Section 3 Economic Opportunities for Low and Very Low-income Persons

Section 3Section 3Economic Opportunities for Low and Economic Opportunities for Low and

Very Low-income PersonsVery Low-income Persons

Council of State Community Council of State Community and Economic Development and Economic Development

AgenciesAgencies

Staci Gilliam Hampton, DirectorStaci Gilliam Hampton, DirectorEconomic Opportunity Division Economic Opportunity Division

Washington, DC 20410Washington, DC 20410202-402-3468202-402-3468

[email protected]/section3

mailto:[email protected]

http://www.hud.gov/section3

Section 3 Section 3 Purpose/IntentPurpose/Intent

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Statute and RegulationStatute and Regulation

Section 3 of the Housing and Section 3 of the Housing and Urban Development Act of 1968Urban Development Act of 1968 12 U.S.C. 1701u12 U.S.C. 1701u

Economic Opportunity Economic Opportunity RegulationRegulation 24 CFR Part 13524 CFR Part 135

Simply Stated… Simply Stated… HUD funds are one of the largest sources of HUD funds are one of the largest sources of

federal investment in distressed federal investment in distressed communitiescommunities

These funds typically result in new These funds typically result in new employment, training and contracting employment, training and contracting opportunitiesopportunities

Section 3 is designed to direct new Section 3 is designed to direct new economic opportunities to local residents economic opportunities to local residents and businessesand businesses

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IntentIntent HUD funding creates opportunities HUD funding creates opportunities

“beyond bricks and mortar”“beyond bricks and mortar”

Promote Self-Sufficiency amongst Promote Self-Sufficiency amongst low-income personslow-income persons

Level the playing field for Section 3 Level the playing field for Section 3 residents and businessesresidents and businesses

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Regulatory DescriptionRegulatory DescriptionTo ensure that economic

opportunities generated from HUD funded projects, to the

greatest extent feasible, will be directed to low and very low-income persons - particularly those receiving assistance for

housing, and the businesses that provide them economic

opportunities

To the Greatest Extent Feasible

…what does this mean???

To the Greatest Extent Feasible

Recipients must make every effort to recruit, target, and direct economic opportunities to Section 3 residents and businesses.

More than normal advertising

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Triggering Triggering ResponsibilitiesResponsibilities

Section 3 regulations do not require Section 3 regulations do not require hiring or subcontracting unless it is hiring or subcontracting unless it is necessary to complete the project.necessary to complete the project.

Section 3 is not an entitlement, it is Section 3 is not an entitlement, it is an opportunityan opportunity

Section 3 is triggered when covered Section 3 is triggered when covered projects require “new” hires or sub-projects require “new” hires or sub-contracting. contracting.

““If-Then” RegulationIf-Then” Regulation

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Who is Required to Who is Required to Comply?Comply?

Any entity which receives Section 3 Any entity which receives Section 3 covered assistance, directly from HUD covered assistance, directly from HUD or from another recipient including: or from another recipient including:

Any State unit of local government, Any State unit of local government, PHA, IHA, Indian tribe, or other PHA, IHA, Indian tribe, or other public body, public or private public body, public or private nonprofit organization, private nonprofit organization, private agency or institution, mortgagor, agency or institution, mortgagor, developer, builder, property manager, developer, builder, property manager, community housing development community housing development organization, resident management organization, resident management corporation, resident council, or corporation, resident council, or cooperative association.cooperative association.

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Section 3 ComplianceSection 3 Compliance

HUD holds direct recipients of HUD holds direct recipients of covered funding accountable covered funding accountable for their own compliance, and for their own compliance, and the compliance of their the compliance of their subrecipients and contractors. subrecipients and contractors.

