Section 3 FRN

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24 CFR Parts 5, 14, 75, 91, 92, 93, 135,
266, 570, 574, 576, 578, 905, 964, 983,
and 1000
[Docket No. FR–6085–F–03]
RIN 2501–AD87

Enhancing and Streamlining the
Implementation of Section 3
Requirements for Creating Economic
Opportunities for Low- and Very LowIncome Persons and Eligible
Businesses
Office of the Secretary, HUD.
Final rule.

AGENCY:
ACTION:

Section 3 of the Housing and
Urban Development Act of 1968, as
amended by the Housing and
Community Development Act of 1992
(Section 3), contributes to the
establishment of stronger, more
sustainable communities by ensuring
that employment and other economic
opportunities generated by Federal
financial assistance for housing and
community development programs are,
to the greatest extent feasible, directed
toward low- and very low-income
persons, particularly those who receive
government assistance for housing. In
accordance with statutory authority,
HUD is charged with the responsibility
to implement and enforce Section 3.
HUD’s regulations implementing the
requirements of Section 3 have not been
updated since 1994 and are not as
effective as HUD believes they could be.
This final rule updates HUD’s Section 3
regulations to create more effective
incentives for employers to retain and
invest in their low- and very lowincome workers, streamline reporting
requirements by aligning them with
typical business practices, provide for
program-specific oversight, and clarify
the obligations of entities that are
covered by Section 3. These changes
will increase Section 3’s impact for lowand very low-income persons, increase
compliance with Section 3
requirements, and reduce regulatory
burden.
DATES: Effective Date: November 30,
2020.
Compliance Dates: Public housing
financial assistance recipients must
implement their Section 3 activities
pursuant to these regulations and
comply with the reporting requirements
starting with the recipient’s first full
fiscal year after July 1, 2021. These
regulations are applicable to Section 3
projects for which assistance or funds
are committed on or after July 1, 2021.

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SUMMARY:

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For
questions, please contact the following
people (the phone numbers are not tollfree):
For Public Housing Financial
Assistance: Merrie Nichols-Dixon,
Director, Office of Policy Program and
Legislation, Office of Public and Indian
Housing, Department of Housing and
Urban Development, 451 7th Street SW,
Room 3178, Washington, DC 20410;
telephone 202–402–4673 (not a toll-free
number).
For Community Development Block
Grant (CDBG)/CDBG Disaster Recovery/
Section 108 Loan Guarantee Program:
Jessie Handforth Kome, Director, Office
of Block Grant Assistance, Office of
Community Planning and Development,
Department of Housing and Urban
Development, 451 7th Street SW, Room
7282, Washington, DC 20410; telephone
202–708–3587 (voice/TDD) (not a tollfree numbers).
For HOME or Housing Trust Fund
Section 3 projects: Virginia Sardone,
Director, Office of Affordable Housing
Programs, Office of Community
Planning and Development, Department
of Housing and Urban Development,
451 7th Street SW, Room 10168,
Washington, DC 20410; telephone 202–
402–4606 (not a toll-free number).
For Office of Housing programs:
Thomas R. Davis, Director, Office of
Recapitalization, Office of Housing,
Department of Housing and Urban
Development, 451 7th Street SW, Room
6230, Washington, DC 20410; telephone
202–402–7549 (voice/TDD) (these are
not toll-free numbers).
Persons with hearing or speech
impairments may access this number
through TTY by calling the Federal
Relay Service, at toll-free, 800–877–
8339. General email inquiries regarding
Section 3 may be sent to: section3@
hud.gov.

in economic opportunities. By directing
HUD-funded economic opportunities to
residents and businesses in the
community where the funds are
expended, the expenditure can have the
dual benefit of creating new or
rehabilitated housing and other facilities
while providing opportunities for
employment and training for the
residents of these communities.
The Section 3 statute establishes
priorities for employment and
contracting for public housing programs
and for other programs that provide
housing and community development
assistance. For example, the
prioritization as it relates to public
housing assistance places an emphasis
on public housing residents, in contrast
to the prioritization as it relates to
housing and community development
assistance, which places more emphasis
on residents of the neighborhood or
service area in which the investment is
being made.
In the 25 years since HUD
promulgated the current Section 3
regulations, significant legislation has
been enacted that affects Section 3.1 In
addition, HUD has also heard from the
public that there is a need for regulatory
changes to clarify and simplify the
existing requirements. HUD’s
experience in administering Section 3
over time has also provided insight as
to how HUD could improve its Section
3 regulations. HUD, thus, concluded
that regulatory changes were necessary
to streamline Section 3 and more
effectively benefit low- and very lowincome persons through HUD financial
assistance to achieve the Section 3
statute’s purposes.

SUPPLEMENTARY INFORMATION:

Promote Sustained Employment and
Career Development
The proposed rule included multiple
elements designed to increase Section
3’s impact in directing employment
opportunities and sustaining
employment for the people served by

FOR FURTHER INFORMATION CONTACT:

DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT

I. Background
Section 3 of the Housing and Urban
Development Act of 1968 (Pub. L. 90–
448, approved August 1, 1968) (Section
3) was enacted to bring economic
opportunities generated by certain HUD
financial assistance expenditures, to the
greatest extent feasible, to low- and very
low-income persons residing in
communities where the financial
assistance is expended. Section 3
recognizes that HUD funds are often one
of the largest sources of Federal funds
expended in low- and very low-income
communities and, where such funds are
spent on activities such as construction
and rehabilitation of housing and other
public facilities, the expenditure results

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II. The Proposed Rule
HUD issued a proposed rule on April
4, 2019 (84 FR 13177) to update the
existing regulations and streamline the
Section 3 program.

1 This legislation includes, but is not limited to,
the following: Reforms made to HUD’s Indian
housing programs by the Native American Housing
Assistance and Self-Determination Act of 1996
(NAHASDA) (Pub. L. 104–330, approved October
26, 1996); public housing reforms made by the
Quality Housing and Work Responsibility Act of
1998 (QHWRA) (Pub. L. 105–276, approved October
21, 1998); reforms made to HUD’s supportive
housing programs by the Section 202 Supportive
Housing for the Elderly Act of 2010 (Pub. L. 111–
372, approved January 4, 2011); and the Frank
Melville Supportive Housing Investment Act of
2010 (Pub. L. 111–347, approved January 4, 2011).

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HUD financial assistance programs. The
rule proposed tracking and reporting
labor hours instead of new hires. While
the previous new hire framework was
valuable for measuring entry into
employment, the new hire framework
did not capture the extent to which new
hiring opportunities are created relative
to the total work performed, nor
whether those opportunities are
sustained over time. The proposed
rule’s focus on labor hours sought to
measure total actual employment and
the proportion of the total employment
performed by low- and very low-income
workers. In addition, the change to labor
hours emphasized continued
employment. For example, the prior
exclusive focus on counting new hires
regarded five new hires for one-month
opportunities as a more valued outcome
than one 12-month opportunity, and it
did not distinguish between full- and
part-time employment. A full-time job
sustained over a long period allows a
low- or very low-income worker to gain
skills and is a strong indicator of
progress towards self-sufficiency. The
new focus on labor hours would ensure
that longer-term, full-time opportunities
are appropriately recognized.
HUD’s proposed rule also sought
comment on maintaining the new hire
framework for only Public Housing
Agencies (PHAs). HUD held a number of
listening sessions and heard from some
PHAs that they would prefer to keep
reporting new hires rather than switch
to reporting labor hours. Therefore,
while HUD believes tracking labor hours
is the best option and would simplify
reporting, HUD did seek comment on
the alternative option of maintaining the
new hires framework for PHAs.
Align Section 3 Reporting With
Standard Business Practices
HUD also proposed tracking labor
hours rather than new hires because it
would be more consistent with business
practices. Most construction contractors
working on HUD assisted projects
already track labor hours in their payroll
systems because they pay their
employees based on an hourly wage. In
some cases, they are also subject to
prevailing wage requirements.2 HUD
believes a consistent labor-hour tracking
mechanism makes compliance with
Section 3 easier not only for recipients
of HUD assistance, but also for
contractors and subcontractors. The
proposed rule provided that for
employers who do not track labor hours
in detail through a time-and-attendance
2 See 42 U.S.C. 1437j(a), 24 CFR 905.308(b)(3)(ii),
24 CFR 965.101, 25 U.S.C. 4225(b)(1)(A), and 24
CFR 1006.345(b).

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system, such employers could provide a
good faith assessment of the labor hours
for a full- or part-time employee.
However, if a time-and-attendance
system is later implemented, the
accurate labor hour accounting would
be required.
Applicability and Thresholds
The Section 3 statute applies to both:
(1) HUD’s Public Housing Program, and
(2) Other HUD programs that provide
housing and community development
assistance. For ease in administration
for recipients using one or both of these
HUD funding streams, the proposed rule
provided definitions for these types of
funding and specified Section 3
requirements for each type. The
proposed rule included the following
definitions for the scope of such
financial assistance:
(1) Public housing financial assistance
covers:
(a) Development assistance provided
pursuant to Section 5 of the United
States Housing Act of 1937 (the 1937
Act),
(b) operations and management
assistance provided pursuant to Section
9(e) of the 1937 Act (Operating Fund),
and
(c) development, modernization, and
management assistance provided
pursuant to Section 9(d) of the 1937 Act
(Capital Fund); and
(2) Section 3 projects cover HUD
program assistance used for housing
rehabilitation, housing construction and
other public construction projects that
generally exceed a $200,000 project
threshold or any Section 3 project
funding from HUD’s Lead Hazard
Control and Healthy Homes programs.
The proposed definitions defined the
scope of programs subject to Section 3
requirements but did not expand such
coverage beyond the compliance
requirements of HUD’s prior
regulations. HUD proposed the $200,000
threshold for housing rehabilitation,
housing construction and other public
construction projects because work
below that amount would likely not
trigger long-term employment
opportunities for which the recipient
could show measurable labor hours. The
proposed rule also clarified that
contracts, subcontracts, grants, or
subgrants subject to Section 7(b) of the
Indian Self-Determination and
Education Assistance Act (25 U.S.C.
5307(b)) or subject to tribal preference
requirements as authorized under
Section 101(k) of the Native American
Housing Assistance and SelfDetermination Act (25 U.S.C. 4111(k))
must provide preferences in
employment, training, and business

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opportunities to Indians and Indian
organizations.
Reporting and Targeted Section 3
Workers
The proposed rule aimed to align
Section 3 reporting requirements more
closely to the statutory priorities; HUD’s
previous regulation tracked only public
housing residents or low- or very lowincome persons who lived in the
metropolitan area or nonmetropolitan
county of the project, rather than
whether the statutory priorities were
met. The rule proposed a new definition
of ‘‘Section 3 worker’’ as any worker or
who meets at least one of the following
criteria: Low- or very low-income, as
established by HUD’s income limits;
living in a Qualified Census Tract
(QCT); or employed by a Section 3
business concern.3
The proposed rule also included a
new ‘‘Targeted Section 3 worker’’
definition so that HUD could track, and
recipients could target, the hiring of
Section 3 workers in selected categories.
The Section 3 statute requires certain
financial assistance recipients to
prioritize their efforts to direct
employment and economic
opportunities to specific groups of lowand very low-income individuals. The
‘‘Targeted Section 3 worker’’ reflects
both statutory and policy priorities that
HUD wishes to specifically track. For
public housing financial assistance, the
proposed definition of a Targeted
Section 3 worker was a Section 3 worker
who is also:
(1) A worker employed by a Section
3 business concern; or
(2) A worker who is currently or who
was when hired by the worker’s current
employer, a resident in a public housing
project or Section 8-assisted housing; or
(3) A resident of other projects
managed by the PHA that is expending
assistance; or
(4) A current YouthBuild participant.
For other HUD assistance programs,
the proposed priorities were:
(1) Residents within the service area
or the neighborhood of the project, and
(2) YouthBuild participants.
3 Section 3 business concern means: (1) A
business concern that meets one of the following
criteria: (i) It is at least 51 percent owned by lowor very low-income persons; (ii) Over 75 percent of
the labor hours performed for the business are
performed by low- or very low-income persons; or
(iii) It is a business at least 25 percent owned by
current public housing residents or residents who
currently live in Section 8-assisted housing. (2) The
status of a Section 3 business concern shall not be
negatively affected by a prior arrest or conviction
of its owner(s) or employees. (3) Nothing in this
part shall be construed to require the contracting or
subcontracting of a Section 3 business concern.
Section 3 business concerns are not exempt from
meeting the specifications of the contract.

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There is also a statutory contracting
priority for businesses that provide
economic opportunities for low- and
very low-income workers. Therefore,
HUD proposed including labor hours
worked by the Section 3 business
concern employees for both Section 3

workers and Targeted Section 3
workers. HUD also proposed a new
Section 3 business concern definition
that reflected the change to labor hours
and increased the threshold of work
performed by a business by low- and
very low-income workers given the

proposed rule’s inclusion of all Section
3 business concerns’ labor hours in the
definition of both Section 3 workers and
Targeted Section 3 workers.
The proposed rule created the
following construct for measuring
workers:

Benchmarks

qualitative reports on their efforts, as
they are required to do under HUD’s
previous rule when they do not meet the
safe harbor, and HUD may conduct
monitoring to review the recipient’s
compliance, again consistent with
practices used to monitor program
participants’ compliance with other
program requirements.
The proposed rule also provided a
burden relieving measure for PHAs with
fewer than 250 units. For these PHAs,
they would only be required to report
on Section 3 qualitative efforts and
would not need to track labor hours for
Section 3 workers and Targeted Section
3 workers.

guidance through a single reporting
office.

