Section 3

Congress established the Section 3 policy to guarantee that the employment and other economic opportunities created by Federal financial assistance for housing and community development programs should, if possible, be directed toward low and very-low-income persons, particularly those who are recipients of government assistance for housing.

Section 3 residents are:

• Public Housing residents
• Section 8 Residents
• Youthbuild Participants
• Low and very-low-income persons who live in the metropolitan area or non-metropolitan county where a HUD-assisted project for housing or community development is located.

Determining Income Levels

• Low income is defined as 80% or below the median income of that area
• Very-low income is defined as 50% or below the median income of that area
• Median incomes can be found using the American Fact Finder website

Type of Opportunities:

• Job training
• Employment
• Contracts

Examples include:

• Administrative/ Management
  • accounting
  • payroll
  • research
  • bookkeeping
  • purchasing
  • word processing
• Services
  • appliance repair
  • carpet installation
  • janitorial
  • landscaping
  • printing
  • manufacturing
  • transportation
• Construction
  • architecture
  • bricklaying
  • carpentry
  • cement/masonry
  • demolition
  • drywall
  • electrical
  • elevator construction
  • engineering
  • fencing
  • heating
  • iron works
  • machine operation painting
  • plastering
  • plumbing
  • surveying
  • tile setting

Recipients of HUD financial assistance and their contractors and subcontractors are required to provide economic opportunities, to the greatest extent possible, consistent with existing Federal, State, and local laws and regulations.

For training and employment:

• Persons in the area where the HUD financial assistance is expended
• Persons in public and assisted housing
• Participants in HUD Youthbuild programs
• Other Section 3 residents in the metropolitan area

For contracting:

Businesses that meet the definition of a Section 3 business owner.

How can businesses find Section 3 residents to work for them?

Businesses can recruit in the neighborhood and public housing developments to inform residents about available training and job opportunities. Distributing flyers, posting signs, placing ads, and contacting resident organizations and local community development and employment agencies to locate potential workers are effective ways of acquiring jobs.

Are recipients, contractors, and subcontractors required to provide long-term employment opportunities and not simply seasonal or temporary employment?

Recipients are required, to the greatest extent feasible, to provide all types of employment opportunities to low and very-low-income persons, including seasonal and temporary employment, as well as long-term jobs.

Kansas City Housing Authority’s Part in Compliance
Kansas City Housing Authority (HAKC) shall comply with Section 3 requirements to ensure the financial assistance HAKC receives, for the greatest extent feasible, is utilized by low- and very low-income residents and business concerns which are owned and/or provide economic opportunities to low- and very low-income persons.

HAKC and all Contractors (construction and/or non-construction) shall provide equal employment opportunity to all employees and applicants for employment without regard to race, color, religion, sex, national origin, disability, veteran’s or marital status, and sexual orientation. All job applicants and existing employees shall be given fair and equal treatment. The implementation of this policy is through the awarding of contracts, to the greatest extent feasible, to create employment and business opportunities for residents and/or businesses to low- and very low-income persons. HAKC and all Contractors shall be proactive in the recruitment, employment, training, and utilization of HAKC residents and other eligible persons within the community for any work made available due to contracts funded by HUD monies.

Changes to Section 3 Effective 2021
Changes to Section 3 adopted by HUD became effective July 1, 2021. The new Section 3 regulations can be found in the Code of Federal Regulations at 24 CFR 75, which replaced 24 CFR 135. The most significant changes under the new rules are that Section 3 compliance will be tracked by labor hours rather than new hires and contracts, and there are no longer Section 3 business contracting goals or requirements. However, HUD and the HAKC encourage the solicitation and utilization of certified Section 3 business concerns to provide contracting opportunities to these firms to assist in meeting Section 3 goals.

This new rule applies to housing rehabilitation, housing construction, and other public construction projects assisted under HUD programs when the total amount of federal assistance to the project from such programs exceeds a threshold of $300,000. Developers of Section 3 projects receiving $300,000 or more from one or a combination of two or more applicable HUD programs (e.g. CDBG, HOME, etc.), will be expected to ensure that to the greatest extent feasible, either directly or through their contractors, employment opportunities at the project are directed to low- and very low-income persons, including seasonal and temporary employment opportunities. The threshold is $150,000 where the assistance is from the Lead Hazard Control and Healthy Homes programs.

