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Section 3 and MBE/WBE

Home Contracts and Procurement Section 3 and MBE/WBE

Section 3 (24 CFR Part 75)

On September 28, 2020, HUD published its Final Section 3 Rule in the Federal Register. In the new rule HUD’s intent is to focus more on outcomes (sustained employment) as opposed to inputs (temporary job creation).

Section 3 of the Housing and Urban Development Act of 1968 (codified at 12 U.S.C. 1701u and implemented at 24 CFR Part 75, hereinafter, "Section 3"), as amended, requires that economic opportunities, most importantly employment, generated by certain U.S. Department of Housing and Urban Development (“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 community in which the Federal assistance is spent

The U.S. Department of Housing and Urban Development’s regulations implementing Section 3 are found at 24 CFR Part 75.

When Section 3 is applicable, the Housing Authority requires its contractors to demonstrate good faith efforts to comply, to the greatest extent feasible, with Section 3 and HACLA’s Section 3 Policy and Compliance Plan (v3).

HACLA's Board of Commissioners is vested in ensuring that HACLA has a robust Section 3 plan and that economic opportunities are directed to Section 3 Businesses and Section 3 Residents to the greatest extent possible.

Section 3 Worker

Any worker who currently fits or when hired within the past five years fit at least one of the following categories, as documented:

  1. The worker’s income for the previous or annualized calendar year is below the income limit established by HUD.
  2. The worker is employed by a Section 3 business concern.
  3. The worker is a YouthBuild participant.
     
Targeted Section 3 Worker 

The definition of a Targeted Section 3 Worker is different based on the source of HUD funding:

A Targeted Section 3 worker for public housing financial assistance means a Section 3 worker who is:

  1. A worker employed by a Section 3 business concern; or
  2. A worker who currently fits or when hired fit at least one of the following categories, as documented within the past five years:
    1. A resident of public housing or Section 8-assisted housing;
    2. A resident of other public housing projects or Section 8-assisted housing managed by the PHA that is providing the assistance; or
    3. A YouthBuild participant.
 

A Targeted Section 3 worker for housing and community development financial assistance means a Section 3 worker who is:

  1. A worker employed by a Section 3 business concern; or
  2. A worker who currently fits or when hired fit at least one of the following categories, as documented within the past five years:
    1. Living within the service area or the neighborhood of the project, as defined in § 75.5; or
    2. A YouthBuild participant.
       
Section 3 Business Concern

A Section 3 Business Concern means: A business concern meeting at least one of the following criteria, documented within the last six-month period:

  1. It is at least 51 percent owned and controlled by low- or very low-income persons;
  2. Over 75 percent of the labor hours performed for the business over the prior three month period are performed by Section 3 workers; or
  3. It is a business at least 51 percent owned and controlled by current public housing residents or residents who currently live in Section 8-assisted housing.
     
Labor Hour Benchmarks

HUD established Section 3 benchmarks for Section 3 workers and Targeted Section 3 Workers. The benchmarks consist of the following two ratios:

  1. Twenty-five (25) percent or more of the total number of labor hours worked by all workers in the recipient’s fiscal year are Section 3 workers; and
  2. Five (5) percent or more of the total number of labor hours worked by all workers in recipient’s fiscal year are Targeted Section 3 workers.

pie chart

New Hire Commitments

Pursuant to HACLA’s Section 3 Policy and Compliance Plan and in addition to satisfying HUD labor hour benchmarks, vendors may be required to make new hire commitments and ensure that thirty percent (30%) of all New Hires are Section 3 Workers.
 

Section 3 Business Contracting Goals

Pursuant to HACLA's Section 3 Policy and Compliance Plan, in addition to satisfying HUD labor hour benchmarks, vendors and developers may be required to meet Section 3 Business subcontracting goals of no less than ten percent (10%) for all construction-related subcontracts and no less than three percent (3%) for all professional services agreements.
 

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