The proposed rule provided that a
new Section 3 benchmark measurement
would serve as a safe harbor for those
recipients that meet the new
benchmark. The primary objective of the
proposed rule was to reflect and
monitor grantees’ abilities to direct job
opportunities that are generated by HUD
financial assistance to Section 3 workers
and Targeted Section 3 workers. The
proposal included using benchmarks
based on ratios of Section 3 workers and
Targeted Section 3 workers in
comparison to all workers. HUD
proposed that the benchmarks would be
set by Federal Register Notice and
amended periodically to provide for
updating of the benchmarks to align
with the reporting data HUD received.
As HUD gathers more data under the
new rule, HUD could increase or
decrease benchmark figures over time,
or tailor different benchmarks for
different geographies and different
funding types. If a recipient certifies
compliance with the statutory priorities
and meets the outcome benchmarks,
HUD will presume the recipient is
complying with Section 3 requirements,
absent evidence to the contrary.
Recipients are still required to report
their outcomes, and HUD will monitor
them accordingly through the data
reporting methods used to oversee all
other program requirements in each
applicable program area. Otherwise,
recipients would be required to submit

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Multiple Funding Sources
The proposed rule created a new
section for housing rehabilitation,
housing construction, or other public
construction projects assisted with
funds from more than one HUD
program. Specifically, the proposed rule
provided that when a Section 3 project
is funded by public housing financial
assistance, the public housing financial
assistance must be tracked and reported
consistent with the public housing
financial assistance requirements in
subpart B, while the community
development financial assistance may
follow the requirements in subpart B or
subpart C. The proposed rule directed
that when a Section 3 project receives
housing and community development
assistance from two different HUD
programs, HUD would designate

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Integrate Section 3 Into Program
Enforcement
Since HUD program office staff are
regularly in touch with HUD’s funding
recipients on other compliance
requirements, HUD proposed that
program offices incorporate Section 3
compliance and oversight into regular
program oversight and make Section 3
an integral part of the program’s
oversight work. The proposed rule also
streamlined the complaint and
compliance process to make Section 3
compliance consistent with existing
practices for other requirements. The
proposed rule shifted the delegation of
authority for Section 3 enforcement and
compliance responsibilities from the
Assistant Secretary for Fair Housing and
Equal Opportunity to reside with each
of the applicable HUD program offices.
III. Changes Made at the Final Rule
Stage
After review and consideration of the
public comments and upon HUD’s
further consideration of Section 3 and
the issues raised in the proposed rule,
HUD has adopted the proposed rule as
final with a few changes in this final
rule. HUD also made minor edits to
clarify the rule’s language. The
following highlights the substantive
changes made by HUD in this final rule
from the proposed rule.
Removing Alternative 2 for New Hires

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After considering the data, Section 3’s
statutory goals, and the public
comments, HUD is not retaining the
tracking of new hires for PHAs, but
instead requiring tracking of labor hours
for all Section 3 outcomes. HUD agrees
with commenters that it is in the best
interest of the communities served by
HUD to implement a more impactful
Section 3 standard across all HUDfunded programs. Using different
metrics for different programs would
unnecessarily further complicate
Section 3 reporting. Tracking labor
hours is meant to ensure that Section 3
workers have sustained employment
and career opportunities. HUD believes
that the use of new hires provides an
incomplete measure of the employment
and local contracting opportunities
available to low- and very low-income
persons envisioned by the Section 3
statute. HUD expects the labor hour data
to present a more accurate assessment of
Section 3’s impact. The focus on labor
hours will measure total actual
employment and the proportion of the
total employment performed by lowand very low-income workers, which
will mitigate contractors’ ability to
manipulate their Section 3 outcomes.

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Section 3 Project Threshold
HUD received many public comments
on proposed changes to the Section 3
Project threshold. HUD still considers
the $200,000 threshold for Section 3
projects appropriate given the
percentage of projects that will continue
to be covered and are likely to result in
opportunities for employment of lowand very low-income workers when
expended on construction-related
activities. However, in response to
public comments, HUD is providing that
in this final rule, the Secretary may
adjust the threshold, through a Federal
Register Notice subject to public
comment, in order to ensure Section 3
compliance. HUD’s proposed rule
already provided for the Secretary to
update the threshold not less than once
every five years based on a national
construction cost inflation factor; the
final rule now provides that the
Secretary updates the benchmarks not
less frequently than once every three
years. HUD believes adding this
flexibility is responsive to the comments
received by the public. HUD will
continue to work with program
participants to adjust the thresholds
accordingly, if necessary, based on the
updated data provided under this final
rule.

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Setting a Project Threshold for Lead
Hazard Control Grants
HUD also received comments
regarding the exclusion of projects
under HUD’s Lead Hazard Control and
Healthy Homes program from the
$200,000 project threshold. Lead hazard
control projects are generally smaller, so
many commenters suggested a lower
threshold for such projects. On the other
hand, other commenters noted that not
including a threshold for lead hazard
control grants altogether may
incidentally include small grants that
should not be subject to Section 3. For
example, some Lead and Healthy Homes
Technical Studies grants study the
health effects of installed housing
components in projects typically
smaller than $100,000. As expected,
they did not result in opportunities for
employment of Section 3 workers under
the previous regulations. At the final
rule stage, HUD is therefore adopting a
$100,000 project threshold for all
projects that receive funding from
HUD’s Lead Hazard Control and Healthy
Homes programs. HUD adopted this
number to match the contract threshold
in the previous regulations (see previous
24 CFR 135.3(a)(3)).
Removing the Qualified Census Tract
Definition
After considering Section 3’s statutory
goals and the public comments, HUD is
removing the QCT definition from this
final rule. The addition of this criteria
was to encourage hiring in the QCT and
to make targeted hiring easier, but HUD
recognizes that the inclusion of workers
in these areas could inadvertently
include individuals who are not low- or
very low-income. Rather than the broad
QCT definition, HUD is limiting the
Section 3 worker definition to be more
consistent with the statute, which
requires prioritization of low- and very
low-income workers and YouthBuild
participants. This should also alleviate
any potential burden on participants
associated with the QCT designation.
Changing the Section 3 Business
Concern Definition
In adopting the proposed definition of
Section 3 business concern in this final
rule, HUD is maintaining the over 75
percent of the labor hours performed for
the business on construction are
performed by low- or very low-income
persons standard, but adding in that
such performance must be over the last
three-month period to help businesses
determine whether or not they meet the
criteria. HUD is also maintaining a
separate criterion for businesses owned
and controlled by current public

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housing residents or residents who
currently live in Section 8-assisted
housing, but increasing the required
percentage of owned and controlled to
51%. This change is in response to
public comments and to maintain
consistency with HUD’s public housing
regulations on contracting with
resident-owned businesses at 24 CFR
part 963. HUD also added a change to
the documentation timing in paragraph
(1) of the Section 3 business concern
definition to allow a six-month grace
period. HUD understands that
businesses need time when bidding on
contracts and prior to the contract’s
execution to assemble materials and to
assess labor hours. This change is
responsive to commenters who
expressed concerns about Section 3
status retention, since labor hours can
be dependent on the number of
contracts on which a business bids and
receives.
Changing the Professional Services
Definition
In this final rule, HUD is amending
the professional services definition to
clarify that only non-construction
services that require an advanced degree
or professional licensing, rather than all
non-construction services, are excluded
from Section 3. HUD wants to ensure
this final rule’s emphasis encapsulates
the statutory requirement to prioritize
low- and very low-income workers, and
provides this category of exempted
workers from reporting given the
challenge to hire low- and very lowincome workers in jobs that require
such degrees and licensing.
Counting Labor Hours for 5 Years
HUD’s proposed rule provided that
labor hours for Section 3 workers and
Targeted Section 3 workers could be
counted as long as the worker met the
definition of a Section 3 worker or
Targeted Section 3 worker at the time of
hire. Based on public comments and
further consideration, HUD agrees that a
worker whose income has risen should
only be counted for Section 3 purposes
for a limited time period. HUD wants to
ensure employers are invested in
keeping Section 3 workers employed,
and that there is enough opportunity to
build skills and experience so that
Section 3 workers may develop selfsufficiency and compete for other jobs
in the future. Therefore, HUD provides
that for purposes of reporting the labor
hours for Section 3 workers and
Targeted Section 3 workers, an
employer may choose whether the
workers are defined as Section 3
workers for a five-year period at the
time of the workers’ hire, or when the

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workers are first certified as meeting the
Section 3 worker definition.
Delayed Effective Date
The rule provides for a delayed
transition to labor hours and the
associated recordkeeping requirements.
HUD recognizes that employers and
grantees will need time to transition
their systems and reporting practices as
a result of this final rule. HUD is
mindful of the need to update policies
and procedures for planning purposes,
and the importance of implementing the
rule such that employers will be able to
comply. Therefore, HUD has provided
for a transition period through at least
July 1, 2021. During this transition
period, HUD expects that employers and
grantees will begin following this final
rule’s requirements for new grants,
commitments, and contracts. The exact
date on which any particular recipient
of HUD funding will be able to
implement the conversion to the new
requirements will vary during this
transition period, but the transition
must be complete by July 1, 2021. The
reporting requirements and labor hours
tracking will not begin until the dates
for each entity specified in the
‘‘Compliance Date’’ section above.

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IV. Discussion of Public Comments and
HUD’s Responses
The public comment period on the
proposed rule closed on June 3, 2019,
and HUD received 163 public
comments. The comments came from
state and city government agencies and
housing administrations, housing
authorities, non-profits, independent
consultants, private citizens, housing
authority directors, small businesses,
the construction industry, and housing
authority associations. The following
presents the significant issues and
questions related to the proposed rule
raised by the commenters, and HUD’s
responses to these issues and questions.
HUD would like to thank all the
commenters for their thoughtful
responses.
‘‘Best Efforts’’ and ‘‘Greatest Extent
Feasible’’
In the proposed rule, HUD included a
specific question for public comment
regarding these statutory terms. Some
commenters suggested the terms are
interchangeable. One commenter
suggested that HUD use the term
‘‘reasonable best efforts’’ for CDBG and
HOME recipients and remove the term
‘‘greatest extent feasible’’ from the
Section 3 regulations or use only ‘‘best
efforts.’’ Other commenters argued that
these words are key to the intent of the
statute, which is to provide recipients

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leeway when constraints outside their
control impede implementation, and
recommended that HUD provide
guidance materials on how to show best
efforts when organizations do not meet
their Section 3 goals, such as data
collection forms which would indicate
best efforts or non-exclusive lists of
examples of ‘‘best efforts’’ and ‘‘greatest
extent feasible.’’
In contrast, some commenters
suggested that these terms are not
interchangeable. One commenter said
that ‘‘best efforts’’ should be measured
by tracking outreach and outcomes of
outreach and ‘‘greatest extent feasible’’
is the result of ‘‘best efforts.’’ Another
commenter argued that ‘‘best efforts’’
can be more clearly defined than
‘‘greatest extent feasible,’’ as specific
actions can demonstrate efforts, while
feasibility is a more passive analysis of
what is possible. One commenter argued
that the ‘‘greatest extent feasible’’ is a
much more rigid and prescriptive
standard than the ‘‘best efforts’’
standard and noted that courts have
found that the ‘‘best efforts’’
requirement ‘‘specifically avoids
creating a mandatory obligation on the
part of the agencies the statute affects.’’
This ‘‘best efforts’’ standard likewise
‘‘does not call for perfect compliance.’’
This commenter encouraged HUD to
allow PHAs to retain greater discretion
over the development of their own
Section 3 programs.
A commenter suggested that Subpart
B participants should continue to use
‘‘best efforts’’ while Subpart C
participants should use ‘‘greatest extent
feasible,’’ and agencies receiving
funding that triggers compliance under
Subparts B and C should use the ‘‘best
efforts’’ standard. One commenter
suggested using the term ‘‘best efforts’’
to comply with employment,
contracting and training opportunities.
Commenters also urged HUD to
enforce the terms ‘‘best efforts’’ and
‘‘greatest extent possible,’’ suggesting
that whatever the standard, if an activity
by a recipient, contractor or
subcontractor does not adequately serve
to hire, train, and retain a Section 3
worker, then it should not meet the
standard. These commenters provided
an example of a PHA’s best effort.
Commenters noted that while the
recipient or contractor appears to meet
the Section 3 goal, or at least made ‘‘best
efforts’’ to reach the goal, in practicality
such effort is not workable.
One commenter wrote that the terms
without any definition are too broad and
should be defined to assist in
compliance with Section 3. Another
commenter proposed that HUD should
define the terms by how they will be

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measured; for instance, that ‘‘best
efforts’’ could be determined by a
specific set of metrics around
recruitment efforts and the percentage of
Section 3 workers in the area. One
commenter suggested a way to draft the
rule using dollars spent to track
compliance such that these terms would
not be necessary.
Other commenters requested that
HUD not define these terms or should
not restrictively define these terms
because HUD should trust the judgment
and common sense of its professional
field staff to determine compliance,
because documenting compliance
according to specific definitions could
create additional administrative burden,
because there are constraints outside the
grantee’s control, and because
guidelines may stifle innovation.
HUD Response: HUD appreciates
commenters’ responses to the specific
question regarding ‘‘best efforts’’ and
‘‘greatest extent feasible’’ in the
proposed rule. ‘‘Best efforts’’ and
‘‘greatest extent feasible’’ are statutory
terms, used in the statute in different
contexts. As such, HUD will continue to
use both terms to track compliance.
HUD agrees with commenters that there
are many ways to interpret the language.
Traditionally, HUD has used the terms
interchangeably, as referenced in the
statute, and will continue to be
consistent with the statutory language.
See 12 U.S.C. 1701u(b)–(d). HUD also
agrees with commenters who noted
these terms are integral to the statutory
intent and provide flexibility, rather
than administrative burden, to grantees
or recipients.
HUD notes that some perceive ‘‘best
efforts’’ to be the more rigorous
standard, while others perceive
‘‘greatest extent feasible’’ to be the more
rigorous standard. HUD has determined
not to define the difference between
these two terms, but rather to increase
the emphasis on outcomes as a result of
these efforts. A recipient’s reported
results will be compared to the outcome
metrics defined in the benchmark
Notice. HUD program staff will evaluate
the level of effort expended by those
recipients that fail to meet the
benchmark safe harbor, and thus will
ensure that the statutory terms are being
properly enforced. HUD included a list
of examples in the regulation at §§ 75.15
and 75.25, including engagement in
outreach efforts to generate job
applicants who are Targeted Section 3
workers, providing training or
apprenticeship opportunities, and
providing technical assistance to help
Section 3 workers compete for jobs (e.g.,
resume assistance, coaching).

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Support for Using ‘‘Labor Hours’’
Many commenters supported the shift
to labor hours and, notwithstanding the
alternatives presented in the proposed
rule for PHAs, encouraged HUD to do
the same for public housing
construction, modernization, and
similar work. These commenters stated
that the ‘‘new hire’’ loophole should be
eliminated for both housing and
community development and public
housing projects. Commenters stated
that, in practice, contractors have only
brought on new hires for short periods
of time; the shift to labor hours will
promote longer term employment.
Commenters also stated that the shift to
labor hours would solve the problem of
contractors using dishonest practices to
meet benchmarks, such as hiring
Section 3 residents to fill the 30%
benchmark only to lay them off shortly
thereafter, or employing Section 3 hires
for less than 20 hours a week.
Commenters stated that allowing PHAs
and their contractors to use ‘‘new hires’’
could provide a loophole to PHAs,
allowing them to hire Section 3 workers
for a limited or short time frame in order
to comply with the regulation. Shortterm employment does not allow
residents to obtain technical skills,
knowledge, or adequate savings. PHAs
should be required to use labor hours
worked because they can evade Section
3 compliance through manipulative
hiring practices.
Commenters stated that the ‘‘labor
hours’’ standard is far more effective,
less susceptible to manipulation and
administratively easier to verify.
Commenters stated that the new hire
standard is vulnerable to manipulation,
because any contractor or subcontractor
that performs work on more than one
project at a time can easily avoid
Section 3 hiring responsibilities by
placing their new hires on non-Section
3 covered projects. Commenters asserted
the new hire standard may be the single
greatest barrier to achieving the
employment potential of Section 3.
HUD Response: HUD agrees that
counting new hires can be problematic
and that collecting labor hours can be a
more effective measure. As stated in the
proposed rule, HUD believes that
counting labor hours is consistent with
the statute and mitigates contractors’
ability to manipulate their Section 3
outcomes. HUD has adopted the
suggestion by the commenters and in
the final rule applies the labor hour
requirements to both housing and
community development and public
housing projects.

