Section 3 Compliance
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Overview

Background:

Section 3 of the Housing and Urban Development Act of 1968, as amended, ("Section 3") requires that economic opportunities generated by certain U.S. Department of Housing and Urban Development (HUD) financial assistance for housing and community development programs be directed to low and very low-income persons. The priority of assistance should be to those who are recipients of government assistance for housing, and business concerns which provide economic opportunities to low and very low-income persons.

The Section 3 program was created to ensure that persons living in communities where HUD -assisted programs were being funded could economically benefit from the resources being spent. This would improve the overall socioeconomic condition of not only the community, but also the low and very low-income residents that reside within the neighborhoods.

New York State’s Section 3 Program:

New York State Homes and Community Renewal (HCR) has developed a Section 3 Plan to ensure that low and very low-income residents and businesses receive economic opportunities through training, employment and contracting from HUD-assisted projects.

HCR’s Section 3 Program exists to establish and support communities and programs that are designed to transform neighborhoods and communities across New York State and empower their low and very low-income neighbors from aid dependency to economic self-sufficiency.

HCR will ensure that recipients of federal funds for HUD-assisted contracts to the greatest extent feasible provide employment, training, and contracting opportunities to Section 3 residents and Section 3 Business Concerns. Examples of these contracts include: housing construction and rehabilitation (including reduction of lead-based paint hazards), demolition, or other public construction involving street repairs, sewage or water line installation or repair, and updates to building facades.

Understanding Section 3

Section 3 is triggered when the award of U.S. Department of Housing and Urban Development funds for construction and rehabilitation projects creates the need for new employment, contracting, or training opportunities.

Section 3 requirements that apply to HCR’s HUD funded Programs:

  • Section 3 applies to recipients of HUD funding, as well as its sub-recipients and developers receiving HUD funding in excess of $200,000. Whenever any portion of HUD funding is invested into projects involving housing construction, demolition or rehabilitation, commercial/private improvements for economic development, or other public construction (e.g., roads, sewers, community centers, and public facilities), the requirements of Section 3 may apply, based on the guidance provided below.

Section 3 requirements that apply to HUD funded Projects:

In conjunction with construction activity, Section 3 applies to projects that are fully or partially funded with HUD assistance, including projects that are financed in conjunction with state, local or private matching or leveraged funds, provided that the Section 3 monetary threshold requirements are met. In particular:

  • In conjunction with construction activities, Section 3 applies to contractors or subcontractors that receive contracts in excess of $100,000 for Section 3 covered projects/activities; and
  • A “Section 3 covered contract” includes professional service contracts, provided that the work to be performed is generated by the expenditure of funds in furtherance of Section 3 covered work (e.g., housing construction, housing rehabilitation and other public construction), arising in connection with construction projects. Professional service contracts that may constitute Section 3 “covered contracts” include construction contract oversight, engineering, architectural, environmental and property evaluation, construction progress and construction draw inspection and prevailing wage labor compliance.
  • Direct beneficiaries (i.e. homeowners, landlords and businesses) are not responsible for meeting Section 3 requirements, as previously detailed above.

The regulations should not be construed to mean that recipients are required to hire Section 3 residents or award contracts to Section 3 Business Concerns other than what is needed to complete covered projects and activities. If the expenditure of funding for an otherwise covered project and activity does not result in new employment, contracting, or training opportunities, reporting is still required.

Section 3 Minimum Program Goals

HCR’s subrecipients, developers and contractors will be required, to the greatest extent feasible, meet the Section 3 HUD numerical goals found at 24 CFR Part 135.30:

  • Thirty percent (30%) of the aggregate number of new hires are Section 3 residents;
  • Ten percent (10%) of the total dollar amount of all covered construction contracts are awarded to Section 3 Business Concerns; and
  • Three percent (3%) of the total dollar amount of all covered non-construction contracts (professional services) are awarded to Section 3 Business Concerns.

Section 3 Residents

To achieve the Section 3 goals, preference should be given to those individuals that meet the following definitions and priority:

  • Public Housing Residents;
  • Low and very low-income persons who live in the metropolitan area or non-metropolitan county where a HUD-assisted project for housing or community development is located;
  • Other Public Housing residents;
  • Participants in Youthbuild programs; and
  • Other Section 3 residents or low to very low-income persons, in metropolitan areas or non-metropolitan counties.

Section 3 Business

To be considered a Section 3 Business Concern a business must meet one of the following criteria:

  • At least 51% or more owned by Section 3 residents, or
  • Whose permanent, full-time employees include persons, at least 30% of whom are currently Section 3 residents, or within three years of the date of first employment with the Business Concern were Section 3 residents, or
  • Provides evidence of a commitment to subcontract in excess of 25% of the dollar award of all subcontracts to be awarded to a Section 3 Business Concern.

Section 3 Compliance

Processing Overview

Monitoring and compliance is critical to ensure high levels of accountability and transparency in HCR's Section 3 program. FEHO staff will assist and provide ongoing technical assistance to recipients of Section 3 covered funding to help them meet the Section 3 goals and objectives. Our Section 3 compliance process will seek to improve overall monitoring, reporting, and tracking of Section 3 activity across all of HCR's Section 3 covered funding programs. Timeliness of reporting, accuracy of results, and continuous improvement toward connecting Section 3 residents to community and economic development, employment and contracting opportunities are paramount to HCR's success.

