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
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.
This August 2006 NHLP Housing Law Bulletin article provides a brief overview of the Pike Project Agreement made with the City of Long Beach.
This May 2006 NHLP Housing Law Bulletin article details the bill’s key modifications to the current Section 3 programs.
This January 2006 NHLP Housing Law Bulletin article provides background on the case and describes the ruling.
This April 2005 NHLP Housing Law Bulletin article sets forth steps that advocates may take locally to obtain compliance with Section 3.
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.
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.
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.
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.
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.
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.
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).
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
Phase 1 for Improvements to the Terminal Area for Long Beach Airport, August 3, 2010. The City of Long Beach and Local trade groups and the city agreed on a PLA for the new, non-HUD funded airport terminal. The parties agreed that Section 3 applied and additional policies also apply to benefit Section 3 individuals.
Materials
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.
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.
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.
This fact sheet is designed to provide basic information to low and very low income residents who may benefit from Section 3.
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.
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.
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.
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).
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
Available at www.hudclips.org (used to file a complaint with HUD regarding Section 3).
Available at www.hudclips.org (requests information regarding subcontractors including whether they are a Section 3 business).
Available at www.hudclips.org (requires information on the number and skill level of Section 3 new hires and trainees).
Provides guidance on implementing Section 3 under ARRA.
Provides guidance on implementing Section 3 under NSP.
Office of Inspector General, United States Department of Housing and Urban Development, (Audit Case # 2003-KC-0001) (2003)
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.
Links
Presenters: Alaric Degrafinried, Equal Justice Works Fellow with NHLP, Robert Damewood, Regional Housing Legal Services, Rachel Joy, Decatur Housing Authority and Rafiq Munir, Economic Opportunity Division, HUD.
This June 2009 report by Barbara Sard and Micha Kubic of the Center on Budget and Policy Priorities reviews the history of Section 3 and suggests areas for improvement or reform, including enhancing HUD’s monitoring and enforcement, statutory changes and increased collaboration with workforce investment boards.
This July 2009 report by the Community Service Society of New York argues that NYCHA should connect the 200,000 public housing residents who are looking for work with available NYCHA jobs.
This August 2010 report by Chinese for Affirmative Action and Brightline Defense Project focuses on building and construction workforce and summarizes the policies and programs that affect local hiring on public projects. It provides local San Francisco data, offers three models of local hiring and presents findings and recommendations for a new approach to targeted community hiring in San Francisco. (Section 3 is not mentioned but the findings and recommendations are applicable to Section 3.)
These combined codes, as amended, have been called the most far reaching in the nation mandating local hiring and hiring of disadvantaged workers. The Report “Failure of Good Faith” provides background information leading up to the revisions to SF Administrative Code, Chapter 6.22.
