HUD Releases Section 3 Proposed Rule and Outcome Benchmarking

On April 4, HUD will release two notices in the Federal Register related to Section 3. The first is a new proposed rule titled  Enhancing and Streamlining the Implementation of ‘Section 3’ Requirements for Creating Economic Opportunities for Low- and Very Low-Income Persons and Eligible Businesses,” which would update the regulations implementing Section 3. The second is titled “Section 3 Benchmarks for Creating Economic Opportunities for Low- and Very Low-Income Persons and Eligible Businesses,” that sets outcome benchmarks for meeting and following Section 3 requirements. HUD also hosted a call the morning of April 3 on the proposed rule. NAHRO was the only participant to ask questions about the proposed rule on the call, specifically about changes to the definition of a Section 3 business, and the impact of the proposed rule on small agencies.

According to HUD, “[t]he purpose of Section 3 is to ensure that employment, training, contracting, and other economic opportunities generated by certain HUD financial assistance are directed to low- and very low-income persons, particularly those who receive government assistance for housing, and for businesses to provide economic opportunities to low- and very low-income persons.” The proposed rule applies to HUD’s Public Housing program and other programs that provide HUD housing and community development assistance.

Major provisions of the proposed rule include: promoting sustained employment and career development for people served by HUD financial assistance programs; aligning Section 3 reporting with standard business practices; changing applicability and reporting thresholds; reporting and targeting Section 3 workers, and proposing benchmarks. HUD has noted that the proposed rule is geared at focusing on outcomes as opposed to inputs.

The proposed rule includes separate reporting requirements for Public Housing Section 3 projects and Section 3 projects that use HUD program assistance for housing rehabilitation, housing construction, and other public construction projects. All recipients of public housing financial assistance are required to report on whether they have met certain Section 3 benchmarks, however agencies with fewer than 250 units would only be required to report on Section 3 qualitative efforts and would not be required to report on whether they have met the benchmarks. Generally, any Section 3 project that uses other HUD program assistance that exceeds a $200,000 threshold or any Section 3 project funding from HUD’s Lead Hazard Control and Healthy Homes programs, must report Section 3 activities to HUD. Section 8 programs are excluded from Section 3 reporting.

NAHRO will continue analyzing the proposed rule and release an in-depth analysis to our website shortly.


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