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Support for Using New Hires
Many commenters supported
retaining the new hires metrics.
Commenters stated that tracking by
labor hours is burdensome, will increase
administrative costs, and will not
streamline the Section 3 reporting
requirements. One commenter refuted
HUD’s hypothesis articulated in the
proposed rule and stated that a labor
hours metric is unlikely to capture the
data on sustained employment
opportunities that HUD is seeking.
Another commenter stated that the
proposed labor hours metric would
decrease the number of firms willing to
bid on contracts, increase the cost of
public contracting for both the PHA and
contractors, and provide no appreciable
increase in Section 3 workers.
Commenters stated that HUD should
continue to track compliance by new
hires for both Subparts B and C.
One commenter stated that labor
hours should only apply to projects that
already require the collection of
certified payrolls as part of Davis Bacon
compliance. Another commenter
recommended HUD look to existing
programs such as the Department of
Transportation’s Disadvantaged
Business Enterprises for guidance to
make substantive changes to Section 3.
Commenters stated that the changes
will generate additional administrative
burdens. Commenters especially
emphasized the potential impact on the
Housing Trust Fund (HTF) program and
state CDBG and HOME program
implementation because states,
particularly small and rural community
sub-grantees, have limited capacity.
Commenters recommended HUD give
State CDBG programs a similar
alternative to the one offered to PHAs in
§ 75.15(d). Another commenter
proposed HUD allow State CDBG
programs to use a good faith assessment
of hours, stating that § 75.25(a)(4) will
help but will not eliminate the difficulty
for State CDBG programs. Another
commenter specifically referenced
HOME funding and the HTF
regulations, noting that stated HTF
regulations do not trigger Davis-Bacon
and it is rare for a HOME-funded project
to trigger Davis-Bacon and prevailing
wage requirements.
Commenters stated that HUD’s
assumption that labor hours are already
tracked by most contractors and
subcontractors to comply with the
prevailing wage requirement is false.
Commenters specifically noted that not
all CDBG programs are subject to such
requirements. One commenter wrote
that even a small maintenance contract
could result in 6 extra work hours for

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staff charged with ensuring correct
payroll entries and compliance, stating
that a current contract that does not
track labor hours would have an
increase of approximately $606,000 of
federal funding required to administer
the contracts, an additional 5% of costs.
Another commenter stated that the
proposed shift to labor hours will create
an estimated 110 hours of additional
administrative effort for the commenter
per construction project, and will not
impact the duration of Section 3 worker
employment or allow HUD to better
determine if long-term employment
opportunities are generated. One
commenter stated that tracking labor
hours would require city contractors
and subcontractors to track project labor
hours using LCPtracker as the city does,
necessitating increased administrative
staff and resulting in higher contract
amounts. One commenter stated that
payrolls required for Davis-Bacon
compliance are often submitted in hard
copy, so compliance with the shift to
labor hours would require manual data
entry, a significant added laborintensive task. Commenters also stated
that many contractors are small business
owners who do not have payroll
software and many housing authorities
do not have sufficient staff to track
hours worked on all projects.
Commenters also noted that many
medium and smaller sized PHAs do not
use LCPtracker and instead rely on
contractor payrolls to monitor DavisBacon and Section 3. Other commenters
stated that tracking hours could be more
burdensome than tracking new hires,
because new hires are only reported
once. Tracking the workers’ hours
necessitates verifying each Section 3
employee each week for the duration of
their employment.
HUD Response: HUD carefully
considered the diverse public comments
on the use of labor hours versus
retaining new hires as the measurement
for assessing compliance with Section 3
requirements. HUD believes that the use
of new hires provides an incomplete
measure of the economic opportunities
available to low and very low-income
persons envisioned by the Section 3
statute. HUD believes that moving to the
labor hours metric provides a more
robust measure of how Section 3 is
intended to work and mitigates
contractors’ ability to manipulate
Section 3 outcomes. HUD concluded the
benefits of the labor hours approach
outweighs the marginal cost that would
result from this shift. HUD has
determined that, while public
commenters have concerns about
possible burdens that result from the

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proposed transition to recording labor
hours instead of new hires, it is in the
best interest of the communities served
by HUD to implement a more impactful
Section 3 standard across all HUDfunded programs. The use of labor hours
is intended to ensure that recipients of
these program funds are fully in
compliance with the intent of Section
3—maximizing the economic
opportunities arising from Federally
funded activities that are available to
low- and very low-income persons,
including those who reside in public
housing.
HUD also notes that the comments
revealed a diversity of understanding
with respect to HUD’s record-keeping
expectations in measuring the labor
hours metric. HUD does not anticipate
the level of detail in record-keeping that
is required under the Davis-Bacon
prevailing wage framework for purposes
of Section 3. The proposed rule does not
require prevailing-wage-style payroll
reports. HUD does anticipate that either
employers have some form of time and
attendance system, particularly where
employment uses an hourly wage
structure, or that employers have
salaried staff. The final rule does not
require any change in these systems, nor
necessitate any software approach to
tracking payroll. Those employers that
use a time and attendance system to
track hourly wages may rely on that
data, while the final rule provides a
good faith reporting exception which
applies to all entities that do not have
an existing time and attendance system.
The final rule has been modified in an
effort to clarify that the good faith
exemption applies to all Section 3
reporting entities (not only contractors
and subcontractors) and that data from
any existing salary-based or time-andattendance-based payroll records can be
used in good faith reporting under
Section 3. HUD is mindful of the need
to update policies and procedures for
planning purposes, and the importance
of implementing the rule such that
employers will be able to comply.
Therefore, HUD has provided for a
transition period and a bifurcated
compliance date. Public housing
financial assistance recipients must
comply with the reporting requirements
starting with the recipient’s first full
fiscal year after this final rule’s effective
date. Section 3 project recipients must
comply with the reporting requirements
starting with the recipient’s first full
program year for projects committed or
awarded after this final rule’s effective
date.

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Many Section 3 Positions Are ShortTerm in Nature
One commenter stated that many of
the jobs made available under Section 3
requirements are short term positions
specific to the needs of the individual
project and/or worksite. These positions
provide opportunities for the target
population of low-skilled workers to
build work experience (leading to
possible economic advancement) while
helping ensure project costs remain
reasonable. Another commenter stated
that the Section 3 goal leading to longterm employment and career
advancement is unrealistic, as most
opportunities generated by Section 3
projects are construction-related and
therefore seasonal or project-based; it
would be burdensome and complicated
to track via labor hours long-term
employment that results from a Section
3 worker being hired on a subsequent
Section 3 project by a different
contractor. Contractors do not keep
pools of long-term general laborers on
hand for consecutive projects as a
means of employing Section 3 workers.
Other commenters stated that nothing in
the statute states that long-term
employment through public housing or
other housing and community
development funding is the goal of
Section 3; the statutory intent is to
provide employment and training
opportunities to residents of lowincome communities where Federal
housing and community development
dollars are being spent, and tracking
new hires better meets this intent.
Similarly, commenters stated Section
3 workers are more likely to assist in
temporary work for PHAs. Using new
hires better fits with this economic
reality. One commenter stated that
contractors do not reduce the number of
part-time employees so they can provide
full-time, long-term employment to
fewer Section 3 workers. Other
commenters stated that the nature of the
construction industry is episodic;
workers are not employed by one
company for long periods of time, but
from project to project, and workers
often move from one company to
another. The number of hours that a
specific person works is generally based
on what is required for the project and
the type of work they are doing.
Commenters asserted it is unreasonable
to think that hours for lower-skilled
employees will dramatically be
increased for a specific construction
project by moving to a ‘‘labor hours’’
standard.
Commenters also stated that the move
to labor hours will confuse contractors
and create more complexity. Another

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commenter anticipated pushback from
contractors declining to bid, which can
lead to an increase in the cost of
developing affordable housing.
Commenters stated that tracking labor
hours could provide contractors with an
incentive to hire fewer low-income
residents by employing those hired for
a greater number of hours. This would
have a negative effect on the number of
low-income residents hired overall.
HUD Response: HUD recognizes that
many Section 3 opportunities are shortterm employment opportunities. The
shift from measuring new hires to
measuring labor hours continues to
value these short-term opportunities as
creating significant economic
opportunities for low- and very-lowincome workers, and these short-term
opportunities will likely remain a
primary source of Section 3
opportunities. At the same time, the
shift in metrics more accurately reflects
the nature and extent of these
employment opportunities and places
greater relative weight on those
opportunities which do provide longterm career ladders and sustained
employment opportunities.
There is no obligation on a reporting
employer to track an employee’s work
beyond the immediate short-term
seasonal or project-based employment.
The opportunity to track an employee
over time is solely an opportunity
which can be seized by those reporting
employers who have invested the extra
time and effort to nurture an employee
over time. That extra effort to develop
a career track is not recognized by the
previous new hire metrics but is
recognized in the labor hour metrics. It
should be noted, however, that the use
of the labor hour metric to reward
retention applies only to the
relationship with the current employer.
(See § 75.11(a)(2) ‘‘A worker who
currently fits or when hired fit at least
one of the following categories, as
documented within the past five years
. . .’’) This provides an option for
employers to look back to the worker’s
status at the time of original
employment but does not require that
an employer do so if the employer only
wants to reference the employee’s
current status. Contrary to the concept
referenced in the comments, there is no
ability to claim long-term employment
when hired on a subsequent Section 3
project by a different contractor.
This rule updates HUD’s Section 3
regulations to create more effective
incentives for employers to retain and
invest in low- and very low-income
workers. It is HUD’s opinion that the
change from new hires to labor hours,
in combination with the opportunity to

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provide good faith assessments, is
consistent with businesses’ existing
payroll systems. Finally, HUD is of the
opinion that this change will better
advance the goal of sustained
employment and career opportunities
for low- and very low-income workers.
Alternatives
Several commenters suggested
alternative frameworks for measuring
Section 3 results, in some cases using
the labor hours metric and/or the new
hire metric already articulated in the
current and proposed rules and in some
cases proposing new alternative metrics
entirely.
Some commenters recommended
including definitions for both
Alternative 1 and Alternative 2 so that
agencies may exercise whichever option
best suits their local circumstances. One
commenter recommended using the
$200,000 project threshold or $400,000
recipient threshold to determine
whether labor hours or new hires
should be the appropriate reporting
metric, as larger projects have greater
potential to create long term
employment opportunities. One
commenter focused on the safe harbor
benchmark, stating PHAs should have
the choice of labor hours at 10% or new
hires at 30%. A commenter stated that
if labor hours is adopted, all recipients
and subrecipients should have the same
flexibility allowed to PHAs.
Another commenter stated that ‘‘labor
hours worked’’ should be used in
conjunction with ‘‘30% new hires.’’ The
commenter wrote that many PHAs do
not track the generated new hires metric
making the current 30% of new hires
mandate irrelevant—some PHAs allow
contractors and subcontractors to select
how many hires they will take onto a
project despite it coming short of the
30% benchmark. The commenter wrote
that tracking both ‘‘labor hours worked’’
along with the ‘‘30% new hires’’
provides further assurance that a
recipient’s contractors and
subcontractors do not avoid their
responsibilities to pay the prevailing
wage in accordance with the Davis
Bacon Act.
Other commenters argued neither
labor hours worked, nor number of new
hires are accurate metrics for Section 3
compliance and impact, where the goal
of Section 3 is sustained economic
independence and economic
enhancement for Section 3 workers in
and around HUD’s investment areas.
Commenters suggested compliance
should instead be measured by: (1)
Payroll dollars paid to Section 3
employees; (2) training dollars spent
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contract dollars paid to Section 3
contractors. Commenters further
asserted tracking employment status
would be unnecessary if all Section 3
employment payroll dollars were
captured as a percentage of gross payroll
dollars instead. Another commenter
stated that an alternate suggestion
would be to delineate Section 3 workers
as full-time or part-time, and that
tracking hours by using these two
categories would be effective while still
giving HUD information about the hours
being completed by each worker. One
commenter recommended Alternative 2,
which continues to track new hires with
the addition of Targeted Section 3
workers.
One commenter stated that
transparency is needed, and the new
revisions of Section 3 should include
that contractors and subcontractors
must make public the total amount of
workers expected to complete a
construction project.
Commenters proposed a third
alternative to the two proposed, which
is to stay with the current existing
Section 3 goals, for both new hires (30%
of new hires) and for contracting with
Section 3 business concerns (10% of
construction dollars and 3% of other
dollars). Changes to what is already
understood by contractors will be
administratively burdensome and will
require additional education and
training for contractors and
subcontractors.
HUD Response: HUD appreciates the
alternatives suggested and has
considered the various comments
regarding the alternatives presented in
the proposed rule and the modifications
to those alternatives presented in the
comments. HUD has concluded that
both the use of Alternative 2 (New
Hires) and the use of a hybrid drawing
from both Alternative 1 and Alternative
2 provide an incomplete measure of
employment opportunities generated
through Section 3. Therefore, HUD
decided not to retain the new hire
standard. Rather than apply new hires
recordkeeping to some programs and
labor hours to others, HUD believes it is
more efficient and effective for purposes
of HUD’s objectives with respect to
Section 3 to apply the same standard
across the board. HUD has determined
to align Section 3 reporting
requirements with typical payroll
business practices by tracking labor
hours (whether based on prevailing
wage data, non-prevailing wage timeand-attendance system data, good faith
assessments of hourly workers not
tracked through a data system, or good
faith assessments of salaried
employees). While commenters varied

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on whether tracking Section 3 outcomes
through labor hours will be easier for
recipients of HUD funding, HUD has
concluded that the consistent labor
hours metric more accurately reflects
the impact of Section 3 and the
economic development opportunities
created. With respect to the alternatives
regarding aggregate payroll tracking or
tracking full-time and part-time
positions, HUD believes that tracking of
labor hours will adequately show hours
worked. HUD has determined that
tracking of training will be done
qualitatively when appropriate.
Process for Tracking Labor Hours
Commenters stated that while they
appreciated the idea of streamlining the
metric, tracking new hires vs. hours may
be a disincentive to developers if the
tracking is more onerous or complicated
than the current method. If tracking
labor hours is a goal similar to Davis
Bacon, then the process should be fully
integrated with the Davis Bacon
procedure including the duration of
tracking (only until project completion),
reporting requirements, and procedures.
Commenters stated that ascertaining
whether an employer has any new hires
is not a simple task; it involves (1)
reviewing pre-award payroll records to
determine who was on the employee’s
payroll at the time of contract award
and (2) reviewing ongoing payroll
records for the duration of the contract
to determine whether any new
employees have been hired.
Commenters also stated that it makes no
sense to apply the ‘‘labor hours’’
standard to only one type of
construction and rehabilitation project
but not to another, based solely on the
type of HUD funds involved. If a
contractor employs no Section 3
workers, there should be no requirement
to provide the data.
Commenters stated inexpensive
software is available that enables
contractors to submit electronic payroll
reports and allows PHAs and other
Section 3 funding recipients to easily
determine the hours worked on the
project, in each trade, by all workers
and by Section 3 residents. Commenters
noted such software is available to
recipients of housing and community
development assistance and also to
PHAs and other public housing
financial assistance recipients.
Commenters stated that commonly used
Contract Management and Payroll
systems such as LCPtracker and
B2GNow have features that align with
compliance practices and make
monitoring more effective. One
commenter stated that HUD could
provide appropriate software to all

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agencies to assist them in tracking and
reporting labor hours. A commenter
noted that its city has a Federal labor
standard software tracker which only
21% of contracts use, and this rule
would require 100% of contractors to
use the software, resulting in increased
administrative work, contract costs, and
system management.
One commenter noted that it would
be easier to track labor hours with
LCPtracker software if the reporting
were more aligned with Davis-Bacon
reporting. Commenters also saw
potential in the hourly tracking if there
were a way to eliminate double
paperwork by adding Section 3
reporting to the existing Davis-Bacon
worksheets. On the other hand, when
Davis-Bacon does not apply to a Section
3 project, some commenters felt the
administrative burden of tracking hours
could be higher. More information
would be needed about how the
reporting requirements would be
implemented before it could be
definitively agreed that tracking hours is
less burdensome than tracking new
hires.
HUD Response: HUD recognizes the
diversity of views on whether tracking
labor hours would be less burdensome
for organizations obligated to report
Section 3 results. Based on the
comments, HUD has concluded that it is
likely to be less burdensome to track
labor hours in many circumstances, and
HUD has clarified the applicability of
the good faith exemption to mitigate any
potential burden for those who do not
have payroll systems which would align
to a labor-hours reporting metric. For
those efforts subject to Davis Bacon
requirements, which includes many
HUD-funded construction endeavors,
tracking labor hours consistent with
existing tracking for prevailing wage
requirements would almost certainly
reduce burden on recipients. HUD is
aware that there are existing software
options that have the potential for
capturing total labor hours and labor
hours contributed by Section 3 workers.
HUD also is exploring whether and how
to operationalize and integrate HUD’s
Section 3 Performance Evaluation and
Registry System (SPEARS) with outside
software vendors. The SPEARS system
already has optional data fields to
capture the Aggregate Number of Staff
Hours Worked and Total Staff Hours
Worked by Section 3 Employees, and
the system will be modified to align
with the final rule. Underlying these
considerations, however, is HUD’s
belief, as described above, that tracking
labor hours will better allow HUD to
determine if long-term employment
opportunities are being generated, and

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that the metric should be consistent
without regard to the identity of the
recipient of HUD funds. Unlike a labor
hours measure, the new hire measure
does not consider the share of actual
work done by low- and very low-income
workers, and new Section 3 hires may
not be given the opportunity to work a
substantial number of hours.

concluded that even with this margin of
error, the labor hours metric provides a
more accurate reflection of the
economic opportunities created in
connection with HUD-funded activities
than the new hires metric. The
exception does not apply if the
employer is subject to other timespecific requirements.

Labor Hours Based on Good Faith
Assessment
One commenter stated that the
proposed new rule allows for recipients
to rely on a contractor’s ‘‘good faith
assessment’’ of labor hours (rather than
payroll reports) if the contractor is not
subject to other requirements specifying
time and attendance reporting. Since a
large proportion of housing
rehabilitation and construction projects
do not meet the unit thresholds that
trigger Federal labor standards (i.e. eight
units for CDBG, 12 units for HOME),
grant administrators will regularly have
to report labor hours based on a
contractor’s ‘‘good faith assessment.’’
Use of this approach will introduce an
unknown error margin into the
calculation of labor hour benchmarks.
This lack of data integrity calls into
question the meaning of the proposed
benchmarks and the soundness of using
‘‘labor hours’’ as a unit of measurement.
Commenters stated that Section 3
businesses who report labor hours in
‘‘good faith’’ need to have specific
recording requirements (i.e., software) to
avoid manipulation; it is more efficient
to rely on tracking systems instead of
contractors’ good faith submissions.
Commenters stated that not all HUD
construction projects are subject to
Davis-Bacon compliance and even a
good faith assessment of labor hours
will require significant PHA resources
to monitor, review, and compile. One
commenter stated that while the
proposed rule states that HUD will
permit ‘‘a good faith assessment of the
labor hours’’ for certain employers,
recipients could still be required to
establish new compliance procedures,
including determining how to protect
the privacy of Section 3 workers and
businesses when supplied with labor
hours supporting documentation.
HUD Response: The final rule is
explicit that employers are not required
to acquire a time-and-attendance system
in order to comply with the Section 3
rule. The ‘‘good faith assessment’’ is a
limited exception to be used by
employers who do not have systems in
place to track labor hours. This rule was
put in place to avoid increased
administrative burdens. HUD is aware
of the margin of error represented in the
good faith assessments, but has

Section 3 Applicability Threshold,
HUD’s Lead Hazard Control and
Healthy Homes Programs and All
Section 8 Programs

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Total Funds Threshold or per Project
Threshold Versus an Increased
Threshold
The proposed rule set the Section 3
applicability threshold for Section 3
projects to projects where the amount of
assistance exceeds $200,000. HUD
received comments both in favor of
maintaining the current $200,000
threshold and in favor of the new
proposed threshold. Commenters also
addressed the use of a project versus a
total funding threshold. In addition,
other commenters provided a range of
alternative frameworks for setting the
threshold amount—different numbers
and the inclusion or exclusion of
different kinds of funding in the
threshold calculations.
Some commenters recommended that
the $200,000 threshold be based on the
total amount of funding received within
the fiscal year because it is a more
simplified and streamlined process.
Commenters stated the change to a per
project threshold would result in many
housing production projects that are
mainly small and resource constrained
having to comply with Section 3
requirements for the first time, noting
that a per project threshold can become
complicated and burdensome when a
recipient handles a large volume of
contracts that are funded by multiple
sources. Commenters went on to state
that a per project threshold would
reduce the number of economic
opportunities directed to low-income
persons and recommended continuing
to subject Project Based Voucher
programs to Section 3 requirements to
ensure those opportunities are directed
toward low-income persons and
businesses that employ them.
Commenters in this line of thought
noted that the $200,000 per project
threshold would potentially exempt
projects where the HUD funding is less
than $200,000, even though the
combined total project funding is much
higher. Commenters stated this could
lead to a decrease in the number of
projects subject to Section 3 and an

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overall reduction in Section 3 program
impact.
Other commenters supported the per
project threshold generally without
commenting on the amount or
supported the $200,000 per project
threshold and saw it as an
improvement. Some of these
commenters noted that while $200,000
is an improvement over the current
threshold, it does not relieve underlying
concerns that contractors may break up
activities into small contracts of less
than $200,000 each to avoid
accountability. Several commenters
agreed that a $200,000 per project
threshold would still allow contractors
awarded significant funding to avoid
Section 3 requirements by carrying out
small discreet activities even though
they cumulatively spend more than the
threshold amount. A commenter
suggested that the final rule include a
prohibition on such activity, so that
HUD has authority to pursue
enforcement measures if HUD
determines a recipient is ‘‘gaming the
system’’ to avoid Section 3 obligations.
Other commenters provided
alternative threshold amounts at a range
of figures up to $1 million. Some
commenters stated the $200,000 per
project threshold will not necessarily
result in employment opportunities for
low-income people, arguing a higher
project amount does not inevitably
translate to the need for new employees
or a benefit to Section 3 business
concerns. Commenters suggested an
alternative $250,000 threshold which
would coincide with the Office of
Management and Budget simplified
acquisition threshold and could
automatically change when that amount
is updated. Other commenters
supported using the $250,000 threshold
for all projects to include PHAs. Some
large PHAs with Section 3 experience
recommended raising the threshold to
$350,000 on a per project basis and
making this threshold consistent across
all programs and funding sources.
Commenters in agreement with this
notion also noted that HUD has
determined that employment
opportunities in CDBG funded projects
under $350,000 are very minimal, and
these commenters argued that the same
is also true of public housing projects.
Commenters also recommended
$400,000 or higher to increase the
number of program recipients exempted
from Section 3 requirements from less
than 4 percent to 20 percent, greatly
reducing the compliance burden for
smaller grantees. Still other commenters
recommended a higher threshold of
$750,000, tied to the single audit
threshold, noting that smaller grants

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generally will not involve sufficient
hiring opportunities to warrant the
increased administrative burden. Other
commenters recommended that a $1
million threshold would be a better
measure of a project of a scale that
would have the potential to drive the
hiring of Section 3 workers and justify
the additional administrative burden on
recipients, subrecipients, and
contractors to implement the program,
particularly state CDBG programs that
primarily fund public infrastructure.
Another commenter recommended
exempting grantees that receive $1
million or less annually in CDBG or
HOME funds because such grantees
focus on a finite set of activities that
involve small projects.
Commenters stated that a low
threshold will create an undue
compliance burden for small projects.
Commenters suggested that adopting a
higher per project threshold would still
ensure the majority of CPD grants are
covered but would likely offer
significant regulatory relief for smaller
grantees, builders, developers,
contractors, and subcontractors who are
disproportionately burdened by
regulatory obligations. Some
commenters who advocated for a higher
threshold linked their reasoning to the
effect of the threshold amount on
contractors and subcontractors, noting
that Section 3 obligations apply to
recipients, their sub-recipients and so
on. Commenters described cases in
which builders forgo using covered
funds to avoid the liability and
compliance burdens of Section 3, and
situations where developers experience
costly delays on projects while
searching for qualified subcontractors
who are not deterred by the Section 3
paperwork and certifications.
Commenters also suggested that both
a recipient threshold at $400,000 and a
project threshold of $200,000,
applicable across all programs, would
be most appropriate to reduce reporting
burdens with a limited impact on the
dollar amounts of funding covered.
Another recommendation was to apply
Section 3 obligations to any entity that
receives at least $200,000 during a
program year for a specific program
activity. Other commenters suggested
either the threshold for contracts should
remain $100,000 in HUD assistance; or
a ‘‘total contract value’’ threshold
should be defined that will trigger
Section 3 on HUD-funded contracts,
regardless of the dollar amount of the
HUD funding. Other commenters
offered an alternative threshold of 10
percent of construction costs per
project. Commenters also reiterated that
some CDBG grant awards are very small,

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ranging from $50,000 to $200,000, so
units of general local government have
difficulty finding contractors to bid on
the projects, let alone finding a
contractor that is a Section 3 business
concern and is willing to work on a
small project. Finally, commenters
suggested limiting activities that trigger
the threshold to only construction and
rehabilitation, as defined within the
Section 3 statute for CDBG, HOME and
other CPD programs.
HUD Response: HUD acknowledges
the considerations raised by all the
commenters in their responses. HUD
found that the portion of Section 3
expenditures excluded by the $200,000
per project threshold generate relatively
few Section 3 jobs. After weighing the
various considerations, this final rule
maintains the $200,000 per project
threshold in general but makes changes
to the Lead Hazard Control & Healthy
Homes Programs threshold. HUD
believes that project funding levels help
accurately define thresholds because the
amount of funding spent on a project is
directly related to the economic
opportunities generated by the project.
HUD acknowledges the potential
disadvantages mentioned by
commenters to using a per project
threshold but reiterates the per project
threshold will help provide
opportunities for those who are
recipients of Federal financial assistance
for housing or residents of the
community in which the Federal
financial assistance is spent. In
addition, HUD remains open to
adjusting thresholds in the future based
on updated data analysis. The final rule
clarifies that HUD may change the
thresholds and benchmarks at a later
date via Federal Register notice, subject
to public comment, based on updated
data input and accounting for inflation.
HUD also notes that not every
contractor, subcontractor or subrecipient must use Section 3 workers. A
funds recipient could meet its Section 3
benchmarks with one contract to a
Section 3 business concern where the
number of labor hours worked is 25%
or more of all the labor hours worked by
all workers on a Section 3 project while
not using Section 3 workers for other
work. The recipient has flexibility in
determining how to meet its
benchmarks.
Lead Hazard Control & Healthy Homes
Programs Inclusion
Commenters who advocated for a
single consistent per project threshold
across all programs stated that the Lead
Hazard Control and Healthy Homes
programs should also be subject to the
same threshold. Other commenters

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agreed that Lead Hazard Control and
Healthy Homes projects should be
exempted from administrative and
compliance burdens based on a
threshold of $200,000 or greater, stating
these projects are unlikely to generate
many employment opportunities
because they are small and Lead Hazard
Control abatement and interim controls
is to be done by trained and certified
workers.
Some commenters agreed that
including Lead Hazard Control projects
with no threshold would increase the
administrative burden without a benefit,
and while the exclusion is
understandable, HUD should pursue a
standardized threshold to avoid
complicating Section 3 by creating a
different scope for Lead Hazard Control
and Healthy Homes programs.
Commenters generally supported higher
thresholds for Lead Hazard Control and
Healthy Homes programs. A commenter
suggested it may be appropriate to use
the community development assistance
threshold for simplicity. Alternatively,
commenters suggested a more modest
reporting threshold of not less than
$50,000 for Lead Hazard Control and
Healthy Homes projects, stating that for
grantees working on multifamily
projects in high cost cities, projects
where the contract is less than $50,000
tend to be awarded to smaller
contractors. A $50,000 threshold would
meet HUD’s admirable intention of
ensuring greater Section 3 participation
from Lead Hazard Control and Healthy
Homes grantees without imposing
hardship on such small contractors.
HUD Response: HUD agrees that the
$200,000 threshold should not apply to
Lead Hazard Control and Healthy
Homes programs since those projects are
generally smaller dollar amounts.
However, in keeping with Section 3’s
statutory priorities and applicability,
HUD is choosing to adopt a $100,000
project threshold regarding application
of Section 3 to Lead Hazard Control and
Healthy Homes programs.
Section 8 Programs Exclusion
Many commenters supported the
exclusion of Section 8 programs in the
proposed rule, as Section 8 programs are
not included in the statute. Commenters
went on to note that because Section 3
programs are development subsidy
sources and Section 8 programs provide
operating subsidies, Section 8 assistance
recipients should not be subject to
Section 3 regulatory responsibilities.
Commenters noted that the primary
purpose of Section 8 programs is to
provide a rental subsidy that covers the
difference between the contract rent and
30 percent of the tenant’s income,