To comply with the new rules, new compliance and reporting requirements will be imposed on all Section 3 projects receiving funding from HAKC.

Section 3 covered projects involve the construction or rehabilitation of housing (including reduction of lead-based paint hazards), or other public construction such as: street repair, sewage line repair or installation, updates to building facades, etc.

Section 3 is both race and gender neutral. The preferences provided under this regulation are based on personal income level and location.

For more information about these changes, please review HUD’s FAQs for Section 3, which are available at the following link: https://www.hud.gov/sites/documents/11SECFAQS.PDF.

HAKC will use HUD established benchmarks to determine if contractors and subcontractors “to the greatest extent feasible” made their “best efforts” to “direct job opportunities that are generated with HUD financial assistance (e.g. CDBG, HOME, etc.) to Section 3 workers and targeted Section 3 workers. These benchmarks include the following goals:

Labor Hours:

• 25% of all labor hours performed by Section 3 workers; and
• 5% of all labor hours performed by targeted Section 3 workers.

The 5% goal will count towards the overall 25% Section 3 Worker goal. HUD will use a benchmark based on ratios of Section 3 workers and targeted Section 3 workers in comparison to all workers.

If benchmarks are not met by contractors and subcontractors working on a Section 3 project, documentation of efforts must be provided. Per 24 CFR §75.15 and §75.25, the efforts reported to HUD may, for example, include but are not limited to the following:

• Engaged in outreach efforts to generate job applicants who are targeted Section 3 workers.
• Provided training or apprenticeship opportunities.
• Provided technical assistance to help Section 3 workers compete for jobs (g., resume assistance, coaching).
• Provided or connected Section 3 workers with assistance in seeking employment including: drafting resumes, preparing for interviews, and finding job opportunities connecting residents to job placement services.
• Held one or more job fairs.
• Provided or referred Section 3 workers to services supporting work readiness and retention (g., work readiness activities, interview clothing, test fees, transportation, childcare).
• Provided assistance to apply for/or attend community college, a four-year educational institution, or vocational/technical training.

More examples
Additional examples of efforts that contractors and subcontractors may be required to document and report to HUD are in the Federal Register. To review these additional examples, please review the Federal Register notice published 9/29/2020, titled “Section 3 Benchmarks for Creating Economic Opportunities for Low- and Very Low-Income Persons and Eligible Businesses.”

Definitions
Section 3 Worker: a worker who meets at least one of the following:

• The worker’s gross income for the previous or annualized calendar year is below the income limit established by HUD. Low- and very low-income limits are typically established at 80 percent and 50 percent of the area median individual income. HUD income limits may be obtained from the following link: https://www.huduser.gov/portal/datasets/il.html.
• The worker is employed by a Section 3 Business Concern.
• The worker is a YouthBuild participant.

Targeted Section 3 Worker: a worker who meets at least one of the following:

• The worker is employed by a Section 3 Business Concern.
• The worker is a YouthBuild participant.
• The worker is a resident in public housing, Section 8-assisted housing, and/or a resident of other public housing projects or Section 8-assisted housing managed by the Public Housing Agency that is providing the assistance (applies only to Public Housing Assistance Projects).
• The worker lives within the service area or the neighborhood of the project. Per 24 CFR § 75.5; “service area or the neighborhood of the project” means an area within one mile of the Section 3 project, or, if fewer than 5,000 people live within one mile of a Section 3 project, within a circle centered on the Section 3 project that is sufficient to encompass a population of 5,000 people according to the most recent U.S. Census (applies only to Housing and Community Development Assistance).

Section 3 Business Concern: A business that meets at least one the following:

• It is at least 51% owned and controlled by low- or very low-income persons.
• Over 75% of the labor hours performed for the business over the prior three-month period are performed by Section 3 workers.
• It is a business at least 51% owned and controlled by current public housing residents or residents who currently live in Section 8-assisted housing.

Yes. HUD receives annual reports from recipients, monitors the performance of contractors, and investigates complaints. HUD examines employment and contract records for evidence of actions taken to train and employ Section 3 residents and to award contracts to Section 3 businesses.

