmarks
Housing And Community Development
- Section 3 workers make up at least 25% of total Section 3 eligible labor hours on a Section 3 project
- Section 3 Labor Hours/Total Labor Hours = 25%
- Targeted Section 3 workers make up at least 5% of total Section 3 eligible labor hours on a Section 3 project
- Targeted Section 3 Labor Hours/Total Labor Hours = 5%
Public Housing
- Section 3 workers make up at least 25% of total Section 3 eligible labor hours
- Section 3 Labor Hours/Total Labor Hours = 25%
- Targeted Section 3 workers make up at least 5% of total Section 3 eligible labor hours
- Targeted Section 3 Labor Hours/Total Labor Hours = 5%
Section 3 Safe Harbor
- MDHA will be considered to be compliant with Section 3 if it:
- Certifies that they have followed the prioritization of the Public Housing and/or Housing and Community Development requirements
- Meets or exceeds the applicable Section 3 benchmarks for Section 3 workers and Targeted Section 3 workers
- Additional reporting is required if Section 3 benchmarks are not met. MDHA must report on the qualitative nature of its Section 3 compliance activities and those of its contractors and subcontractors.
- May include but not limited to:
- Engaged in outreach efforts to generate job applicants who are Targeted Section 3 workers
- Provided training opportunities or apprenticeship opportunities
- Provided technical assistance to help Section 3 workers compete for jobs (ex. resume assistance, coaching)
- Provided or connected Section 3 workers with assistance in seeking employment including: drafting resumes, preparing for interviews, and finding job opportunities connecting residents to job placement services
- Held one or more job fairs
- Provided or referred Section 3 workers to services supporting work readiness and retention
- Provided assistance to apply for/or attend community college, a four-year educational institution, or vocational/technical training
- Assisted Section 3 workers to obtain financial literacy training and/or coaching
- Engaged in outreach efforts to identify and secure bids from Section 3 business concerns
- Provided technical assistance to help Section 3 business concerns understand and bid on contracts
- Divided contracts into smaller jobs to facilitate participation by Section 3 business concerns
- Provided bonding assistance guaranties, or other efforts to support viable bids from Section 3 business concerns
- Promoted use of business registries designed to create opportunities for disadvantaged and small businesses
- Outreach, engagement, or referrals with the state one-stop system