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stating these programs are ‘‘affordability
tools, not construction tools,’’ and
agreed HUD should not increase
regulatory burdens on housing
providers by expanding the scope of
Section 3 to programs not covered in the
statute.
Some commenters urged that for
Subpart B, HUD should retain an option
for PHAs to report on Section 3
requirements for Section 8 funded
programs, noting that these programs
generate significant employment and
training opportunities for Section 3
workers. Commenters suggested HUD
format Section 3 reporting so that
Section 8 funded placements can be
captured as part of a PHA’s overall
efforts. Commenters also suggested the
current reporting system be updated to
allow for the reporting of other
placements that might be excluded with
the new proposed rule, such as
placements under professional service
contracts.
HUD Response: Section 8 programs
are not covered under the Section 3
statute. Therefore, HUD in this final rule
maintains the clarification in the
proposed rule that Section 8 programs
are excluded from Section 3
requirements.
Section 3 Project Definition
Commenters recommended that HUD
more clearly define ‘‘project’’ for the
purpose of Section 3, and asked how
HUD would view a job order contract of
more than $200,000 that may work on
various locality-owned sites (e.g., all of
a locality’s schools or homeless
shelters). These commenters also asked,
if several unrelated HUD-funded
activities are taking place at the same
location and have a combined value of
more than $200,000 constitutes a
project. Lastly, the commenters asked
whether the per-project threshold is
based solely on construction-related
activities, and whether the level of
Federal assistance to a project must
exceed the $200,000 threshold to trigger
Section 3.
Another commenter recommended
that HUD define ‘‘project’’ as follows:
Project means a site or sites together
with any building or multiple buildings
located on the site(s) that are under
common ownership, management, and
financing and are to be assisted with
Section 3 covered funds as a single
undertaking. A program that funds
multiple buildings under separate
ownership, management and financing
is not a project.
HUD Response: HUD supports the
Section 3 Project definition within the
proposed rule and believes it is
consistent with the statutory

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requirements of HUD programs. HUD
also intends to provide sub-regulatory
guidance and technical assistance on a
program-by-program basis to assist
recipients with Section 3
implementation.
Section 3 Worker
Rule Rewards Creating Opportunities for
Persons Who Are Not Low-Income
Commenters stated that the rule,
particularly the definitions of Section 3
worker, rewards creating opportunities
for persons who are not low-income,
which would be counterproductive to
the intent of the Section 3 program. A
commenter stated that the proposed
definition could inadvertently include
individuals who are not low-income
because categories (ii) and (iii) are not
income-based.
Specifically, some commenters
objected to category (ii) which allowed
workers who live in a Qualified Census
Tract (QCT) to be included in the
definition of ‘‘Section 3 worker’’
because these individuals will not
necessarily be low-income. One
commenter noted this is especially true
in large metropolitan cities with mixed
income communities and gentrifying
areas. Another commenter stated that
researching employee residence as of
the date of hire to determine census
tract qualification will be difficult or
impossible for long-term employees
who may have moved multiple times.
Commenters warned that the QCT
designation would create a risk of
potential abuse by recipients. Some
commenters suggested removing the
QCT criteria altogether since the
definition already includes a low- or
very low-income person.
Other commenters objected to
category (iii) which included all Section
3 business concern employees as
Section 3 workers. These commenters
stated that someone working at a
Section 3 business concern is not
necessarily a resident of HUD-assisted
housing, nor is it likely that a business
owned by 51% low-income people
would hire only public housing or HUDassisted residents. For this reason,
commenters recommended that HUD
should exclude ‘‘a worker employed by
a Section 3 business’’ from its definition
and benchmarks and the definition of
Section 3 worker and Targeted Section
3 worker. One commenter noted the
phrase ‘‘worker is employed by a
Section 3 business’’ is included in both
the Section 3 worker and Targeted
Section 3 worker definitions and
recommended including this term in the
Targeted Section 3 worker definition

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only and not the Section 3 worker
definition.
HUD Response: HUD agrees that
paragraph (1)(ii) could inadvertently
include individuals who are not lowincome. This final rule removes
paragraph (1)(ii) regarding the QCT from
the definition of ‘‘Section 3 worker’’
from this final rule. However, HUD
disagrees that the category of Section 3
business concerns should be removed
from the Section 3 worker and Targeted
Section 3 worker definitions. The
Section 3 statute states that HUD must
prioritize Section 3 business concerns. If
HUD did not include Section 3 business
concerns in the definitions that are used
for the benchmarks, PHAs and other
HUD funded entities would have no
incentive to hire Section 3 businesses.
Including all Section 3 business concern
employees in the definition of Section 3
worker and Targeted Section 3 worker
creates an incentive to contract with a
Section 3 business while maintaining a
single reporting metric. The final rule
maintains that all hours worked on the
project by the Section 3 business counts
towards the benchmarks. HUD believes
these changes are consistent with the
statute.
Prior Conviction
One commenter wrote that
convictions for certain categories of
crimes may have a direct bearing on the
worker’s suitability for particular jobs.
Previous theft convictions, for example,
may be relevant for a worker who will
be involved in procurement and
distribution of materials. Other
commenters supported this language,
stating that ‘‘there is no evidence that
hiring an individual with a criminal
history will have a negative impact on
employee success.’’ The commenters
also noted that the language is
consistent with other HUD guidance on
the use of background reports in
housing decisions. However, one
commenter suggested a minor revision
to clarify the regulation: ‘‘A recipient,
contractor, or subcontractor shall not
refuse to hire a Section 3 worker on the
basis of a prior arrest or conviction,
unless otherwise required by Federal,
state, or local law.’’
HUD Response: HUD agrees with the
commenters that convictions for certain
crimes, such as fraud or theft, might
affect a worker’s qualifications for a
particular position, and that ‘‘there is no
evidence that hiring an individual with
a criminal history will have a negative
impact on employee success.’’ HUD
notes that the Section 3 worker
definition provides that an individual’s
prior arrest or conviction shall not
negatively impact their Section 3 worker

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status, but the definition maintains the
requirement that the individual is
qualified for the job. Job qualifications
may include the worker’s arrest or
conviction history. The rule does not
require a Section 3 worker with a
criminal history to be hired. HUD has
considered the suggestions and has
chosen to keep the regulatory language
in § 75.5. See Section 3 business
concern, § 75.5 (‘‘The status of a Section
3 business concern shall not be
negatively affected by a prior arrest or
conviction of its owner(s) or
employees.’’); Section 3 worker, § 75.5
(‘‘The status of a Section 3 worker shall
not be negatively affected by a prior
arrest or conviction.’’); Targeted Section
3 worker, § 75.5 (‘‘does not exclude an
individual that has a prior arrest or
conviction.’’)
Additional Categories
One commenter stated that the
proposed rule no longer explicitly lists
a public housing resident as a ‘‘Section
3 resident’’ and does not provide for the
employer to continue counting that
worker in the future. Another
commenter suggested that staff hired by
a PHA should be counted toward
Section 3 requirements. Commenters
suggested additional categories and
expansion of existing categories, and
requested HUD explicitly list the
following: people immediately prior to
hiring are public housing, Section 8,
Section 811, Section 202 residents or
other low-income people, and women.
Commenters recommended that a
‘‘Section 3 worker’’ should be a worker
whose income is below the limit set by
HUD, or a resident of public or HUDassisted housing.
One commenter supported the change
to using an individual’s status as lowincome versus household income,
which will increase the pool of persons
that can be counted as a Section 3
worker and make meeting the
benchmarks more attainable.
Commenters requested clarification on
whether the HUD-defined low-income
level will be based on individual or
family income and one commenter
recommended the use of only an
individual’s income.
HUD Response: HUD wants to clarify
that, while the definition of Section 3
worker does not include public housing
residents, it does include all workers
whose income is below the income limit
established by HUD, which is the same
limit that would qualify someone for
public housing. Therefore, public
housing residents would be considered
Section 3 workers. HUD does not
believe that all staff hired by a PHA
should be counted as Section 3 workers.

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Those staff that meet the qualification of
a low or very low-income person, as
defined by HUD’s income limit, would
already qualify, and HUD does not think
it is appropriate to include all PHA staff.
As for expanding the categories further,
the Section 3 statute is specific as to the
priorities that HUD should be providing
with employment and other economic
opportunities generated by Federal
financial assistance. Therefore, HUD is
not expanding the scope of Section 3
workers beyond those listed in the
statute. HUD changed the Section 3
worker definition to include a worker
whose income is below the income limit
established by HUD in place of the
family income and appreciates the
comments in support of the change.
Setting Time Limits
Commenters recommended that HUD
should keep the existing standard of a
three-year period for counting workers
in order to account for staff turnover
and to generate more accurate metrics.
Other commenters recommended HUD
limit someone counting as a Section 3
person to 5 years. Another commenter
stated that because many contractors
and subcontractors report no new hires
for specific projects, a Section 3 worker
should be defined as one who ‘‘at the
time of hire’’ was low- or very lowincome. One commenter asked HUD to
be more specific in defining a Section 3
worker rather than stating low-income is
a ‘‘limit established by HUD.’’
HUD Response: HUD agrees with the
commenters that a worker whose
income has risen should only be
counted for Section 3 purposes for five
years. HUD wants to ensure employers
are invested in keeping Section 3
workers employed, and that there is
enough opportunity to build skills and
experience so that Section 3 workers
may develop self-sufficiency and
compete for other jobs in the future. An
employer may choose whether the
workers are defined as Section 3
workers for that five-year period at the
time of the workers’ hire, or the date
from which the workers are certified as
meeting the Section 3 worker definition.
Guidance
Commenters requested that HUD
provide more specific guidance
regarding how to calculate labor hours
for the purpose of determining Section
3 status. For example, is there a set
timeline for consideration, such as
during the past year or several years? Or
is it based on the business’ last 1–2
payrolls to capture the most recent
picture of employment? Commenters
stated that it is unclear over what time
period labor hours are to be measured.

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One commenter stated that it is unclear
whether the ‘‘labor hours’’ standard
relies on the labor hours on the Section
3 project, or in general.
HUD Response: HUD will provide
additional guidance to assist PHAs and
grantees in how to calculate labor hours.
Generally, labor hours will be calculated
based on the labor performed on a
Section 3 project for housing and
community development financial
assistance or on all labor hours
performed within the fiscal year for
public housing assistance.

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Subrecipient
One commenter stated that using the
applicable definition of subrecipient in
the HOME program would mean that
multifamily owners contracting directly
with the State may not have to comply
with Section 3 requirements because
they are not included in that definition
for the HOME program in 24 CFR 92.2.
This commenter also noted that
multifamily owners are also not often
contractors (under the proposed
definition), because they do not enter
into a contract with a recipient to
perform the work. This commenter
suggested inclusion of owners in the
HOME program and changing the
definition of subrecipient to say ‘‘has
the meaning provided in the applicable
program regulations, and in 2 CFR
200.93’’ or suggested HUD amend the
definition of contractor to further define
the phrase by adding ‘‘work in
conjunction with a Section 3 project,’’ to
more clearly identify that it includes an
owner in the HOME program that
contracts with general contractors.
HUD Response: HUD appreciates the
comment. However, subrecipient has
different meanings in different
programs, which is why HUD defined it
as either the meaning as is applied in
the specific program or 2 CFR 200.93.
Targeted Section 3 Worker Definition
Some commenters supported the new
‘‘Targeted Section 3 worker’’ definition
and eliminating tracking Section 3
business concern types separately. Some
commenters stated that the Targeted
Section 3 worker concept is consistent
with the goal of expanding employment
opportunities for individuals that
receive Federal assistance for housing.
Another commenter agreed with HUD’s
efforts to track and target certain high
priority Section 3 workers separately
and efforts to fold Section 3 business
concern engagement into other
benchmarks.
Other commenters opposed the
‘‘Targeted Section 3 worker’’ definition,
stating that it is duplicative with worker
categories already given preference

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under § 75.9. Commenters stated a
separate reporting category for
‘‘Targeted Section 3 worker’’ merely
complicates reporting requirements for
recipients, contractors, and
subcontractors, and recommended HUD
keep the existing definition and the
existing priority preference order. Other
commenters noted that tracking
additional information to determine
Section 3 compliance would be
burdensome.
A commenter recommended that
hours worked by Section 3 business
employees be categorized as regular
Section 3 worker hours and Targeted
Section 3 worker hours depending on
the employee’s status to avoid inflated
reporting of hours worked by targeted
Section 3 workers. Other commenters
suggested that a worker employed by a
Section 3 business only be included in
the ‘‘Targeted Section 3 worker’’
definition because it was created to
better align the regulation with the law.
Commenters stated that counting all
Section 3 business concern employees
as Targeted Section 3 workers is
problematic and risks questionable data.
HUD should exclude ‘‘a worker
employed by a Section 3 business’’ from
the definition of Targeted Section 3
worker and Section 3 worker. Including
‘‘a worker employed by a Section 3
business’’ in the definition of ‘‘Targeted
Section 3 worker’’ dilutes the purpose of
creating a Targeted worker designation.
It also frustrates the purpose of the
statute, which is to give priority to
public housing and other HUD-assisted
residents in employment and training
opportunities, along with low-income
families near the Section 3 project
location.
Commenters also suggested that HUD
include public and HUD-assisted
housing residents in the Targeted
Section 3 worker definition for Section
3 projects, not just PHA projects. The
proposed definition of Targeted Section
3 worker for PHA projects more
accurately interprets the statutory
priority of Section 3 to employ public
housing and other Federally assisted
residents than the definition for CPD
recipients. One commenter
recommended that HUD include the
word priority in the definition of
‘‘Targeted Section 3 worker’’ to clarify
the requirements and add objective
criteria or guidance by which to monitor
or measure success or satisfactory
performance.
HUD Response: HUD appreciates the
commenters’ recommendation to target
public and HUD-assisted housing
residents in both funding types.
However, the statute specifies priority
categories differently for recipients of

