NLIHC Provides Comprehensive Preliminary Summary of Proposed Section 3 Rule

NLIHC has prepared a comprehensive preliminary summary and initial analysis of HUD’s proposed changes to the 1994 interim Section 3 regulations (see Memo, 4/8).

There are three potentially positive changes:

  • Instead of using a “new hires” standard, HUD proposes to use “labor hours worked.” However, public housing agencies (PHAs) will be able to use the new hires standard.
  • Residents with Section 8 vouchers or living in Section 8 properties with project-based rental assistance are added to the second-level priorities for employment and contracting provisions. Section 8 residents would also be included among Targeted Section 3 workers in a PHA context.
  • HUD would establish “benchmarks” indicating that 30% of all labor hours worked are by Section 3 workers (25%) and Targeted Section 3 workers (5%), replacing the current rule’s 30% new hires “goals.”

One change might have uncertain impacts:

  • The proposed rule would create a “Targeted Section 3 worker,” intended to emphasize the statue’s intention to encourage economic opportunities for low-income people, including through contracting opportunities for businesses primarily owned by or controlled by low-income people, or for businesses that hire a substantial number of low-income people. However, one option could result in someone who is not low-income being counted as a Section 3 worker.

Four potentially negative changes are proposed:

  • HUD would remove Section 3 monitoring and enforcement from HUD’s Office of Fair Housing and Equal Opportunity (FHEO), shifting monitoring and enforcement to the Office of Public and Indian Housing (PIH) and to the Office of Community Planning and Development (CPD).
  • HUD would eliminate any Section 3-specific complaint process.
  • In place of the interim rule’s term “Section 3 resident”, the proposed rule would create the term “Section 3 worker”.
    • Public housing residents would no longer be specifically identified.
    • There would be three options to determine whether someone was a Section 3 worker, two of the options could result in someone who is not low-income being counted as a Section 3 worker.
  • HUD would establish a $200,000 per project threshold before a contractor or subcontractor would have to comply with Section 3. Jurisdictions, contractors, and subcontractors could avoid Section 3 by breaking up construction activities (such as single-family housing rehabilitation or road repaving projects) into small contracts of less than $200,000, even if a contractor or subcontractor is receiving large sums of HUD program funds to carry out construction work. 

Next week NLIHC will prepare separate summaries, one focusing on provisions specific to public housing and one focusing on projects receiving non-public housing funds, such as the Community Development Block Grant (CDBG) and HOME Investment Partnerships (HOME) programs.

NLIHC’s “Preliminary Summary and Analysis of the Proposed Section 3 Regulation” is at:

The proposed rule is at:

The proposed benchmark is at:

An easier to read version of the proposed rule is at:

An easier to read version of the proposed benchmark is at: