Section 3 New Rule - 24 CFR 75
About Section 3
Section 3 is not just a grantee "requirement." It's a path toward economic uplift and self-sufficiency.
The Section 3 program requires that recipients of certain HUD funding, to the greatest extent possible, provide training, employment, contracting, and other economic opportunities to low- and very low-income persons, especially those living in federally subsidized housing, and to businesses that provide economic opportunities to low- and very low-income persons.
The intent of Section 3 is to promote economic uplift and self-sufficiency among low-income persons, level the playing field for Section 3 residents/workers and businesses, and strengthen local economies. Section 3 is not about compliance. It's about investing in good partners for an economic benefit and giving them the opportunity to benefit with you.
Section 3 Final Rule
Section 3 has been around almost as long as HUD has existed. As part of the ladder to economic uplift and self-sufficiency, the rule was revised on September 28, 2020.
Section 3 new rule will allow more HUD-assisted households to secure long-term employment and put them on a path toward economic uplift and self-sufficiency.
The final rule seeks to improve effectiveness by:
- Focusing reporting on key outcome metrics
- Promoting sustained employment and career development
- Aligning reporting with standard business practices
- Changing thresholds for Section 3-covered assistance
Section 3 Worker
What is a Section 3 Worker?
Section 3 worker means any resident who fits one of the following categories:
- A worker whose income for the previous or annualized calendar year is below the income limit established by HUD
- Employed by a Section 3 business concern
- A YouthBuild participant
Targeted Section 3 Worker
What is a Targeted Section 3 Worker?
Targeted Section 3 is a Section 3 worker who is also:
- A worker employed by a Section 3 business concern
- A worker who currently is or who was when hired by the worker's current employer, as documented within the past five years:
- Public Housing resident or HCV participant
- Resident of other housing assisted by the PHA or in the PHA's property management portfolio
- Living within the service area or the neighborhood of the project; or
- A YouthBuild participant
Section 3 Business
What is a Section 3 Business?
Section 3 business means any business that meets at least one of the following criteria, documented within the last six-month period:
- 51% or more owned and controlled by low-very low-income persons
- 75% or more labor hours are performed by low or very low-income persons
- 51% or more owned and controlled by current residents of public housing or HCV-assisted housing
The final rule changes the definition of a Section 3 business by focusing on how many hours employees work rather than the number of employees. Rather than limiting businesses to low- or very low-income residents of the metropolitan statistical area where Section 3 funds are spent, it emphasizes low- or very-low-income persons, including those living in public housing or Section 8.
The rule focuses on tracking and reporting of labor hours instead of new hires. The focus on labor hours would measure total actual employment and the proportion of the total employment performed by low- and very-low-income workers. In addition, the focus on labor hours emphasizes continued employment.
New Rule Benchmarks
The new Section 3 performance benchmarks are still under consideration by HUD and will be published in the near future.
A listing of firms that have self-certified that they meet one of the regulatory definitions of a Section 3 business and are included in a searchable online database that can be used by agencies that receive HUD funds, developers, contractors, and others to facilitate the awareness of certain HUD-funded contracts.
Please click here to visit the Business Registry.
Section 3 Business Registry and Opportunity Portal
Frequently Asked Questions
What is Section 3?
Section 3 is a provision of the Housing and Urban Development Act of 1968. The purpose of Section 3 is to ensure that preference for employment, training and contacting opportunities generated from the expenditure of certain HUD funds is directed to local low- and very low-income persons, particularly those who receive federal housing assistance, and businesses that are owned by or substantially employ such persons.
Section 3 Opportunity Portal
The Section 3 Opportunity Portal is intended to help HUD grantees and Section 3 businesses meet their Section 3 obligations for employment and contracting. The site is to be used by either Section 3 workers or employers. Section 3 residents may use the site to search for Jobs and post their profile/employment history for companies to search. Employers may use the site for posting jobs/contract opportunities or search for residents to fill positions.
Please click here to visit the Section 3 Opportunity Portal.
HUD's Section 3 Business Registry
Section 3 Business Registry is a registry of businesses that have self-certified their status as Section 3 businesses. Businesses who self-certify that they meet one of the regulatory definitions of a Section 3 business will be included in a searchable online database. The database can be used by agencies that receive HUD funds, developers, contractors, and others to facilitate the award of covered construction and non-construction contracts to Section 3 businesses. Section 3 workers are also encouraged to use the registry to identify businesses that may have HUD-funded employment opportunities.
Please click here to visit the HUD Section 3 Business Registry.
How does my firm submit a self-certification application for Section 3?
When does a business certification expire?
Businesses must recertify after 3 years
Where do I find the database of businesses that have self-certified for Section 3?
How can I change or update my contact information?
Business Registry Required Documentation
For inclusion in the registry, businesses must submit the online application and are not initially required to submit any additional documentation to HUD. Additional documentation may be requested if HUD receives complaints alleging that any business in its registry has misrepresented their firm's status to the Department. Businesses may also be required to submit supporting documentation as evidence of their eligibility to recipients prior to the award of the HUD-funded contract.
Verification of Business Authenticity
While the Department maintains the business registry database, it has not verified the information submitted by the businesses and does not endorse the services they provide. Accordingly, it is recommended that users perform due diligence before awarding contacts to businesses that have self-certified their status as a Section 3 business.
The Department will periodically conduct random audits of the Section 3 businesses in its registry.
Are Section 3 Businesses Automatically Entitled to HUD-funded Contracts?
Section 3 businesses are not entitled to a contract simply by being listed in the HUD Section 3 Business Registry Database. Section 3 businesses may need to demonstrate to the satisfaction of the recipient agency (i.e., Public Housing Authority, local government agency, developer, etc.) that they are a responsible bidder with the ability to perform successfully under the terms and conditions of prospective contracts.
Section 3 regulation at 24 CFR Part 135.36 provides preference to Section 3 businesses that submit responsible bids for contracts and subcontracts but does not guarantee the award of contracts.
Will My Business Be Contacted After it is Listed on Section 3 Business Registry?
HUD grantees and their developers or contractors may contact your business with bid solicitations for contracts, but they are not required to do so. Businesses should proactively reach out to recipients of Section 3-covered HUD funding in their metropolitan area or Nonmetropolitan Country.
How to Report a Firm That is Not Section 3
The Department strongly encourages anyone who believes that a firm in this registry does not meet the eligibility criteria of a Section 3 business to please click here to notify the HUD Office of Inspector General. HUD's Office of Inspector General is responsible for investigating claims of fraudulence. In such situations, the HUD Office of Inspector General may request documentation and additional information from the business to verify that they qualify for inclusion in the database. Businesses found to have misrepresented themselves will be removed from the database and penalized as appropriate by the HUD Office of Inspector General.