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public housing financial assistance and
housing and community development
financial assistance. The Targeted
Section 3 worker is a concept designed
to serve as a proxy for the highest
priority categories, allowing HUD to
collect data through standardized
reporting regarding the funding
recipients’ efforts with respect to the
priority categories. HUD believes that
the definitions of Targeted Section 3
worker for both public housing financial
assistance and other housing and
community development financial
assistance funds provide good reporting
proxies for the statutory priorities and
should remain as proposed. As Targeted
Section 3 workers are a proxy for the
priority categories solely for reporting
purposes, and do not replace the
prioritization that funding recipients
must apply in their efforts under
Section 3, the use of the word ‘‘priority’’
in the definition would be
inappropriate.
§ 75.11 Targeted Section 3 Worker for
Public Housing Financial Assistance
Commenters stated that HUD should
combine 75.11(a)(2)(i) and (ii) into a
single category, ‘‘residents of public and
HUD-assisted housing’’ to more clearly
include residents of all HUD-assisted
housing programs and conversion
projects. Commenters supported the
addition of Section 8 assisted
households. This change mirrors the
Section 3 statute, which broadly
emphasizes employment and training
opportunities for ‘‘recipients of
government assistance for housing.’’
Some commenters recommended
deleting paragraph § 75.11(a)(1), because
it is redundant with § 75.5. Commenters
also asked HUD to clarify what
‘‘residents of other projects managed by
the PHA’’ covers. One commenter
suggested HUD add ‘‘administered by
the PHA’’ when describing Section 8
assisted housing.
HUD Response: HUD appreciates the
support for the categories in § 75.11 and
recommendations to make changes to
include additional HUD programs. HUD
believes that consistent with the statute,
the Targeted Section 3 worker definition
for public housing financial assistance
should focus on the categories as listed.
To be inclusive of residents in other
housing assisted by the PHA and
residents of housing in the property
management portfolio of the PHA, both
categories have been included in the
regulation in place of the vaguer term
‘‘managed by the PHA.’’ Those residents
would also count as Section 3 workers
for purposes of Targeted Section 3
workers for public housing financial
assistance. The rule’s current ‘‘resident

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of other projects managed by the PHA’’
has been replaced, which should
address the commenter’s concerns.
§ 75.21 Targeted Section 3 Worker for
Housing and Community Development
Financial Assistance
One commenter wrote that limiting
the definition to a geographic area
eliminates large sectors of nearby
Section 3 workers and business.
Another commenter noted some State
CDBG programs do not operate in areas
where public housing residents or
YouthBuild participants typically live.
Commenters also stated that the
proposed definition gives broader
opportunity to identify low-income
construction employees for Section 3
projects but requires wage calculations
and census tract verification from
contractors already burdened by
paperwork and will remove the focus
from employing eligible persons living
within a neighborhood.
HUD Response: HUD retained the
proposed Targeted Section 3 worker
definition in the final rule. The rule
creates the ‘‘Targeted Section 3 worker’’
concept so that HUD can track, and
recipients can target, the hiring of
Section 3 workers in selected categories
based on the statute’s hiring priorities.
The Targeted Section 3 worker category
also incorporates the statutory
requirements of contracting with
business concerns employing low- and
very low-income persons. For other
HUD housing and community
development financial assistance
programs, such as the State CDBG
program or HOME Investment
Partnerships programs, Targeted Section
3 workers would be low- or very lowincome workers residing within a onemile radius of the Section 3 project. If
fewer than 5,000 people live within that
one-mile radius, the circle may be
expanded outward until that population
is reached.
The requirement that contractors
verify whether workers are low or very
low-income for tracking purposes is not
new. Contractors were already required
to verify new hires as qualifying for
Section 3 status, and the statute requires
that employment and other economic
opportunities generated by work in
connection with housing rehabilitation,
housing construction or other public
construction projects receiving housing
and community development assistance
be directed to low- and very low-income
persons in the local community. HUD’s
proposal to use Targeted Section 3
workers for housing and community
development programs that fall within a
defined service area should reduce
burden because HUD’s mapping tool

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will identify the jurisdiction the
contractor should target.
§ 75.5: Section 3 Business Concern
Definition
Previous Rule’s ‘‘Dollar Value’’ Method
Commenters stated that the previous
‘‘dollar value’’ method of reporting
contracts awarded to Section 3 business
concerns should be kept, as it gives
recipients and general contractors a
clear benchmark to achieve when
selecting subcontractors and aligns with
methods many are already using to
report on minority-, women-, and
veteran-owned businesses. Commenters
noted Section 3 is designed to promote
wealth-building in addition to
employment opportunities and the
‘‘dollar value’’ method is a better
measure of economic opportunities
provided to low-income owners of
Section 3 business concerns than the
labor hours worked by their employees.
Without having a metric tied to the
number of contracts awarded to Section
3 business concerns, commenters
anticipated a reduction in the number of
contract awards, and a reduction in
employment opportunities. One
commenter stated that both definitions
will likely continue to be a challenging
means of qualifying for eligibility and
may prove difficult to document.
HUD Response: HUD found the
Section 3 business concern definition to
be consistent with both the previous
regulation and with the statute,
although HUD notes that the final rule’s
definition does impose more rigorous
criteria for qualifying as a Section 3
business concern with respect to the
percentage of workers who must be
Section 3 workers. This additional rigor
in the criteria ensures that, if qualifying
on the basis that the firm employs
Section 3 workers, a high percentage of
workers are in fact Section 3 workers,
and ensures that, if qualifying on the
basis that the owner is a low-income
individual, the owner is in operational
control and will benefit from the wealth
creation opportunities. The changes to
the Section 3 business concern
definition do not depend on the change
in reporting to a labor hours metric.
HUD recognizes that some in the
industry have found the ‘‘dollar value’’
method to be workable, and that the
dollar value metric does provide a
measure of the extent of contracting to
Section 3 business concerns. However,
HUD believes there is value in having a
unitary reporting metric—labor hours—
and has designed the metric to measure
both direct employment and to reflect
prioritization of contracting with
Section 3 business concerns. HUD

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believes that this new method will be
effective, will encourage wealth creation
opportunities for the owners of Section
3 business concerns, and will provide
the opportunity for recipients of HUD
financial assistance to determine which
projects use Section 3 businesses in a
way that is not administratively
burdensome.
Rule Rewards Creating Opportunities for
Persons Who Are Not Low-Income
One commenter stated that the focus
on hours worked is appropriate in light
of the statute’s focus on providing
economic opportunities to low-income
residents, but aggregating hours poses a
risk that non-low-income people at
Section 3 business concerns may report
hours, though this risk is mitigated by
the Section 3 business concern
definition. Another commenter stated
that the 51% owned and 75% labor
hours requirements allow Section 3
business concerns to employ persons
who are not low-income or very lowincome.
Another commenter supported
replacing the aggregate dollars spent
metric, but stated that including all
Section 3 business concerns’ employee
hours will lead to the misleading
inclusion of non-low-income worker
hours in the data; only the hours
worked by the low- and very lowincome employees of a Section 3
business concern should be reported as
Section 3 hours worked.
HUD Response: According to the
Section 3 statute, HUD must prioritize
businesses that provide economic
opportunities for low- and very-lowincome persons. The statute does not
require that HUD prioritize business
that only provide economic
opportunities for such persons. If HUD
were to include only the Section 3
workers in the reporting metrics, the
regulation would not effectuate the
statutory requirement to also place an
emphasis on Section 3 business
concerns. The Section 3 statute states
that HUD must prioritize Section 3
business concerns in the awarding of
contracts. By collecting labor hour data
on all employees of Section 3 business
concerns, HUD is creating an incentive
to contract with a Section 3 business
concern while maintaining a unitary
reporting metric for Section 3
performance. The final rule maintains
the provision of the proposed rule that
all hours worked on the project by the
Section 3 business concern counts
towards the benchmarks, with the
awareness that this reporting framework
will collect labor hour data for workers
who are not low-income. This serves as
the incentive to contract with Section 3

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business concerns. HUD believes these
changes are consistent with the statute.
Verification
A commenter stated that nothing
addresses processes for verification of
Section 3 business concern eligibility,
and that HUD should enhance the
Section 3 business concern registry to
include confirmation of eligibility or
work with Equal Employment
Opportunity Commission to assist
jurisdictions with certification
programs. One commenter noted that
using the Section 3 business concern
registry to project availability of Section
3 workers is unreliable because the
registry is a self-reporting structure with
no mechanism to verify the business on
the list, it assumes such businesses are
able to work in any geographic area, and
many PHAs in rural and suburban areas
have reported that there are no Section
3 business concerns in their areas.
Another commenter raised the issue
that verifying Census tract designations
would create an additional burden,
especially Census tract data that
changes over time, which will result in
fewer contractors participating in
Section 3 projects.
One commenter stated apprehension
about this part of the definition because
accurately tracking and reporting labor
hours will be much more challenging
than tracking and reporting full-time
employees. The proposed definition
also makes it difficult for Section 3
business concerns and the entities that
contract with them to predict with
confidence that they will retain their
Section 3 status, as labor hours can be
dependent on the number of contracts a
business bids for and receives.
Another commenter requested
clarification regarding how long a
business retains the Section 3 business
concern status once it is certified as a
Section 3 business concern.
Commenters suggested HUD or the local
government should bear the
responsibility for verifying the
eligibility of a Section 3 business
concern, rather than shunting that
responsibility to the builder, general
contractor, or subcontractors. HUD’s
online Section 3 Business Registry 4 was
a positive first step, but HUD does not
verify the self-certifications submitted
by the business concerns, and it
cautions database users to perform due
diligence before awarding contracts.
HUD Response: HUD plans to
continue the use of the Section 3
Business Registry as an available public
4 HUD, What is the Section 3 Business Registry?,
Hud.gov, https://portalapps.hud.gov/Sec3BusReg/
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tool. While HUD appreciates the
suggestion that HUD or the local
government make determinations of
eligibility for Section 3 business
concerns, HUD believes that, consistent
with other paperwork requirements, it is
appropriate that the entity receiving
HUD financial assistance ensure
compliance with Section 3
requirements, which includes
confirming that both Section 3 workers
and Section 3 Business concerns qualify
as such under this regulation. HUD
addressed commenters’ concerns about
Census tract designations by removing
that language from the rule, and
concerns about labor hours are
addressed in previous comment
responses. Once a business is certified
as a Section 3 business concern, it will
retain that status as long as it continues
to meet the definition. Status is
determined at the time of hiring for each
contract and is no different from any
other definition. Currently, business
concerns self-certify, and verification is
done by HUD. The timing is on a project
by project basis.
(1)(i) ‘‘At least 51 percent owned by lowor very low-income persons’’
One commenter stated that this part of
the definition follows the statute’s
intent. Another commenter stated that
51 percent ownership by low- or very
low-income persons is unrealistic
without training programs on business
management.
HUD Response: HUD appreciates the
feedback from commenters and is
keeping this part of the Section 3
business concern definition as it is.
HUD has found this definition to be
consistent with both the previous
regulation and with the statute. HUD
notes that the definition also includes
other methods by which a business
concern may be defined as a Section 3
business concern. See 24 CFR 135.5; 12
U.S.C. 1701u (e)(2).
(1)(ii) ‘‘Over 75 percent of the labor
hours. . . performed by low- or very
low-income persons’’
Commenters supported changes to
definitions of Section 3 business
concerns, Section 3 workers, and
Targeted Section 3 workers under the
new hire approach. One commenter
stated that the decision to focus on
percentage of hours worked by Section
3 individuals will result in a decrease of
self-identified Section 3 business
concerns. The commenter asserted that
although it is a better metric for proving
actual commitment to long-term
employment of Section 3 individuals,
gathering the data will be overly
burdensome. One commenter stated that
this option will present undue hardship

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to small businesses and should be
omitted. Another commenter stated that
this requirement will negatively affect
HOME and CDBG funded projects.
Some commenters supported tracking
Section 3 hiring separately from Section
3 business concern tracking. Section 3
business concerns are already
encouraged to retain existing employees
to meet the previous Section 3 business
concern definition. Counting existing
employees to meet both the contract and
hiring goals may result in decreased
new hiring in connection with Section
3 covered assistance. Commenters
recommended only tracking new
Section 3 hires employed by Section 3
business concerns relative to a
contractor’s hiring goals.
One commenter also stated that even
though the proposed rule provides a
mechanism for PHAs to continue
documenting compliance through a
‘‘new hire’’ metric, this proposed
definition would still require PHAs to
analyze a business’s labor hours in order
to determine whether a business could
qualify as a Section 3 business concern.
One commenter noted the new
burden would affect businesses who
may not meet the new markers and
might reevaluate the benefits of working
with PHAs given the increased work to
track labor hours. The commenter noted
in an environment where getting bids is
already difficult this would further
dissuade them from doing business with
PHAs. Other commenters suggested
focusing on long-term employment
goals for employees, developing
benchmarks for growth of Section 3
business concerns, providing microbusiness support, and targeting capital
construction projects for mentorship
and sub-contracting with Section 3
business concerns.
Some commenters stated that the
definition of a Section 3 business
concern should remain defined in part
as a business where at least 30% of the
permanent, full-time workforce are
currently Section 3 residents, or were
Section 3 residents within three years of
the date of first employment at the
business concern.
Commenters stated that this proposed
amendment would render most Section
3 business concern owners in the
commenter’s city ineligible, as over 50%
qualified by meeting the existing
standard for the makeup of their
workforce (30% full time permanent
employees who are Section 3 residents).
The result will be fewer Section 3
business concerns maintaining and/or
seeking certification and will further
compound the challenges of helping
low-income workers access jobs. Most
Section 3 business concerns do not