How can businesses or residents pursue an alleged violation of Section 3?

You can file a written complaint with the local HUD Field Office at:

ATTN: Region 7 Office of Fair Housing and Opportunity

U.S. Department of Housing and Urban Development

Gateway Tower II

Fourth Floor

400 State Avenue

Kansas City, KS 66101

A written complaint should contain:

• Name and address of the person filing the complaint
• Name and address of subject of complaint (HUD recipient, contractor, or subcontractor)
• Description of acts or omissions in alleged violation of Section 3
• Statement of corrective action sought i.e. training, employment, or contracts

1. Entering into “first source” hiring agreements with organizations representing Section 3 residents.
2. Sponsoring a HUD-certified “step-up” employment and training program for Section 3 residents.
3. Establishing training programs, which are consistent with the requirements of the Department of Labor, for public and Indian housing residents and other Section 3 residents in the building trades.
4. Advertising the training and employment positions by distributing flyers (which identify the positions to be filled, the qualifications required, and where to obtain additional information about the application process) to every occupied dwelling unit in the housing development or developments where category 1 or category 2 persons (as these terms are defined in Sec. 134.34) reside.
5. Advertising the training and employment positions by posting flyers (which identify the positions to be filled, the qualifications required, and where to obtain additional information about the application process) in the common areas or other prominent areas of the housing development or developments where category 1 or category 2 persons reside; for all other recipients, post such advertising in the housing development or developments and transitional housing in the neighborhood or service area of the Section 3 covered project.
6. Contacting resident councils, resident management corporations, or other resident organizations, where they exist, in the housing development or developments where category 1 or category 2 persons reside, and community organizations in HUD-assisted neighborhoods, to request the assistance of these organizations ion notifying residents of the training and employment positions to be filled.
7. Sponsoring (scheduling, advertising, financing or providing in-kind services) a job informational meeting to be conducted by an HA or contractor representative or representatives at a location in the housing development or developments where category 1 or category 2 persons reside or in the neighborhood or service area of the Section 3 covered project.
8. Arranging assistance in conducting job interviews and completing job applications for residents of the housing development or developments where category 1 or category 2 persons reside and in the neighborhood or service area in which a Section 3 project is located.
9. Arranging for a location in the housing development or developments where category 1 persons reside or the neighborhood or service area of the project, where job applications may be delivered to and collected by a recipient or contractor representative or representatives.
10. Conducting job interviews at the housing development or developments where category 1 or category 2 persons reside, or at a location within the neighborhood or service area of Section 3 covered project.
11. Contacting agencies administering HUD Youthbuild programs and requesting their assistance in recruiting HUD Youthbuild program participants for the HA’s or contractor’s training and employment positions.
12. Consulting with State and local agencies administering training programs funded through JTPA or JOBS, probation and parole agencies, unemployment compensation programs, community organizations, and other officials or organizations to assist with recruiting Section 3 residents for the HA’s or contractor’s training and employment positions.
13. Advertising the jobs to be filled through the local media, such as community television networks, newspapers or general circulation, and radio advertising.
14. Employing a job coordinator or contracting with a business concern that is licensed in the field of job placement (preferably one of the Section 3 business concerns identified in part 135) that will undertake, on behalf of the HA, other recipient or contractor, the efforts to match eligible and qualified Section 3 residents with the training and employment positions that the HA or contractor intends to fill.
15. For an HA, employing Section 3 residents directly on either a permanent or a temporary basis to perform work generated by Section 3 assistance. (This type of employment is referred to as “force account labor” in HUD’s Indian Housing regulations. See 24 CFR 905.102, and Sec. 905.201(a)(6)
16. Where there are more qualified Section 3 residents than there are positions to be filled, maintaining a file of eligible qualified Section 3 residents for future employment positions.
17. Undertaking job counseling, education, and related programs in association with local educational institutions.
18. Undertaking such continued job training efforts as may be necessary to ensure the continued employment of Section 3 residents previously hired for employment opportunities.
19. After selection of bidders but prior to execution of contracts, incorporating into the contract a negotiated provision for a specific number of public housing or other Section 3 residents to be trained or employed on Section 3 covered assistance.
20. Coordinating plans and implementation of economic development (e.g., job training and preparation, business development assistance for residents) with the planning for housing and community development.

