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Resource Center


Section 3

The purpose of Section 3 of the Housing and Urban Development Act of 1968 is to provide economic and employment opportunities to low- and very-low income individuals. Section 3 requires recipients of certain types of HUD funding to ensure to the “greatest extent feasible” that a certain percentage of the job training, employment, and contracting opportunities that arise from the expenditure of the funds benefit low- and very-low income individuals. Section 3 residents are low- and very-low income individuals who are public housing residents or who live in the metropolitan area or non-metropolitan county where the funds are expended. Section 3 businesses are businesses that are majority owned by Section 3 residents or whose permanent, full-time employees are 30% Section 3 residents or are businesses that contract in excess of 25% of subcontracts to such Section 3 businesses.

All HUD funds received by public housing agencies (PHAs) are subject to Section 3. Therefore, PHAs must ensure that 30% of all employees newly hired for public housing administrative, modernization or construction jobs are Section 3 residents. Ten percent of all public housing construction, modernization, repair and development contracts must be with Section 3 businesses and 3% of all other contracts must be with Section 3 businesses. Advocates and residents have often focused on Section 3 job and contracting opportunities that have arisen in the context of HOPE VI and the expenditure of public housing capital funds.

Other recipients of HUD funds, such as cities and local governments, must also comply with Section 3, provided that the recipient receives more than $200,000 and the contract or subcontract exceeds $100,000. Non public housing funds that are subject to Section 3 are for construction and public works and include but are not limited to Community Development Block Grant funds, HOME funds, and the recent stimulus funds such as Neighborhood Stabilization Program (NSP) funds and Assisted Housing Energy and Green Retrofit investments. In selecting a Section 3 resident or Section 3 business, the PHA or other recipient of HUD funds must give a priority to certain classes of residents such as public housing residents, homeless individuals, YouthBuild participants or other low-income residents or certain classes of businesses, such as businesses owned by Section 3 residents who are public housing residents or that provide economic opportunities for Section 3 residents in the area/neighborhood.

Section 3 residents and businesses that have been harmed by the failure of HUD or recipients of HUD funds to enforce or implement Section 3 have sought both judicial and administrative relief. Residents and advocates have also worked with local agencies, such as PHAs and city or county governments that receive HUD funds subject to Section 3, and commented on local PHA annual plans or ConPlans to get them to implement Section3.

Representative Velázquez is circulating draft legislation, Earnings and Living Opportunity Act, proposing to amend Section 3.

Articles

NHLP, Improved Section 3 Enforcement by HUD at Work in St. Paul

This June 2010 NHLP Housing Law Bulletin article reviews the current status of the HUD investigation of St. Paul regarding compliance with Section 3, notes that HUD withheld $18 million in Neighborhood Stabilization Program (NSP) funds for a period of time because of a finding of non compliance and summarizes the Voluntary Compliance Agreement (VCA) in which the City agreed to provide up to $1 million to fund various Section 3 initiatives.

NHLP, Courts Reluctant to Enforce Section 3

This November-December 2006 NHLP Housing Law Bulletin article provides background on Section 3 and private enforcement, implied right of action vs. Section 1983, and the Williams decision.

NHLP, Long Beach Ordered to Designate Additional Projects as Subject to Section 3

This August 2006 NHLP Housing Law Bulletin article provides a brief overview of the Pike Project Agreement made with the City of Long Beach.

NHLP, Proposed Legislation Signals New Hope for HUD’s Section 3 Program

This May 2006 NHLP Housing Law Bulletin article details the bill’s key modifications to the current Section 3 programs.

NHLP, City of Long Beach Finalizes its Section 3 Restitution Plan

This January 2006 NHLP Housing Law Bulletin article provides background on the case and describes the ruling.

NHLP, Encouraging PHA Compliance with Section 3 Employment Requirements

This April 2005 NHLP Housing Law Bulletin article sets forth steps that advocates may take locally to obtain compliance with Section 3.

NHLP, HUD Rules Long Beach Violated Section 3 Employment Requirements

This June 2004 NHLP Housing Law Bulletin article provides a brief overview of the tools that advocates can use at the local level to address some of HUD’s oversight and enforcement failings, as well as sample language that advocates can use to help PHAs develop a Section 3 plan.

NHLP, Inspector General Faults HUD on Section 3

This November/December 2003 NHLP Housing Law Bulletin article summarizes the IG Report which found that HUD has not implemented effective oversight controls, that Section 3 is not a priority area for HUD, that the regulations are vague, and that HUD cannot assure that Section 3 is functioning as intended.

NHLP, Business Owned by Low-Income Individuals Entitled to Damages for Violation of Section 3

This July 2003 NHLP Housing Law Bulletin article provides a brief overview of Mannarino v. Morgan, in which the U.S. Court of Appeals for the Third Circuit upheld the award of a substantial damage claim against a Pennsylvania township that failed to award a rehabilitation contract funded by HUD to a very low-income contractor who should have received preference under Section 3.

NHLP, Highway Fund Could be Subject to Section 3 Requirements

This June 2010 NHLP Housing Law Bulletin article notes that NHLP submitted comments on a proposal to create an experimental Federal Highway Administration (FHWA) project for states using Community Development Block Grant (CDBG) to remove any conflicting obligations and apply Section 3 obligations to FHWA funds.