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possess the infrastructure to support
tracking this information. A commenter
stated that 75 percent of labor hours is
too high as a standard for determining
Section 3 business concern eligibility. A
smaller percentage would be more
appropriate, or perhaps HUD could
allow businesses to qualify either by
labor hours or percentage of staff.
Commenters stated that the 75 percent
criterion would defeat important
purposes of the Section 3 program
which include encouraging business
creation and increasing contract
opportunities for businesses that
employ a substantial number of lowincome residents.
One commenter stated that it would
significantly increase compliance costs,
and that HUD appears to assume that
every project will be tracking employee
hours worked due to the applicability of
federal prevailing wage requirements,
but this is not the case. This
commenter’s program includes projects
that are not subject to prevailing wage
requirements, but that are subject to
Section 3. Another commenter stated
that the new definitions could pose
significant challenges to businesses as
they will have to first determine which
employees are considered low- and very
low-income persons, and then have to
calculate if their labor hours are over 75
percent.
One commenter agreed that reporting
on business concerns should not be an
aggregate of dollars spent. The
commenter recommended that HUD
keep the self-certification tool and
website resource and incentivize
Section 3 contractors to register to make
this resource as useful as possible. The
commenter observed a review of the
website shows that some states do not
have any Section 3 contractors listed.
Commenters stated that the change
from 30 percent of full-time employees
to 75 percent of labor hours performed
will limit Section 3 business concerns
only to those lower-skilled businesses
(cleaning companies, moving
companies, perhaps landscaping or
painting companies) that hire an
overwhelming majority of their workers
as low-income.
One commenter stated that the
proposal will not have the intended
impact of increasing access to
opportunity. This change would look
backwards rather than measuring
opportunities provided as a direct result
of the contract award. In practice, this
change would significantly impact
administrative efforts, would adversely
affect other qualified Section 3 business
concerns, and potentially limit
employment opportunities available to
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One commenter stated that the rule
should keep the threshold at 30% but
change it to hours worked rather than
new hires and retain other elements of
the current definition. The commenter
recommended that HUD only count the
hours worked by Section 3 residents
toward the percentage goals of hours
worked by Section 3 residents (not all
employees of the Section 3 business
concern). The commenter believes the
30% benchmark creates an incentive for
established businesses to create a
professional development component to
their project approach, while 75% is
much too high for most businesses to
pursue.
One commenter recommended the
definition be modified to include more
than 75 percent of the labor hours
worked at the business are performed by
public housing, Section 8, Section 811,
or Section 202 residents or persons who,
immediately prior to the date of hire,
were low-or very low-income,
particularly women. Commenters
suggested removing the 75 percent labor
hour portion all together. If HUD
proceeds with this definition, it should
consider a transition period so existing
Section 3 business concerns can adjust
to the new definition.
HUD Response: HUD believes that the
refined definition continues to reflect
the language and intent of the Section
3 statute, defining Section 3 business
concerns in a way that furthers
economic opportunities for low- and
very low-income persons. HUD
recognizes that 75% is a higher number
than the prior new hire standard but
believes that Section 3 business
concerns should be either majority
owned by low or very low-income
persons or should primarily employ
such individuals. HUD believes that the
prior 30% standard does not ensure that
a sufficiently substantial number of lowor very-low-income persons benefit
from the priority contracting status that
the Section 3 statute and regulation
provide. Section 3 business concern
employees are counted as Targeted
Section 3 workers, giving HUD funding
recipients and Section 3 projects an
incentive to hire them to meet their
Targeted Section 3 Benchmark numbers.
HUD acknowledges that the revised
definition of Section 3 business
concerns may result in a decrease in
firms qualifying for the designation, but
the benefits of qualification will be more
directly targeted to low- and very-lowincome persons. HUD notes that the safe
harbor benchmarks can be adjusted by
notice periodically, which is intended
to allow HUD to modify the benchmarks
to accommodate geographies where the
initially proposed benchmarks cannot

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be met due to the unavailability of
Section 3 workers and Section 3
business concerns. HUD amended this
provision to clarify that the 75% of
labor hours should be determined based
on looking back over the last 3 months
of work performed for the business. The
determination as a Section 3 business
concern is made at the time the contract
or subcontract is executed, so that the
program participants have certainty in
their Section 3 strategies. However, the
final rule also provides flexibility to
establish Section 3 business concern
status during the Section 3 covered
activity, to provide further incentive to
employ Section 3 workers. If the
business performed multiple projects,
all of the hours on the projects over the
prior three-month period should be
considered for making the
determination.
HUD notes the comment that
observed a Section 3 business concern
might need to track labor hours to be
qualified, even if the federal funding
recipient is reporting new hires. By
eliminating the new hire alternative
reporting metric, HUD anticipates that
this dimension of documenting
qualification as a Section 3 business
concern will be mitigated. HUD further
notes that businesses do not need to
track labor hours precisely. HUD is not
presuming the applicability of
prevailing wage requirements, but rather
is presuming that all employers paying
an hourly wage will have some method
to tabulate the number of hours worked,
and for those that do not have a tracking
mechanism in place, the final rule
permits them to rely on a good faith
assessment. An objective of Section 3 is
to provide employment opportunities
for public housing and low-income
residents, which can lead to a focus on
long-term employment goals. Other
activities identified by the commenters
are better suited for business
development and therefore are outside
the scope of this rule.
As for the concern that the definition
will limit wage growth or promotion or
result in Section 3 business concerns
where all employees have low-income
wages, HUD provides that the
qualification of a Section 3 worker takes
place at either the date of the Section 3
covered activity or the date of initial
hire by the employer, not more than five
years previously. Labor hours of an
employee who is low- or very lowincome at hire will continue to count for
5 years even if that person grows into a
new, more advanced position. HUD
anticipates that the employee with 5
years of experience with that same
employer would be moving up in the
business and would eventually need to

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be replaced by a new, presumably lowor very-low-income entry-level
employee. The definition has been
modified to clarify this framework and
to reduce the potential incentive to
maintain workers at lower salaries
simply to qualify as a Section 3 business
concern. HUD also acknowledges that
many entry-level opportunities for lowwage workers are in businesses and
industries with a high percentage of
low-wage employment possibilities.
HUD determined not to implement a
transition period, although contracts
with Section 3 business concerns
entered into under the regulations in
place prior to the final rule’s
compliance date will continue to be
considered Section 3 business concerns.
(1)(iii) at least 25 percent owned by
current public housing residents or
Section 8 residents
One commenter stated that the
revised definition of at least 25 percent
owned by current public housing
residents, or residents who currently
live in Section 8 assisted housing, will
be easier to justify than evidence of a
commitment to subcontract 25 percent
or more of the dollar amount to all
subcontracts. Other commenters stated
that the third option for defining
‘‘Section 3 business concern’’ should be
modified to require that the business
have 51% ownership by public housing
or Section 8 residents. These
commenters warned that unless
residents have majority control there is
a danger of the business being a front for
owners who might not represent
residents’ interests.
Further, the statute defines a Section
3 business concern as one with Section
3 residents having a controlling interest,
or the business employs a substantial
number of Section 3 residents. The
commenter does not believe that this
new proposed criterion is appropriate.
Commenters also thought it would be
inconsistent with the Congressional
statutory intent that economic
opportunities be provided to business
concerns that are majority owned and
controlled by low- and very low-income
people and/or residents of government
assisted housing. (12 U.S.C. 1701u(b)).
Commenters further argued reducing the
required ownership percentage would
also be inconsistent with HUD’s public
housing regulations at 24 CFR part 963,
which defines resident-owned business
as one ‘‘(1) which is at least 51% owned
by one or more public housing residents
and, (2) whose management and daily
business operations are controlled by
one or more such individuals.’’
Commenters felt reducing the required
ownership percentage would invite

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manipulation and abuse, the prevention
of which would require a significant
administrative burden. Commenters
recommended the Section 3 regulations
should be designed to encourage
entrepreneurial development, not a
passive ownership interest.
HUD Response: HUD agrees with
commenters that the 25% ownership
language may create the risk of
unscrupulous business practices.
Therefore, HUD revised the final rule to
require a Section 3 business concern
seeking to meet this third test be 51%
owned and controlled by PHA residents
and Section 8 residents, in place of the
25% test contained in the proposed
rule. This number is also more
consistent with HUD’s current
contracting provision for PHA resident
owned businesses in 24 CFR part 963.
Wages
Commenters stated that businesses
should not be rewarded for paying low
wages; businesses should not receive a
contracting preference by virtue of the
fact that they pay their employees low
wages. The commenters asserted
Section 3 regulations should be
designed to reward businesses that
provide economic opportunities to lowincome persons so that they have a
chance to work their way out of poverty,
and the income determination must be
made immediately prior to the date of
hire. According to the commenters,
HUD’s regulations should also reward
employers who provide decent-paying
jobs so that their employees no longer
need to depend on HUD assistance to
make ends meet. Commenters observed
that by determining the low-income
status of employees at the time of
contract award (the labor hours ‘‘are
performed by low- or very low-income
persons’’) the definition inadvertently
restricts eligibility to businesses whose
employees are currently low-income.
For these reasons, the commenters
proposed that the definition of ‘‘Section
3 business concern’’ be changed to
‘‘Over 75 percent of the labor hours
performed for the business are
performed by persons who were low- or
very low-income immediately prior to
the date of hire and whose current wage
is equal to or greater than 80 percent of
the area median income.’’
HUD Response: The Section 3
regulations are designed to provide jobs
for low-income persons. As these
individuals gain experience, HUD
anticipates wages will increase, and the
individuals should be able to work their
way out of poverty. The definition has
been modified to clarify this framework
by including a three-month
documentation period and to reduce the

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potential incentive to maintain workers
at lower salaries simply to qualify as a
Section 3 business concern.
Contract Requirement
One commenter expressed concern
over the elimination of Section 3
business concern contracting
requirements because the commenter’s
agency spends a lot of resources on
outreach, but recognized many housing
authorities lack the resources or diverse
vendor marketplaces to do the same.
HUD Response: HUD recognizes that
not all PHAs will have the same
resources to outreach to Section 3
business concerns. HUD believes,
however, that counting the Section 3
business concern employees as Targeted
Section 3 workers will incentivize PHAs
to target Section 3 business concerns to
help meet their Targeted Section 3
worker benchmark. HUD will continue
to have a Section 3 business concern
directory as well to make it easy for
PHAs and other entities to identify
Section 3 business concerns in their
jurisdiction. HUD also believes that
making the definition consistent with
the PHA resident-owned businesses
definition in 24 CFR part 963 will also
provide another avenue for finding
Section 3 business concerns.
Alternative Suggestions for the
Definition of Section 3 Business
Concern
One commenter recommended that
HUD extend Section 3 business concern
status to businesses funded through the
Opportunity Zone program.5
Commenters suggested defining a
Section 3 business concern as meeting
one of the following categories, in the
following priority order: (1) Businesses
owned 100% by Section 3 persons; (2)
businesses owned and operated at a
minimum 51% by Section 3 Persons; (3)
Businesses whose total employees
consist of a minimum of 75% Section 3
persons who reside within the project
area; (4) Businesses whose total contract
specific staffing (not back office
administration unless the opportunity
created is a back office position) has
more than 50% Section 3 persons
residing in the project area; (5)
businesses owned by persons providing
a negotiated employment level greater
than 30% of total project staffing to
Section 3 persons; (6) businesses who
commit to directly conduct or to subcontract professional employment
readiness and employment trade skills
training related to the project work or
other in-demand employment
5 See HUD, Opportunity Now, Hud.gov, https://
opportunityzones.hud.gov/.

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disciplines, at a minimum of 10% of
their total contract award, plus or minus
change orders, to Section 3 persons.
Under (1), (2), (5), and (6), there is a
priority order for the Section 3 persons
as well: (A) Public housing assisted
persons at the property where the work
is being executed. When a contract is
issued for service work covering
multiple properties of the PHA, any
public housing person from that PHA’s
portfolio shall compete equally for any
opportunities created as a direct result
of the expenditure. (B) When the service
contract only covers one public housing
property, the persons from that property
will receive first priority for
opportunities and then persons from
other properties of the PHA’s public
housing portfolio will be secondly
considered. (C) Housing Choice Voucher
holders of that specific housing
authority that administers that voucher
will be third priority. (D) Persons
residing in any project-based Section 8
property owned in whole or in part by
that PHA. (E) Current YouthBuild
participants. (F) All other low- and very
low-income persons within the legal
boundaries of the service area of the
project.
HUD Response: HUD appreciates all
the different options provided by
commenters. However, HUD believes
the final Section 3 business concern
definition provided in this final rule
provides a balance that is consistent
with the statute and ensures that most
Section 3 business concerns are in fact
aimed at employing low- and very lowincome persons. See responses above for
additional discussion of the Section 3
business concern definition.

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Small PHA Reporting
Support
Some commenters supported
reporting flexibility for small PHAs, and
especially the removal of the nonconstruction contract goal of 3 percent
of all covered contracts to Section 3
business concerns, which they said is
challenging to meet due to the amount
of professional service contracts. One
commenter suggested that for
consistency and clarity, the final rule
should exclude all PHAs with 250 or
fewer units from reporting on
benchmarks, regardless of procurement
cost. The commenter also suggested that
since the proposed rule exempts Section
8 funding from having to meet Section
3 requirements, the final rule should
clarify the definition of a small agency
for the purposes of Section 3 reporting
to mean an agency with 250 or fewer
public housing units. Another
commenter recommended defining

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‘‘small PHA’’ in a way that alleviates
regulatory burdens for as many agencies
as possible and suggested defining small
PHA as those having 550 or fewer
combined public housing and Section 8
units; or, as Section 8 funding is not
covered by Section 3, utilize a 250 unit
threshold.
Another commenter supported the
small PHA reporting exemption
suggesting that HUD should define a
small PHA in a way that would
maximize the number of agencies
exempted from detailed reporting,
recommending 550 combined units
(consistent with the Economic Growth,
Regulatory Relief, and Consumer
Protection Act of 2018 and the Housing
and Economic Recovery Act of 2008) or
250 public housing units (as Section 8
assistance is not covered by Section 3).
HUD Response: HUD continues to
support the Small PHA reporting
provision in the proposed rule. Small
PHAs with less than 250 public housing
units will not be required to report the
number of labor hours and instead will
be required to report their qualitative
efforts. The final rule does not require
a commitment to award at least 3
percent of the total dollar amount of all
other Section 3 covered contracts to
Section 3 business concerns. HUD
currently is also not changing the
number of public housing units for
determining the Small PHA exception.
All PHAs Should Report for Data
Collection and Compliance
Some commenters recommended that
all PHAs, regardless of size, should be
required to report for data collection
and compliance. Other commenters
specifically objected to the labor hours
reporting exemption for PHAs with
fewer than 250 housing units, because
inexpensive software is available for
PHAs to track and report labor hours.
Other commenters suggested removing
all exceptions for PHAs. Additional
commenters elaborated that reporting
requirements should be the same for all
entities with no exceptions, noting that
every recipient and every dollar should
be included in order to guarantee that
opportunities reach the poorest and
smallest communities.
Commenters noted that small PHAs
should not be exempt because they
could have significant contractor and
subcontractor activity in any given year.
Specifically, one commenter noted that
the $200,000 threshold should apply to
small PHAs because they have the same
opportunity to create jobs as other
entities. Another commenter noted that
not requiring small PHAs to report
creates a loophole that hinders
opportunity.