1. Utilizing procurement procedures for Section 3 business concerns similar to those provided in 24 CFR part 905 for business concerns owned by Native Americans (see section III of this Appendix).
2. In determining the responsibility of potential contractors, consider their record of Section 3 compliance as evidenced by past actions and their current plans for the pending contract.
3. Contacting business assistance agencies, minority contractors associations, and community organizations to inform them of contracting opportunities and requesting their assistance in identifying Section 3 businesses that may solicit bids or proposals for contracts for work in connection with Section 3 covered assistance.
4. Advertising contracting opportunities by posting notices, which provide general information about the work to be contracted and where to obtain additional information in the common areas or other prominent areas of the housing development or developments owned and managed by the HA.
5. For HAs, contact resident councils, resident management corporations, or other resident organizations where they exist and request their assistance in identifying category 1 and category 2 business concerns.
6. Providing written notice to all known Section 3 business concerns of the contracting opportunities. This notice should be in sufficient time to allow the Section 3 business concerns to respond to the bid invitations or request for proposals.
7. Follow up with Section 3 business concerns that have expressed interest in the contracting opportunities by contacting them to provide additional information on the contracting opportunities.
8. Coordinating pre-bid meetings at which Section 3 business concerns could be informed of upcoming contracting and subcontracting opportunities.
9. Carrying out workshops on contracting procedures and specific contract opportunities in a timely manner so that Section 3 business concerns can  take advantage of upcoming contracting opportunities, with such information being made available in languages other than English where appropriate.
10. Advising Section 3 business concerns as to where they may seek assistance to overcome limitations such as the inability to obtain bonding, lines of credit, financing, or insurance.
11. Arranging solicitations, times for the presentation of bids, quantities, specifications, and delivery schedules in ways to facilitate the participation of Section 3 business concerns.
12. Where appropriate, breaking out contract work items into economically feasible units to facilitate participation by Section 3 business concerns.
13. Contacting agencies administering HUD Youthbuild programs and notifying these agencies of the contracting opportunities.
14. Advertising the contracting opportunities through trade association papers and newsletters and through the local media, such as community television networks, newspapers of general circulation, and radio advertising.
15. Develop a list of eligible Section 3 business concerns.
16. For HAs, participating in the “Contracting with Resident-Owned Business” program provided under 24 CFR part 963.
17. Establishing or sponsoring programs designed to assist residents of public or Indian housing in the creation and development of resident-owned businesses.
18. Establishing numerical goals (number of awards and dollar amount of contracts) for the award of contracts to Section 3 business concerns.
19. Supporting businesses that provide economic opportunities to low-income persons by linking them to the support services available through the Small Business Administration (SBA), the Department of Commerce, and comparable agencies at the State and local levels.
20. Encouraging financial institutions, in carrying out their responsibilities under the Community Reinvestment Act, to provide no or low-interest loans for providing working capital and other financial business needs.
21. Actively supporting joint ventures with Section 3 business concerns.
22. Actively supporting the development or maintenance of business incubators that assist Section 3 business concerns.

This Section III provides specific procedures that may be followed by recipients and contractors (collectively referred to as the “contracting party”) for implementing the Section 3 contracting preference for each of the competitive procurement methods authorized in 24 CFR 85.36(d).

1. Small Purchase Procedures. For Section 3 covered contracts aggregating no more than $25,000, the methods set forth in this paragraph (1) or the more formal procedures set forth in paragraphs (2) and (3) of this Section III may be utilized.
   1. Solicitation.
      1. Quotations may be solicited by telephone, letter, or other informal procedure provided that the manner of solicitation provides for participation by a reasonable number of competitive sources. At the time of solicitation, the parties must be informed of:
         • the Section 3 covered contract to be awarded with sufficient specificity;
         • the time within which quotations must be submitted; and
         • the information that must be submitted with each quotation.
      2. If the method described in paragraph (i) (A) is utilized, there must be an attempt to obtain quotations from a minimum of three qualified sources in order to promote competition. Fewer than three quotations are acceptable when the contracting party has attempted, but has been unable, to obtain a sufficient number of competitive quotations. In unusual circumstances, the contracting party may accept the sole quotation received in response to a solicitation provided the price is reasonable. In all cases, the contracting party shall document the circumstances when is has been unable to obtain at least three quotations.
   2. Award.