How Does Section 3 Affect Grant Recipients

The Section 3 program requires that recipients of certain HUD financial assistance, to the greatest extent possible, provide job training, employment, and contract opportunities for low or very low-income residents in connection with projects and activities in their neighborhoods. Each recipient has the responsibility to comply with Section 3 in its own operations, and ensure compliance in the operations of its contractors and subcontractors.

HCR programs covered by Section 3 are HUD-funded programs that provide housing and community development assistance for housing rehabilitation, demolition, housing construction and other public construction projects such as roads, sewers, community centers, etc. All recipients of housing and community development assistance that invest in excess of $200,000 into projects or activities involving housing construction, rehabilitation, or other public construction must comply with Section 3. The requirements of Section 3 only apply to the portion(s) of covered funding that was used for project/activities involving housing construction, rehabilitation, demolition, or other public construction. However, Section 3 applies to the entire covered project or activity regardless of whether the activity was fully or partially funded with covered assistance.

For those recipients of non-construction housing and community development assistance, including down payment assistance, closing cost assistance, etc., New York State Homes and Community Renewal program staff will review on a case-by-case basis for the determination of Section 3 applicability.

How Does Section 3 Affect Sub-contractors

All contractors (or subcontractors) that receive covered funds in excess of $100,000 to complete projects involving housing construction, rehabilitation, or other public construction are required to comply with the requirements of Section 3.

Reporting Requirements

Annually, in accordance with 24 CFR Part 135.9, HCR is required to submit form HUD-60002 to HUD’s Economic Opportunity Division in Washington, DC. The Section 3 Summary Report shall follow the same program, fiscal, or calendar year as HCR’s annual performance report and will correspond to the covered projects and activities that were administered during the reporting period.

HCR’s Section 3 Annual Summary Report is intended to measure its efforts to comply with the statutory and regulatory requirements of Section 3 in its own operations AND those of covered Awardees, Contractors and Subcontractors.

HCR requires its covered Awardees, Contractors and Subcontractors to also submit its Section 3 performance using the HUD 60002 form to HCR’s Fair and Equitable Housing Office.
The Section 3 performance report is due to HCR FEHO quarterly on the 15th of the month following the end of the quarter throughout the program period for all recipients of Section 3 covered funding. 

All recipients are required:

  • To file regular quarterly reports on their Section 3 covered projects performance;
  • To file or compile their utilization reports to HCR FEHO to assist in compilation of the HUD Annual 60002 report.

How The Agency Can Help

HCR monitors its funding recipients for compliance with Section 3 requirements. HCR provides training and ongoing technical assistance for all its recipients, This includes, but is not limited to:

  • Templates, samples and other examples of program documents such as Section 3 Participation Plans, Utilization Reports, HUD 60002 Form, Section 3 Resident Certification, Section 3 Business Certification;
  • Podcasts of Section 3 training sessions, which include presentations targeted for contractors/developers, The Units of General Local Government, and residents; and
  • HCR Section 3 Policies and Procedures to help recipients understand their responsibilities under the HCR Section 3 Program.

Forms and Templates

HCR is providing recipients with tools, templates and samples to assist in meeting the goals and objectives of the Section 3 program. Here are samples and templates, along with reference materials, that can be useful in developing your Section 3 program. If you have any questions about any of the tools, templates, or samples provided, please contact HCR's Section 3 Coordinator. These tools, templates, and samples are for reference purposes only. Recipients should consult their legal counsel prior to utilizing and publishing these documents.

Templates

Reporting Forms

HUD Section 3 Regulations

Section 3 Participation Plans

Training

Description

HCR is providing recipients with tools, templates and samples to assist in meeting the goals and objectives of the Section 3 program. Here are templates and samples, along with reference materials, that can be useful in developing your Section 3 program. If you have any questions about any of the tools, templates, or samples provided, please contact HCR's Section 3 Coordinator. These tools, templates, and samples are for reference purposes only. Recipients should consult their legal counsel prior to utilizing and publishing these documents.

Training

Section 3 Business Concern Registration and Search Engine

Registering Your Business

To register your business as a Section 3 Business Concern, use the following link to the HUD Section 3 Business Registry:

https://portalapps.hud.gov/Sec3BusReg/BRegistry/RegisterBusiness.action

Search for a Section 3 Business

To search for a Section 3 Business in your local area, use the following link:

https://portalapps.hud.gov/Sec3BusReg/BRegistry/SearchBusiness

Creative Partnerships

Fair Housing Section 3 Creative Partnerships

 

Minority and Women Owned Business Program (MWBE)

The Division of MWBE Development operates under the Department of Empire State Development (ESD).

This program supplements NY State’s economic leadership with information and resources that increase access to information and opportunities for MWBEs throughout the state.

Visit the MWBE Business Directory.

Service Disabled Veteran Owned Businesses (SDVOB)

The SDVOB program is a division of the Office of General Services (OGS).

The goal of the program is to encourage and support eligible SDVOBs to play a greater role in the State’s economy by increasing their participation in NY State’s contracting Opportunities.

Visit the SDVOB Business Directory.

Department of Labor (DOL)

The DOL guides workers to training that will keep New York strong in the world economy.

Visit their website.

Public Housing Authorities (PHA)

PHA’s provide safe and affordable quality housing for eligible low-income families, the elderly, and persons with disabilities.

Visit the NY State PHA Directory.

Chamber of Commerce Directory

Visit the NY State Chamber of Commerce Directory.

Disadvantaged Business Enterprises (DBE)

DBE’s are for-profit small business concerns. View the Directory of NY State Disadvantaged Business Enterprises.

Resource Library

For more information, view our helpful State Resources.