Section 3 Program

Applicability and Benchmarks

Section 3 is a provision of the Housing and Urban Development (HUD) Act of 1968, federal regulation formerly 24 CFR Part 135.  HUD released a final rule in the fall of 2020 changing the regulation to 24 CFR Part 75.  The final rule moved from tracking the number of qualified new hires (Section 3 residents) in Section 3 projects to tracking the total labor hours worked (by Section 3 workers and Targeted Section 3 workers).  In connection with the final rule, 24 CFR Part 75, HUD published a document citation via the federal register, 85 FR 60907, Section 3 Benchmarks for Creating Economic Opportunities for Low- and Very Low-Income Persons and Eligible Businesses.  The citation includes benchmark numbers and the methodology for determining the benchmarks.

The new Section 3 regulation, 24 CFR Part 75 still aims 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 residents of the community in which the federal assistance is spent.  Requiring recipients of certain HUD housing and community development financial assistance, to the greatest extent feasible, to provide employment and job training for low- and very low-income persons and contracting opportunities to business concerns which provide economic opportunities to low- and very low-income persons in connection with projects and activities in their neighborhoods.  HUD believes the final rule makes Section 3 goals and reporting more meaningful and more aligned with statutory requirements.

HUD established nationwide benchmarks for work performed by tracking the labor hours.  The two benchmarks are (1) twenty-five percent (25%) or more of the total number of labor hours worked on a Section 3 project is performed by Section 3 workers; and (2) five percent (5%) or more of the total number of labor hours worked on a Section 3 project is performed by Targeted Section 3 workers.  The five percent is within the twenty-five percent.  The labor hours reported must include any labor hour charged against the budget of the project.

Benchmarks for Total Number of Labor Hours Worked
Section 3 Workers25%
Targeted Section 3 Workers5%

Successful compliance with HUD Section 3, federal regulation 24 CFR Part 75, by the subrecipient, developer, general contractor, and subcontractor will be a factor in determining future awards of Section 3 covered assistance.

Documentation

Two documents must be completed and submitted with your RFP bid package 

  1. Section 3 Intent to Comply
  2. Section 3 Plan.  

If awarded HUD funds for a covered Section 3 project, then your Section 3 Plan is your baseline for meeting at least the minimum Section 3 requirements.  All parties associated with your project must maintain documentation for a time period required for record retention or in the absence of applicable program regulations in accordance with 2 CFR Part 200.

For your future reference, the following are Section 3 documents required throughout the life of the project:

  • Intent to Comply (including the required Section 3 language for all contracts) 
  • Section 3 Plan (including the required Section 3 language for all contracts) 
  • Section 3 Worker and Targeted Section 3 Work Certification
  • Section 3 Business Concern Certification
  • List of all businesses on project (Contractor and Subcontractor Activity, HUD form 2516) 
  • Project Workforce Lists (list of employees working on the project from each company)
  • Weekly Certified Payrolls
  • Monthly Labor Hours Summary Report (modified HUD 60002, the same form as the final summary report)
  • Final Project Total Labor Hours Summary Report (modified HUD 60002, the same form as the monthly summary report) List of documents below may change as needed