HUD, Chicago Housing Authority Arrive At Section 3 Voluntary Compliance Agreement

HUD and the Chicago Housing Authority (CHA) finalized a voluntary compliance agreement (VCA) on March 1, 2013 in response to public housing residents’ complaints regarding CHA’s failure to comply with its Section 3 obligations. In June 2011, public housing residents and local businesses complained that from 2008 through 2010 CHA did not award any Section 3 covered contracts to “Section 3 business concerns.” After conducting an investigation, HUD issued a Letter of Findings of Noncompliance on January 5, 2012.

The purpose of Section 3 of the Housing and Urban Development Act of 1968 is to ensure that when HUD assists housing and community development projects, some of the new jobs, training, and contracting opportunities that are created go to low income people and to the businesses that hire them, “to the greatest extent feasible.” A Section 3 business is one that is primarily owned by, or that employs a significant number of, Section 3 residents, “to the greatest extent feasible.” Section 3 residents, in general, are public housing residents and low and very low income people in the metro area or non-metro county.

The VCA covers a five-year period requiring CHA to:

• Establish a mechanism to ensure that within four years it will achieve full compliance with all Section 3 contracting and hiring obligations.
• Have a Section 3 administrator.
• Develop a HUD-approved Section 3 plan.
• Compile and maintain a registry of Section 3 businesses.
• Create new HUD-approved Section 3 training and outreach materials.
• Engage in outreach and education efforts, focusing on potential Section 3 businesses.
• Create and maintain a database of Section 3 residents and their job qualifications. The database must be searchable by residents seeking to register, as well as potential employers and contractors. Residents with vouchers and residents of other HUD-assisted housing must also have access to the database.

Most notable is a required phase-in of the standard obligation to have at least 10% of the total dollar amount of all Section 3-covered contracts for “building trades” work at public housing be awarded to Section 3 businesses. Building trades include but are not limited to carpenters, plumbers, and electricians. After one year at least 3% of the contracting requirement must be met, with at least 5% met after the second year and 8% met after the third year.

If a contractor demonstrates that it has no need to subcontract or to hire additional workers, or if a contractor demonstrates that it has attempted but failed to meet its hiring and subcontracting goals, then the contractor must provide other economic opportunities, such as:

• Contributing to a Section 3 fund the difference between 10% of the covered contract amount and the actual amount of contracts it provided to Section 3 businesses, up to a maximum of $500,000 per contract.
• Counting a percentage of contractor payments made to Section 3 businesses that are unrelated to a CHA contract (called “indirect participation”).
• Providing mentorships or training that benefits Section 3 businesses or residents.

By the end of the first year of the VCA, contractors that have made new hires must meet the regulation’s Section 3 resident hiring goals (30% of new hires). If the contractor demonstrates that it is not feasible to meet the new hire goals, then it must provide other economic opportunities, such as mentoring, indirect participation, or contributing to the Section 3 fund an amount equal to 5% of the total dollar amount of the contract for building trades work, up to $100,000 per contract.

The VCA is at http://1.usa.gov/14hoGbj (PDF).

HUD’s Section 3 website is at http://1.usa.gov/YJPOIi.