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Section 3 Certification(s)Section 3 Certification(s) Annual Certifications Annual Certifications

Signed by Highest-Elected Officials Signed by Highest-Elected Officials

Westchester County, NY Westchester County, NY

Failing to comply with Section 3 Failing to comply with Section 3 Certifications could have severe Certifications could have severe consequencesconsequences

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Failure to Comply with Failure to Comply with Section 3Section 3

HUD holds direct recipients HUD holds direct recipients of covered funding of covered funding

accountable for their own accountable for their own compliance, and the compliance, and the compliance of their compliance of their

subrecipients and contractorssubrecipients and contractors

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Penalties for Penalties for NoncomplianceNoncompliance

Sanctions for noncompliance Sanctions for noncompliance may include:may include:

DebarmentDebarment SuspensionSuspension Limited Denial of Participation Limited Denial of Participation

in HUD Programsin HUD Programs

Applicability and Applicability and Funding ThresholdsFunding Thresholds

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ApplicabilityApplicability Public and Indian Housing Public and Indian Housing

DevelopmentDevelopment OperationOperation ModernizationModernization

Housing and Community Housing and Community DevelopmentDevelopment Housing rehabilitation Housing rehabilitation Housing constructionHousing construction Other public constructionOther public construction

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Section 3 Covered AssistanceSection 3 Covered Assistance PIH AllocationsPIH Allocations

Operations, Capital, Modernization, HOPE Operations, Capital, Modernization, HOPE VIVI

CDBG FundingCDBG Funding HOME Funding HOME Funding NAHASDA fundingNAHASDA funding Competitive GrantsCompetitive Grants

EDI and BEDI EDI and BEDI Lead Based PaintLead Based Paint 202/811202/811 ROSSROSS

Section 108 Loan GuaranteesSection 108 Loan Guarantees

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Applicability to Entire Applicability to Entire Project Project

Section 3 requirements apply to the entire project or activity, regardless of whether it is fully or partially funded by HUD. (Example: leveraged private funds associated with HOPE VI or CDBG.)

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Funding ThresholdsFunding Thresholds**Recipients of Housing and Community Recipients of Housing and Community

Development AssistanceDevelopment Assistance

The requirements apply to The requirements apply to recipients of housing and recipients of housing and community development community development assistance exceeding $200,000 assistance exceeding $200,000

The requirements also apply The requirements also apply to Contractors/Subcontractors to Contractors/Subcontractors that receive awards in excess that receive awards in excess of $100,000of $100,000

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Funding ThresholdsFunding Thresholds ALLALL construction and rehabilitation construction and rehabilitation

activities are coveredactivities are covered

Does not apply on a per-project Does not apply on a per-project basisbasis

Contractors that receive $100,000 Contractors that receive $100,000 have the same responsibilities as have the same responsibilities as direct recipientsdirect recipients

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Thresholds Met for Thresholds Met for Recipients but Not Recipients but Not

ContractorsContractors

If the threshold of $200,000 is If the threshold of $200,000 is met for the project/activitymet for the project/activity

but no contract of $100,000 is but no contract of $100,000 is awarded, awarded, the requirements the requirements only apply to the recipientonly apply to the recipient

Section 3 Residents and Section 3 Residents and Business ConcernsBusiness Concerns

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CertificationCertification

Recipients are currently Recipients are currently responsible for certifying responsible for certifying the eligibility of residents the eligibility of residents and businesses that are and businesses that are seeking Section 3 seeking Section 3 preference.preference.

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Section 3 ResidentSection 3 Resident

Public Housing Resident, Public Housing Resident, oror

A resident of metro area or non A resident of metro area or non metro county in which the metro county in which the Section 3 covered assistance is Section 3 covered assistance is expended, and who qualifies as expended, and who qualifies as a low- or very low-income a low- or very low-income person.person.

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Low- and Very Low-Low- and Very Low-IncomeIncome

HUD sets the low-income HUD sets the low-income limit at limit at 80%80% and very low and very low income limits at income limits at 50%50% of the of the median family incomemedian family income for for the county or metropolitan the county or metropolitan area in which you choose to area in which you choose to livelive

http://www.huduser.org/portal/datasets/il.html

http://www.huduser.org/portal/datasets/il.html

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Today’s Section 3 Today’s Section 3 ResidentsResidents

Residents of Public HousingResidents of Public Housing Section 8 Voucher HoldersSection 8 Voucher Holders Recently Unemployed Recently Unemployed VeteransVeterans Recipients of Other Federal Recipients of Other Federal

Assistance (TANF, employment)Assistance (TANF, employment) Single Mothers Re-entering the Single Mothers Re-entering the

WorkforceWorkforce Recent College GraduatesRecent College Graduates

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Sample Certification FormSample Certification FormSection 3 ResidentsSection 3 Residents

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Section 3 PreferenceSection 3 Preference Section 3 of the HUD act is Section 3 of the HUD act is race race

and gender neutraland gender neutral..