1. 1. 1. Where the Section 3 covered contract is to be awarded based upon the lowest price, the contract shall be awarded to the qualified Section 3 business concern with the lowest responsive quotation, if it is reasonable and no more than 10 percent higher than the quotation of the lowest responsive quotation from any qualified source, the award shall be made to the source with the lowest quotation.
      2. Where the Section 3 covered contract is to be awarded based on factors other than price, a request for quotations shall be issued by developing the particulars of the solicitation, including a rating system for the assignment of points to evaluate the merits of each quotation. The solicitation shall identify all factors to be considered, including price or cost. The rating system shall provide for a range of 15 to 25 percent of the total number of available rating points to be set aside for the provision of preference pg. 13  for Section 3 business concerns. The purchase order shall be awarded to the responsible firm whose quotation is the most advantageous, considering price and all other factors specified in the rating system.

1. Procurement by sealed bids (Invitation for Bids). Preference in the award of Section 3 covered contracts that are awarded under a sealed bid (IFB) process may be provided as follows:

1. 1. Bids shall be solicited from all businesses (Section 3 business concerns, and non-Section 3 business concerns). An award shall be made to the qualified Section 3 business concern with the highest priority ranking and with the lowest responsive bid if that bid

1. 1. 1. Is within the maximum total contract price established in the contracting party’s budget for the specific project for which bids are being taken, and
      2. Is not more than “X” higher than the total bid price of the lowest responsive bid from any responsible bidder. “X” is determined as follows:
         • When the lowest responsive bid is less than $100,000: 10% of that bid or $9,000
         • At least $100,000, but less than $200,000: 9% of that bid, or $16,000
         • At least $200,000, but less than $300,000: 8% of that bid, or $21,000
         • At least $300,000, but less than $400,000: 7% of that bid, or $24,000
         • At least $400,000, but less than $500,000: 6% of that bid, or $25,000
         • At least $500,000, but less than $1 million: 5% of that bid, or $40,000
         • At least $1 million, but less than $2 million: 4% of that bid, or $60,000
         • At least $2 million, but less than $4 million: 3% of that bid, or $80,000
         • At least $4 million, but less than $7 million: 2% of that bid, or $105,000
         • $7 million or more: 1.5% of the lowest responsive bid, with no dollar limit.

1. 1. If no responsive bid by a Section 3 business concern meets the requirements of paragraph (2)(i) of this section, the contract shall be awarded to a responsible bidder with the lowest responsive bid.

1. Procurement under the competitive proposals method of procurement (Request for Proposals (RFP)).

1. 1. For contracts and subcontracts awarded under the competitive proposals method of procurement (24 CRF 85.36(d)(3)), a Request for Proposals (RFP) shall identify all evaluation factors (and their relative importance ) to be used to rate proposals.
   2. One of the evaluation factors shall address both the preference for 3 business concerns and the acceptability of the strategy for meeting the greatest extent feasible requirement (Section 3 strategy), as disclosed in proposals submitted by all business concerns (Section 3 and non-Section 3 business concerns). This factor shall provide for a range of 15 to 25 percent of the total number of available points to be set aside for the evaluation of these two components.
   3. The component of this evaluation factor designed to address the preference for Section 3 business concerns must establish a preference for business concerns in the order of priority ranking as described in 24 CFR these 135.36.
   4. With respect to the second component (the acceptability of the Section 3 strategy), the FRP shall require the disclosure of the contractor’s Section 3 strategy to comply with the section 3 training and employment preference, or contracting preference, or both, if applicable. A determination of the contractor’s responsibility will include the submission of an acceptable Section 3 strategy. The contract award shall be made to the responsible firm (either Section 3 or non-Section 3 business concern) whose proposal is determined most advantageous, considering price and all other factors specified in the RFP.