Section 3 Compliance Reporting Still Not Required by HUD

HUD’s Office of Public and Indian Housing (PIH) issued Notice PIH 2022-38/FPM-19-2022 on December 20, 2022, informing public housing agencies (PHAs) that they are not required to report on Section 3 labor hours worked or other Section 3 compliance efforts until PIH has a new reporting system. However, PHAs must keep on-site records of their Section 3 activities, as well as records demonstrating compliance with Section 3 regulations.

HUD’s Office of Field Policy and Management (FPN) issued final Section 3 rules on September 29, 2020 (see Memo, 10/2/20), replacing the 1994 interim rule and introducing dramatic changes (see NLIHC’s summary). Prior to the formulation of the new rule, PHAs reported Section 3 compliance through the Section 3 Performance Evaluation and Registration System (SPEARS), which cannot address the final rule’s switch from measuring Section 3 “new hires” to measuring Section 3 “labor hours worked.”

Notice PIH 2022-38/FPM-19-2022 indicates that PHAs can use forms 4737, 4737A, 4737B, 4737C, and 4737D as aids to document Section 3 compliance activities. The Notice also states that PHAs must continue to follow recordkeeping requirements regarding the final Section 3 rule. PHAs can use forms 4736, 4736A, 4736B, 4736C, and 4736D to aid recordkeeping requirement compliance. The Notice supplements guidance previously provided by Notice PIH 2022-10 issued on April 18, 2022 (see Memo, 4/25/22).

The purpose of Section 3 of the “Housing and Urban Development Act of 1968” is to ensure that when HUD funds are used to assist housing and community development projects, “to the greatest extent feasible” preference for some of the jobs and other economic opportunities created goes to low-income people, “particularly those who are recipients of government assistance for housing.” Another Section 3 obligation is to support businesses owned or controlled by low-income people or businesses that hire them. PHAs and jurisdictions using Community Development Block Grant (CDBG), HOME Investment Partnerships program, and other HUD funds must comply with Section 3 and ensure that contractors and subcontractors comply.

Notice PIH 2022-38/FPM-19-2022 is available at:

HUD’s Section 3 website is available at:

Read more about Section 3 on page 7-46 of NLIHC’s 2022 Advocates’ Guide and on NLIHC’s public housing website.