Not MBE/WBENot MBE/WBE

The preference provided by this The preference provided by this federal act is based on income and federal act is based on income and location.location.

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Section 3 Business Section 3 Business ConcernsConcerns

51%51% or more owned by Section or more owned by Section 3 Residents, or3 Residents, or

30%30% of employed staff are of employed staff are currently Section 3 Residents currently Section 3 Residents or were Section 3 residents or were Section 3 residents within three years of the date within three years of the date of first employment; orof first employment; or

25%25% of subcontracts committed of subcontracts committed to Section 3 Businesses.to Section 3 Businesses.

Sample Certification FormSample Certification FormSection 3 BusinessesSection 3 Businesses

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Section 3 Employment Section 3 Employment OpportunitiesOpportunities

The Following Can be Counted The Following Can be Counted Towards the Numerical Towards the Numerical Goals:Goals:

New HiresNew Hires Laid off WorkersLaid off Workers Temporary/Seasonal WorkersTemporary/Seasonal Workers Part-time/Full-time WorkersPart-time/Full-time Workers

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Employment Employment OpportunitiesOpportunities

Housing and Community Housing and Community Development Programs- Development Programs-

Construction LaborConstruction LaborManagement & Administrative Management & Administrative

SupportSupportArchitectural, Engineering and Architectural, Engineering and

Professional servicesProfessional services

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Eligibility for employment Eligibility for employment and contractingand contracting

A Section 3 resident must A Section 3 resident must meet the qualifications of the meet the qualifications of the position to be filled.position to be filled.

A Section 3 business concern A Section 3 business concern must have the ability and must have the ability and capacity to perform.capacity to perform.

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Recipient Recipient Responsibilities Responsibilities

& & Practical TipsPractical Tips

24 CFR Part 135.3224 CFR Part 135.32

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HUD

State Agencies

Units of Local Govt

Contractor

business residentresident residentbusiness

Contractor

Section 3 Covered AssistanceSection 3 Covered Assistance

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States and CountiesStates and Counties

MustMust inform units of local inform units of local governments to whom covered governments to whom covered funds are distributed of their funds are distributed of their obligations under Section 3 obligations under Section 3 and monitor the performance and monitor the performance of local governments. of local governments.

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Responsibility #1Responsibility #1

Design and implement Design and implement procedures to comply procedures to comply

with the requirements of with the requirements of Section 3Section 3

Develop and Publish official Develop and Publish official policies—Section 3 Planpolicies—Section 3 Plan

Strategic Planning Strategic Planning

Internal/External Meetings Internal/External Meetings

Practical Tips:Practical Tips:

Identify long and short term Identify long and short term projects/activities projects/activities

Consider applicable State, Consider applicable State, Federal and local lawsFederal and local laws


Strategies to target Section 3 Strategies to target Section 3 residents and businesses residents and businesses

Certification/Selection criteriaCertification/Selection criteria

Process for informing contractors Process for informing contractors about responsibilities and about responsibilities and assessing hiring/subcontracting assessing hiring/subcontracting needsneeds

Section 3 PlansSection 3 Plans

Penalties for noncompliancePenalties for noncompliance

Incentives for good performersIncentives for good performers

Reporting RequirementsReporting Requirements

RecordkeepingRecordkeeping

Section 3 Coordinator Section 3 Coordinator

Section 3 PlansSection 3 Plans

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Responsibility #2Responsibility #2Notify Section 3 residents Notify Section 3 residents

about training and about training and employment opportunities and employment opportunities and

Section 3 businesses about Section 3 businesses about contracting opportunitiescontracting opportunities

Establish certification proceduresEstablish certification procedures

Maintain lists of certified Section 3 Maintain lists of certified Section 3 residents & businessesresidents & businesses

Personally notify certified residents Personally notify certified residents and businesses and businesses

Post Notices Door-to-DoorPost Notices Door-to-Door


Community Job FairsCommunity Job Fairs

Online Job Search VehiclesOnline Job Search Vehicles

Community PartnershipsCommunity Partnerships

Section 3 CoordinatorSection 3 Coordinator


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Responsibility #3Responsibility #3Notify covered Notify covered

contractors about the contractors about the requirements of requirements of

Section 3Section 3

Pre-Bid Hearings/ MeetingsPre-Bid Hearings/ Meetings

Section 3 WorkshopsSection 3 Workshops

Provide copies of your Provide copies of your agency’s Section 3 Plan and agency’s Section 3 Plan and have contractors certify have contractors certify receiptreceipt


Include compliance with Include compliance with Section 3 as a rating factor Section 3 as a rating factor when selecting “responsible when selecting “responsible bidders”bidders”

Assess bidders on their Assess bidders on their strategy for meeting the strategy for meeting the requirements of Section 3requirements of Section 3


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Responsibility #4Responsibility #4Incorporate the Section 3 Incorporate the Section 3

clause into covered clause into covered solicitations and solicitations and

contractscontracts

--24 CFR Part 135.38--24 CFR Part 135.38

Refer to Section 3 in bid Refer to Section 3 in bid packages, RFPs, etc.packages, RFPs, etc.

Review clause with developer Review clause with developer and have them certify and have them certify compliancecompliance


Practical Tips:Practical Tips:Monitor Developers/Contractors Regularly

Develop appropriate penalties for noncompliance and/or incentives for those that exceed minimum goals

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Responsibility #5Responsibility #5Facilitate training and Facilitate training and

employment of Section 3 employment of Section 3 residents and the award residents and the award contracts to Section 3 contracts to Section 3

businesses, as businesses, as appropriate to reach the appropriate to reach the

minimum numerical goalsminimum numerical goals

Assess needs of developers at Assess needs of developers at time of contract awardtime of contract award

Match potential employees or Match potential employees or subcontractors with developerssubcontractors with developers

Ensure that developers advertise Ensure that developers advertise vacancies in accordance with the vacancies in accordance with the agency’s policiesagency’s policies


Conduct local career/business Conduct local career/business development trainingsdevelopment trainings

Sponsor Job-FairsSponsor Job-Fairs

Develop Partnerships with local Develop Partnerships with local One-Stop Career CentersOne-Stop Career Centers

Youthbuild/Apprenticeship Youthbuild/Apprenticeship ProgramsPrograms


Practical Tips:Practical Tips: Provide guidance for Provide guidance for

determining Section 3 determining Section 3 eligibilityeligibility

Have certified residents and Have certified residents and businesses provide evidence to businesses provide evidence to contractorscontractors

Minimum Numerical Goals:Minimum Numerical Goals: 30% of new hires annually30% of new hires annually

10% of the total dollar amount of 10% of the total dollar amount of covered construction contractscovered construction contracts

3% of the total dollar amount of 3% of the total dollar amount of covered non-construction covered non-construction contractscontracts


24 CFR Part 135.3024 CFR Part 135.30

Numerical Targets (may be Numerical Targets (may be exceeded)exceeded)

Safe Harbor Compliance Safe Harbor Compliance

Other Efforts Taken to Achieve Other Efforts Taken to Achieve Compliance—To the Greatest Compliance—To the Greatest Extent Feasible Extent Feasible

Minimum Numerical Minimum Numerical GoalsGoals

Identify short- and long-term Identify short- and long-term capital improvement projects, job capital improvement projects, job vacancies, training opportunities, vacancies, training opportunities, contracts, etc.contracts, etc.

Implement strategies to target Implement strategies to target Section 3 residents and Section 3 residents and businesses businesses

Review Appendix to RegulationReview Appendix to Regulation


Consider all hiring and Consider all hiring and subcontracting needs of subcontracting needs of developers and contractorsdevelopers and contractors

Maintain evidence of efforts Maintain evidence of efforts taken to achieve compliancetaken to achieve compliance

Describe efforts taken on Describe efforts taken on Section 3 annual reportSection 3 annual report


Assisting and actively Assisting and actively cooperating with the cooperating with the Assistant Secretary in Assistant Secretary in

obtaining the obtaining the compliance of compliance of

contractorscontractors


Cooperate with HUD’s Section Cooperate with HUD’s Section 3 Enforcement Actions3 Enforcement Actions

Hold developers/contractors Hold developers/contractors accountableaccountable


Develop appropriate penalties Develop appropriate penalties and apply them consistently and apply them consistently

Withhold Final Payments for Withhold Final Payments for “Section 3 Training Fund”“Section 3 Training Fund”


Refrain from entering Refrain from entering into contracts with into contracts with contractors that fail contractors that fail

to complyto comply


Determine appropriate Determine appropriate timeframe for suspensionstimeframe for suspensions(i.e., 90 days, 1 year, 3 years)(i.e., 90 days, 1 year, 3 years)

Be Consistent!!! Be Consistent!!!

