Compliance

HUD Section 3

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HUD Section 3

Section 3 of the Housing and Urban Development Act of 1968, as amended by the Housing and Community Development Act of 1992, requires that recipients of financial assistance provided by the U.S. Department of Housing & Urban Development (HUD), including developers, owners, contractors, and their subcontractors provide, to the greatest extent feasible, training and employment opportunities for low-income area residents and contract opportunities for the performance of work by local businesses owned by and/or employing low-income residents. 

HUD requires HPD to collect information on every sponsor, contractor, subcontractor, etc. that receives a contract or loan agreement, funded entirely or in part by federal funds in excess of $200,000, to ensure compliance with Section 3 regulations (or in excess of $100,000 for work funded by the Lead Hazard Control and Healthy Homes programs). Section 3 applies to housing rehabilitation, housing construction, and other public construction projects.  

On September 29, 2020, HUD published the Section 3 Final Rule with an effective date of November 30, 2020, which amended Section 3 reporting guidelines.  

Funding Recipients 

Projects funded from the following Housing and Community Development (HCD) sources by HUD via HPD are subject to Section 3 requirements. The following packages contain guidance and forms for use by recipients in compliance with HUD regulations: 

Reporting Responsibilities: Employment and Training 

Sponsors, contractors, and subcontractors must document labor hours performed by employees on Section 3 qualifying projects and indicate the number of labor hours performed by Section 3 workers.   

Section 3 workers include any worker who currently fits, or when hired within the past five years fit, at least one of the following categories:   

  • The worker’s income for the previous or annualized calendar year is below 80% of the area median income for a household of one; 
  • The worker is employed by a Section 3 business concern; or 
  • The worker is a YouthBuild participant.  

Reporting is also required on labor hours performed by Targeted Section 3 workers, which includes any worker who:  

  • Is employed by a Section 3 business concern; or 
  • Currently fits or when hired fit at least one of the following categories within the prior five years: 
    • Lives within one mile of the Section 3 project; or 
    • Is a YouthBuild participant 

Additional information can be found here:  

Section 3 Business Concerns 

Section 3 regulations define Section 3 Business Concerns in one of three ways: 

  • The business is at least 51 percent owned and managed by Section 3 workers; 
  • Over 75 percent of the labor hours performed for the business over the prior three-month period are performed by Section 3 workers; or 
  • At least 51 percent of the business is owned and controlled by current public housing residents or residents who currently live in Section 8-assisted housing.   

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