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What you need to know about Section 3: Part II

Section 3 of the Housing and Urban Development Act of 1968 requires recipients of HUD funding to create job training, employment, and contract opportunities for low- and very low-income individuals. When you think of HUD funding, it's probably subsidized housing that comes to mind. However, HUD also provides financial assistance to community centers, libraries, parks, and local road improvement, among other things.

The intent of Section 3 is to provide these opportunities to the "greatest extent feasible," as outlined in 24 CFR 135.30. This means that other procurement considerations are subordinate to Section 3 goals, and that cost considerations are insufficient grounds for awarding contracts to firms that are not Section 3-compliant.

Is my PHA subject to Section 3?

Unless your PHA is HCV-only, it's subject to Section 3. The programs covered by Section 3 include public housing operating subsidies and capital funds, HOPE VI grants, ROSS grants, family self-sufficiency (FSS) grants, economic stimulus funding, and lead hazard control grants. Any entity which receives Section 3-covered assistance, either directly from HUD or from another recipient (such as a PHA, state or local government, property owner, developer, etc.), is subject to Section 3 requirements.

How much housing and community development funding counts?

Section 3 also applies to recipients of more than $200,000 from housing and community development programs. The following are a list of examples of such funds:

  • Community Development Block Grants (CDBG)
  • HOME Investment Partnerships (HOME)
  • Housing Opportunities for Persons with AIDS (HOPWA)
  • Economic Development Initiative (EDI)
  • Emergency Solutions Grants (ESG)
  • Continuum of Care (CoC)
  • Office of University Partnerships (OUP)
  • Neighborhood Stabilization Program (NSP)
  • Section 202 Supportive Housing for the Elderly
  • Section 811 Supportive Housing for Persons with Disabilities
  • Project-based voucher (PBV) program (for projects owned by the PHA)

Do the Section 3 requirements apply to state and county agencies?

Yes. State and county agencies that distribute covered funds to units of local government, nonprofit organizations, or other subrecipients must attempt to reach the minimum numerical goals, regardless of the number of subrecipients that receive covered funding.

What is the definition of Section 3 compliance for training and hiring?

Thirty percent of new hires must be Section 3 residents. Additionally, PHAs and contractors should aim for 30 percent of their permanent fulltime staff to be Section 3. However, keep in mind that once a Section 3 resident has been employed for three years, they can no longer be counted towards the 30 percent goal. Here's an example:

Calculating Section 3 eligibility

Joan is a Section 3 resident first hired by ABC Company on January 1, 2013.

  • She received a raise of $2,500 in March 2014, thereby putting her above the local low-income level.
  • ABC Company may continue to count Joan as a Section 3 employee until December 31, 2015 (i.e., within three years of the date of first hire).

What is the definition of Section 3 compliance for contracting?

Ten percent of the total public construction contracts dollar amount must go to Section 3 businesses, and 3 percent of non-construction contracts jobs must go to Section 3 businesses.

All contracts (or subcontracts) funded with Public and Indian Housing (PIH) assistance, regardless of dollar amount or type of contract, are subject to the requirements of Section 3.

What are some examples of trades in which Section 3 residents can be trained?

  • Bricklaying
  • Carpentry
  • Carpet installation
  • Cement/concrete
  • Demolition
  • Drywall
  • Electrical
  • Elevator construction and repair
  • Fencing
  • HVAC
  • Janitorial
  • Landscaping
  • Machine operation
  • Surveying
  • Painting
  • Plastering
  • Plumbing
  • Tile setting

What are some examples of Section 3 hiring opportunities?

  • Accounting
  • Architecture
  • Appliance repair
  • Bookkeeping
  • Information technology (IT)
  • Payroll
  • Photography
  • Purchasing
  • Transportation
  • Desktop publishing

What are some examples of Section 3 contracting?

  • Construction or rehabilitation of housing (including reduction of lead-based paint hazards)
  • Street repair
  • Sewage line repair or installation
  • Updates to building facades

Next week, we'll talk about how this all affects the responsibilities of your PHA.

NMA senior associate Cara Gillette trains, consults, and provides technical assistance nationwide in fair housing, public housing management, hearings, economic self-sufficiency, and governing boards. Prior to joining NMA, she administered public housing and Section 8 waiting lists, served as hearing officer, managed public housing, and oversaw resident economic development programs at the San Diego Housing Commission. She has previously written for the NMA blog on how to work with sequestration in the public housing program.

Looking for further guidance? We can bring our Procurement and Section 3 seminar to your PHA. Email for more information about our affordable onsite training options.