NHLP, Recent Developments Show Promise for Enforcing Section 3

This November-December 2009 NHLP Housing Law Bulletin article summarizes three promising developments in implementation and enforcement of Section 3. First, HUD has begun to aggressively enforce use of Form HUD-60002, which requires public housing agencies (PHAs) and other recipients of HUD funds to report annually on their Section 3 compliance. Second, HUD recently found Saint Paul, Minnesota in noncompliance with several Section 3 provisions, including obligatory HUD-60002 reporting. Third, the Connecticut Housing Finance Authority provides points to applicants for Low-Income Housing Tax Credits (LIHTC) that demonstrate they will comply with Section 3.

NHLP, New Opportunity for Section 3 Job Creation Under the Revovery Act and the Neighborhood Stabilization Program

This July 2009 NHLP Housing Law Bulletin article discusses the applicability of Section 3 to programs funded by HUD under the American Revocery and Reinvestment Act of 2009 (ARRA), including Neighborhood Stabilization Program (NSP).

NHLP, Earnings and Living Opportunities Act Would Strengthen Section 3

This October 2009 NHLP Housing Law Bulletin article summarizes and expands upon testimony presented in support of ELOA by the NHLP before a congressional subcommittee and examines major changes that ELOA proposes.

Cases

Judicial Cases

Materials

Testimony in Support of the Earnings and Living Opportunities Act

David Rammler, Attorney and Director of Government Relations at the National Housing Law Project, July 20, 2009, Hearing Before the Subcommittee on Housing and Community Opportunity.

National Housing Law Project webinar Section 3 and Neighborhood Stabilization Program

Presenters: Staci Gilliam and Rafiq Munir, Economic Opportunity Division, HUD, Sandra Walker and Sheryl Kaullen, City of Kansas City, Andrea Robins, Full Employment Council, Catherine Bishop, NHLP.

NHLP, An Advocate’s Guide to the HUD Section 3 Program; Creating Jobs and Economic Opportunity, NHLP, (Feb. 2009)

The Guide sets forth the rules of the Section 3 program with it the historical context, highlights successful Section 3 programs, and provides tips on how to advocate for improved Section 3 compliance and results.

NHLP Fact Sheet on Section 3

This fact sheet is designed to provide basic information to low and very low income residents who may benefit from Section 3.

NHLP and NLIHC Comments dated May 14, 2010 on DOT Experimental Project Triggering Section 3 and DOT response dated June, 25 2010

The National Housing Law Project and the National Low Income Housing Coalition submitted comments on a Department of Transportation (DOT) Notice that proposes to create an experimental project which would allow states to use CDBG funds with their Federal Highway Administration (FHWA) funds and thereby trigger HUD’s Section 3 geographic preferences in hiring and contracting.

Comments filed by advocates with state and local governments on Consolidated Plans (ConPlans) and with PHAs on PHA annual plans

Residents and advocates have worked with local agencies, such as PHAs and city or county governments that receive HUD funds subject to Section 3, and commented on local PHA annual plans or ConPlans to get them to implement or improve Section 3.

NHLP Comments dated February 28, 2011 on Proposed Changes to HUD’s Section 3 Reporting Forms and HUD's response dated March 17, 2011

On February 28, 2011, NHLP submitted comments to HUD responding to proposed changes to the Section 3 complaint form, HUD 958, and anticipated changes to the Section 3 annual report form, HUD 60002. The comments propose changes designed to facilitate enforcement of the Section 3 requirements.

Document Prepared by NHLP and others for the HUD Section 3 Listening Forum (August 24, 2010)

The purpose of the document is to highlight key issues and recommendations and to assist HUD in developing policy guidance and new regulations for Section 3.

NHLP Webinar: How Does it Work and What is New? Round I (June 29, 2010) and Round II (July 13,2010)

NHLP Webinar: How Does it Work and What is New? Round I (June 29, 2010) and Round II (July 13, 2010).

Round I presenters: Catherine Bishop, NHLP; Staci Gilliam-Hampton, HUD; Ken Nim and Ronnie Rhoe, SF Office of Economic and Work Force Development.

Round II presenters: Catherine Bishop, NHLP; Scott Strawbridge, Housing Authority of Fort Lauderdale, FL; Benjamin Beach, Community Benefits Law Center; and Rafiq Munir, HUD.

Statutes and Regulations

HUD, Contract and Subcontract Activity, form 2516 (exp. 11/30/09)

Available at www.hudclips.org (requests information regarding subcontractors including whether they are a Section 3 business).

Section 3 Summary Report: Economic Opportunities for Low- and Very Low-Income Persons, form 60002 (exp. 11/30/2010)

Available at www.hudclips.org (requires information on the number and skill level of Section 3 new hires and trainees).

Survey of HUD’s Administration of Section 3 of the HUD Act of 1968

Office of Inspector General, United States Department of Housing and Urban Development, (Audit Case # 2003-KC-0001) (2003)

Department of Labor, Training and Employment Notice 6-09, August 11, 2009

Subject: US Department of Housing and Urban Development and US Department of Labor Partnership. This notice announces a pilot program to link public housing residents with their local Workforce Investment Board and its One Stop Career System and provides a set of "Frequently Asked Questions" to facilitate greater linkages between the two systems at the local level.

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