Publicize actions taken Publicize actions taken


Documenting actions Documenting actions taken to comply with taken to comply with the requirements of the requirements of Section 3, results of Section 3, results of actions taken, and actions taken, and

impediments, impediments, if anyif any


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Practical Tips:Practical Tips: Records of notification/ recruiting Records of notification/ recruiting

effortsefforts Copies of vacancy announcementsCopies of vacancy announcements Participation in local eventsParticipation in local events Signed contractsSigned contracts Penalties imposed Penalties imposed Outcomes producedOutcomes produced Annual 60002 formsAnnual 60002 forms

Section 3 Section 3 Reporting RequirementsReporting Requirements

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Section 3 ReportingSection 3 Reporting

Direct recipients of Section 3 Direct recipients of Section 3 covered financial assistance covered financial assistance are required to submit are required to submit form form

HUD-60002HUD-60002 for all sub- for all sub-recipients and contractors that recipients and contractors that receive sub-awards/contracts receive sub-awards/contracts

from the agency.from the agency.

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Section 3 ReportingSection 3 Reporting Measures efforts to meet Measures efforts to meet

numerical goalsnumerical goals

Narrative explanationsNarrative explanations

Must be submitted even if no Must be submitted even if no covered actions were covered actions were completedcompleted

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Form HUD-60002Form HUD-60002

Online Reporting SystemOnline Reporting System

Hard copies submitted to Hard copies submitted to FHEO in Washington, DCFHEO in Washington, DC

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Separate report for each type Separate report for each type of covered funding of covered funding

Online Reporting SystemOnline Reporting System

Hard copies submitted to Hard copies submitted to FHEO in DCFHEO in DC

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Determining Determining ComplianceCompliance

Absent Evidence to the Absent Evidence to the Contrary Contrary

Meeting Minimum Meeting Minimum Numerical Goals—Safe Numerical Goals—Safe HarborHarbor

Narrative Explanations Narrative Explanations

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Increase Section 3 reporting Increase Section 3 reporting rates and accuracyrates and accuracy

Increase overall compliance Increase overall compliance

Provide more training/technical Provide more training/technical assistanceassistance

Listening SessionsListening Sessions

2010 & 2011 2010 & 2011 InitiativesInitiatives

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New Guidance MaterialsNew Guidance Materials

New Section 3 reporting forms New Section 3 reporting forms and online system and online system

New Section 3 regulation New Section 3 regulation

Section 3 Business Concern Section 3 Business Concern Registry—Pilot Program Registry—Pilot Program


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Enforce penalties for noncompliance Enforce penalties for noncompliance

Incorporate compliance with Section Incorporate compliance with Section 3 into Annual Plans and Performance 3 into Annual Plans and Performance Assessments Assessments

Limited Monitoring Reviews Limited Monitoring Reviews

Section 3 Coordination and Section 3 Coordination and Implementation NOFAImplementation NOFA


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Additional ResourcesAdditional ResourcesPlease visit our webpage:Please visit our webpage:www.hud.gov/section3

Guidance Materials Guidance Materials Sample DocumentsSample Documents Link to Online Reporting Link to Online Reporting Upcoming TrainingsUpcoming Trainings Model ProgramsModel Programs Contact Information Contact Information [email protected]



QuestionsQuestions&&

AnswersAnswers

Staci Gilliam Hampton, DirectorStaci Gilliam Hampton, DirectorEconomic Opportunity Division Economic Opportunity Division

Washington, DC 20410Washington, DC 20410202-402-3468202-402-3468

[email protected]/section3



Section 3 Economic Opportunities for Low and Very Low-income Persons

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