Deciphering the New HUD Section 3 Rule Change
New HUD Section 3 Rule
Not long ago, the U.S. Department of Housing and Urban Development (HUD) announced the release of the final rule implementing the “Section 3” statute. This is a big deal. Why? The Section 3 regulations have not been updated since 1994!
However, there are a few concerns we often hear from agencies regarding Section 3 regulations, even before the release of this new rule. First, the guidance and regulations themselves can be confusing and unclear, and second the tracking and reporting on these requirements is oftentimes time consuming and complex.
In order to address these concerns we’re breaking down the Section 3 prior requirements versus the new final rule and providing a few real-world examples of how the rule applies to agencies.
Ready? Let’s dive in…
First thing’s first, let’s take a look at an overview of Section 3:
- The Section 3 regulations apply to agencies who receive funding from Housing and Urban Development (HUD)
- Section 3 regulations create incentives for employers to retain and invest in their low and very low-income workers through hiring, contracting, and other economic opportunities
- Overall, the changes are supposed to make it easier for ORGs to track the progress and impact of the program, while hopefully impacting the residents and moving them to a stronger financial future through work and training
- Residents want more job opportunities, and this new rule helps support their needs and proves that HUD listened to years and years of community feedback
Section 3 Regulations – Hiring
Before the new rule, all Section 3 job opportunities arising from a covered contract must meet a minimum hiring rate of 30% of all new hires.
Now, HUD is now requiring agencies to track by labor hours, not new hires. HUD has outlined requirements for Labor Hour Tracking such that 1) Section 3 Worker = 25% of all labor hours and 2) Targeted Section 3 Worker = 5% of all labor hours
Section 3 Regulations – Section 3 Business Concerns
Before the new rule, the definition of a Section 3 Business concern is a business concern under HUD Regulations: 1) 51 percent or more owned by section 3 residents; or 2) Whose permanent, full-time employees include persons, at least 30 percent of whom are currently section 3 residents, or within three years of the date of first employment with the business concern were section 3 residents; or 3) That provides evidence of a commitment to subcontract in excess of 25 percent of the dollar award of all subcontracts to be awarded to business concerns that meet the qualifications set forth in paragraphs (1) or (2) in this definition of “section 3 business concern.”
Now, after the new rule, this means: a business concern meeting at least one of the following criteria, documented within the last six-month period: 1) It is at least 51 percent owned and controlled by low- or very low-income persons; 2) Over 75 percent of the labor hours performed for the business over the prior three-month period are performed by Section 3 workers; or 3) It is a business at least 51 percent owned and controlled by current public housing residents or residents who currently live in Section 8-assisted housing.
Section 3 Regulations – Other Economic Opportunities
Before the new rule, agencies always had the opportunity to apply Other Economic Opportunities, as needed. They could be used in lieu of Hiring and/or Contracting shortfalls or used in addition to those requirements. In addition, other economic opportunities to train and employ section 3 residents, include, but need not be limited to, use of “upward mobility”, “bridge” and trainee positions to fill vacancies. Before the new rule this also equated to Hiring section 3 residents in part-time positions, and Special Programs that contractors propose for other opportunities.
Now, this is now called Qualitative Efforts, but it is essentially the same concept. Overall, not much has changed with this one, except that small PHA’s are given the opportunity to track qualitative efforts. HUD plans to create some type of tracking form, but it hasn’t been solidified yet.
Download Your Complimentary B2Gnow HUD Section 3 Rule Change Guide
Ready for more? We invite you to download your complimentary B2Gnow HUD Section 3 Rule Change Guide. Download the guide to receive an easy-to-digest resource on navigating the HUD Section 3 Rule Change, plus get access to an overview of B2Gnow’s Section 3 Module Suite – a complete solution leveraged by Housing Authorities across the US to help track and report for the entirety of Section 3 regulations.
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