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HUD Response: HUD has heard from
small PHAs that they do not receive
enough funding or have sufficient pools
of Section 3 workers to support annual
new hire or labor hour reporting. Close
to one-half of small PHAs with less than
250 public housing units receive less
than the $200,000 project threshold
applicable to Section 3 projects that
receive other HUD assistance such as
CDBG and HOME funding. Due to
Operating Fund shortfalls, small PHAs
can take advantage of the authority
under section 9(g)(2) of the United
States Housing Act of 1937 to use its
Operating and Capital Funds flexibly to
fund any eligible activities under either
funding stream. Some small PHAs
compensate by promoting economic
opportunities through referrals of
residents to employers and job fairs,
providing training facilities and
offerings, and other local efforts. To
recognize these other activities and the
generally low amount of funds available
or used for capital projects, small PHAs
will report qualitatively on their efforts.
No Good Faith Assessment for Small
PHAs
Some commenters objected to
allowing small PHAs to supply a ‘‘good
faith’’ assessment of hours worked
because doing so would invite those
entities to bypass important tracking
requirements, suggesting that HUD
should require quarterly, instead of
annual reporting.
HUD Response: The small carve out
for good faith assessment is not limited
to small PHAs. As stated in the
proposed rule, it is a limited exception
where PHAs and other recipients of
public housing financial assistance
could use the reporting of a good faith
assessment of the labor hours of a fulltime or part-time employee from
contractors and subcontractors that have
not been subject to requirements
specifying time and attendance
reporting, and do not have systems
already in place to track labor hours.
This is to address employers that do not
already track labor hours without
making changes in time and attendance
or payroll. It is not a permanent
exception and if in the future the
contractor or subcontractor is required
to track labor hours under some other
authority, or begins to voluntarily track
labor hours, the exception would no
longer apply.
Qualitative Reporting
Another commenter noted that the
rule lacks information on what
qualitative reporting will be required of
small PHAs to substantiate the claim
that such reporting will be less

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burdensome and recommended that
small PHAs have the option to track
labor hours or do qualitative reporting.
HUD Response: The rule seeks not to
be too prescriptive on qualitative
reporting to provide small PHAs with
the flexibility to report on a range of
activities. HUD is considering some of
the following to signify qualitative
efforts: Outreach efforts to generate job
applicants who are Targeted Section 3
workers; direct on-the-job training
(including apprenticeships); indirect
training such as arranging for,
contracting for, or paying tuition for, offsite training technical assistance to help
Section 3 workers; and outreach efforts
to identify and secure bids from Section
3 business concerns. HUD plans to
create a form for tracking and reporting
qualitative efforts, to ease burden on
recipients. HUD agrees that small PHAs
should have the option of conforming to
the more quantitative reporting
standards and has modified the text to
permit such option.

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Dollar Threshold for Small PHAs
A few commenters also recommended
use of a dollar threshold for public
housing assistance similar to that used
for other HUD assistance as a means to
reduce reporting burdens on small
agencies. One commenter suggested that
using a dollar threshold, rather than a
threshold based on number of public
housing units, is a more practical and
effective means of identifying those
smaller projects that are less likely to
generate significant Section 3
employment opportunities. Another
commenter further suggested that
thresholds established in the proposed
rule for Community Planning and
Development (CPD) should be applied
across the board to all programs and
noted that using a per-project or perrecipient threshold would more
accurately exclude or include small
PHAs based on funding. This
commenter also suggested establishing a
threshold for work-able non-working
residents below which small PHAs
would not have to report.
HUD Response: HUD continues to
maintain that a dollar threshold for
public housing financial assistance is
not consistent with the statute. Section
3 applies to public housing operating,
development, modernization, and
management assistance, which covers
virtually all housing authority projects
and activities. HUD believes that the
statute’s expansive coverage of public
housing projects and activities indicates
that any attempt to diminish the
coverage would be inconsistent with the
statute.

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Subcontractors
Several commenters noted that
Section 3 requirements should not
apply to subcontractors. Commenters
stated that extending reporting
requirements to subcontractors would
discourage participation in PHA
contracting opportunities, adversely
impacting competition in the market,
driving up construction costs and
limiting economic opportunities. Other
commenters added that HUD should
consider ways to reduce administrative
requirements on subcontractors
wherever possible, echoing concerns
that regulatory burdens which do not
acknowledge subcontractor’s practical
limitations will discourage private
sector partners from working with
PHAs.
The commenters also suggested that
regulatory relief for subcontractors
could be achieved in a number of
different ways, which range from
exempting small subcontractors,
excluding subcontractors from Section 3
obligations if their contracts are below
a certain dollar threshold or below a
percentage of the total covered funding
on the Section 3 project. Commenters
also suggested HUD consider limiting
Section 3 obligations to the recipient,
general contractor and immediate
subcontractor(s), noting that relieving
some or all Section 3 obligations on
subcontractors may attract more
high-quality tradespeople to affordable
housing construction projects and
possibly also lower the construction
costs on Low Income Housing Tax
Credit (LIHTC) and other affordable
housing projects with covered HOME or
CDBG funds.
Other commenters who expressed
concerns about the reporting
requirements for grantees and
subcontractors also suggested thresholds
for subcontractor reporting. Some
commenters suggested retaining the
existing $100,000 threshold, though one
commenter recommended a reduced
compliance level, allowing
subcontractors to track Section 3
employees instead of labor hours, to
reduce the administrative burden on
small entities who lack the capacity to
track hours. Some commenters
suggested a reporting requirement
threshold of $250,000 to align with the
OMB procurement threshold, one of
whom recommended this threshold also
apply to contractors and offered the
$10,000 micro purchase threshold as an
alternative. Other commenters suggested
a compliance threshold of $200,000.
A number of commenters supported
reporting requirements for both
contractors and subcontractors. One

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commenter recommended excluding
second tier and below subcontractors
from requirements, noting that large
PHAs are more likely to award or fund
multimillion-dollar projects that have
more than 25 first-tier subcontractors.
Two commenters mentioned the role of
contractors simplifying the reporting
mechanism for subcontractors and
encouraging subcontractors to comply
with requirements. One commenter also
suggested that the funding recipient
should be allowed to decide the extent
of the Section 3 reporting requirements
for subcontractors.
One commenter requested
clarification as to how Section 3
requirements ‘‘flow down’’ to
contractors and subcontractors for
housing and community development
financial assistance, noting the current
regulation includes references to
recipients as well as contractors and
subcontractors when describing
numerical goals and hiring/contracting
preferences. The commenter went on to
state that Subpart C of the Proposed
Rule references only the recipient when
describing the employment, training
and contracting requirements and safe
harbors, and removes the $100,000
contractor and subcontractor threshold
in the current regulation for triggering
Section 3 requirements. The commenter
noted that while the Proposed Rule does
mandate that each recipient ‘‘require
subrecipients, contractors, and
subcontractors’’ to meet the hiring/
contracting requirements, they would
propose a clarification on the extent to
which contractors, subcontractors and
subrecipients on Section 3 projects are
bound by the requirements.
HUD Response: HUD is sensitive to
the potential burden that Section 3
compliance may impose and has
focused on outcomes, allowing the
recipient to direct where the recipient’s
efforts, and its contractors’ and
subcontractors’ efforts, will have
maximum effect.
In the statute, the sections addressing
public housing programs specifically
include ‘‘contractors and
subcontractors’’ in Section 3
requirements. In contrast, the statute
does not reference ‘‘subcontractors’’ in
the sections addressing other covered
housing and community development
assistance. Section 3’s applicability to
subcontractors as set forth in this final
rule closely tracks the statute’s
requirements. The reporting
requirements, however, focus on
outcomes, deferring to the recipient to
focus their efforts for maximum impact
with respect to Section 3, and aligning
the contractual obligations the recipient
imposes on contractors and

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subcontractors accordingly. Unlike the
current rule, which applies Section 3
compliance to all subcontractors in
excess of a $100,000 contract threshold,
the final rule does not apply specific
Section 3 reporting obligations to any
subcontractor and instead such
requirements would stem from the
recipient. See § 135.3(a)(3)(ii)(B). The
proposal to reinstate the $100,000
contract size threshold or any
alternative threshold would limit the
recipient’s flexibility to determine how
to achieve the ‘‘greatest extent feasible’’
standard most effectively. Similarly,
subcontractors are excluded from the
contract language provisions in Section
75.27(a), but subcontractors are still
required to meet Section 3 requirements
in Section 75.19, which provides the
recipient flexibility to achieve the goal.
The rule implements the suggestion
provided in the comments that the
recipient be allowed to decide on the
extent of the Section 3 reporting
requirements for subcontractors where
the statute does not constrain HUD from
providing this flexibility.
Definition for ‘‘neighborhood’’ or
‘‘service area’’
Some commenters supported the
proposed definition, stating that the
definitions are reasonable and will
simplify compliance. Other commenters
accepted only the one-mile radius
definition of ‘‘service area’’ or
‘‘neighborhood,’’ but suggested that
HUD eliminate the population
requirement given the impact on rural
areas.
Some commenters disagreed with the
proposed definition, stating that metrics
will be skewed based on close proximity
to more affluent areas. Another
commenter thought the definition is
inconsistent with the statutory intent to
encourage employment opportunities
among low- and very low-income
persons, noting a single definition
cannot capture the expansive
geographic areas. Another commenter
noted the definition will actually limit
mobility and the long-term success of
resident programs because contracts
will not provide opportunities to
residents in successive projects in
different neighborhoods. Some
commenters wrote that the definition
limits businesses in diverse economies
and in high-cost cities that need more
flexibility to recruit. One commenter
wrote that this new definition would
significantly reduce the labor pool of
eligible Section 3 new hires, making it
difficult to achieve benchmarks. Other
commenters wrote that it may exclude
local public housing or Section 8
residents. Another commenter thought

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that it would add challenges for
contractors in identifying and
prioritizing eligible workers.
Other commenters noted that the
restriction does not account for Section
3 covered projects in areas that are not
low-income, such as some CDBG
expenditures. In addition, commenters
noted that such a limitation could have
the unintended consequence of
excluding large groups of people from
the pool of potential employees,
especially in cities that are combatting
racial segregation. Another commenter
stated that the requirements are too
geographically limited as to whom and
where recipients/contractors must
provide opportunities. Additionally, it
does not account for opportunities that
are accessible beyond the prescribed
radii by using mass transit and other
commuting opportunities.
Some commenters noted that a new
definition would add unnecessary
administrative burdens which increases
the cost of program management and
compliance. One commenter wrote that
determining how to meet a 5,000-person
radius would be burdensome. Other
commenters wrote that completing data
analysis of employee home locations
and certification would be
administratively burdensome and could
be covered under state and local data
privacy laws. In addition, a commenter
stated that the definition may limit
PHAs’ abilities to hire individuals in
their communities who would
otherwise qualify as a Section 3 worker
and stated that entities receiving
community development funds are
better at determining which individuals
would benefit most from Section 3
employment.
Several commenters suggested that
HUD retain the definition of ‘‘service
area’’ as it exists in the current rule at
24 CFR 135.5. Another commenter
supported Section 3 and encouraged the
retention of flexible approaches to
compliance, such as those outlined in
24 CFR 135.30. Any proposed rule
changes should consider geographical
and service population differences. The
commenter supported maintaining the
rule as is, noting it provides flexibility
for compliance through training, hiring,
or contracting. Similarly, another
commenter noted that there should be
flexibility and factors other than hours
worked and earned to provide Section 3
credit.
HUD Response: HUD notes that the
neighborhood or service area
requirement applies to the prioritization
of effort with respect to housing and
community development financial
assistance, not public housing funds.
The hiring prioritization is different for

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this category of funding, and pursuant
to the statute is focused on residents of
the geographic area in which the work
is being done, not on the rent-assisted
status of the workers. Consequently, in
this context, HUD is not adjusting the
regulatory text to acknowledge the
availability of transit or to prioritize
employment of low- and very-lowincome people from a broader
geography.
The rule seeks not to limit the labor
pool available within specific
geographic areas, but to allow flexibility
for smaller and more rural areas through
the definition. HUD believes counting
individuals who live within one mile of
the worksite and within an expandable
circle centered around the worksite that
encompasses 5,000 people provides a
definitive means of determining who
counts as a Targeted Section 3 worker
within the service area or the project
neighborhood. Where the one-mile
radius circle centered around the
worksite has less than 5,000 people, the
radius would be expanded outwardly to
achieve the desired population of 5,000
people. This expansion would address
many of the commenters’ concerns
regarding smaller communities or rural
areas. For the benefit of densely settled
urban areas, HUD recognizes there may
be more than 5,000 people, but will
hold at the one-mile geographic
diameter.
HUD believes this final rule does take
into consideration geographical and
service population differences and
retains flexibility for compliance
through training, hiring, or contracting.
Additionally, the rule is meant to
streamline the Section 3 process to
make it consistent with the statute and
easier to implement. Compliance can be
evaluated qualitatively if the labor hours
benchmark cannot be met. Under this
rule, both measurements are
permissible, and the requirements for
qualitative evaluation are laid out in the
rule. In addition, HUD intends to create
a web-based tool to support recipients,
subrecipients, contractors, and
subcontractors in determining the
geographic area encompassing Targeted
Section 3 workers.
Allow Grantees To Define
‘‘Neighborhood’’ or ‘‘Service Area’’
Commenters recommended that
grantees be given the ability to define
‘‘service area’’ for themselves. Another
commenter urged HUD to adopt
something other than a ‘‘one-size-fitsall’’ approach so that small rural
counties would not have difficulty
utilizing federal funding. One
commenter noted for example that in
New Orleans, there are clearly defined

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neighborhoods that most residents and
officials understand and recognize,
some having a larger area than a onemile radius. The commenter stated that
allowing for a more localized definition
of ‘project area,’ rather than using
HUD’s definition of a one-mile radius or
5,000 person population guideline,
increases local participation in projects
that impact those individuals and their
immediate surroundings and makes the
most sense for their community. This
commenter stated that recipients should
be able to define their geographic size
for purposes of how they focus their
priorities regarding low-income persons
residing within the service area or
neighborhood in which the project is
located, and communicate their
determination to sub-recipients,
contractors and subcontractors. Another
suggestion was to have localities work
with their local HUD office to define
service area based on the locality’s
characteristics.
Commenters suggested that HUD
allow residents and businesses from
anywhere in the state to receive priority
consideration or to give state recipients
deference in establishing areas for
purposes of meeting Section 3
requirements. Additionally, one
commenter stated that service area may
change based on project type, some
serving entire communities while others
serve smaller sections of a community,
rendering the one-mile radius
inapplicable depending on the project’s
scope of impact.
The commenters noted that limiting
preference to a certain ‘‘service area’’
may have the unintended consequence
of excluding large groups of people from
the pool of potential employees. The
commenters proposed allowing
localities to either target job
opportunities to low-income hires from
anywhere within the locality, or work
with their local HUD offices to define
appropriate service areas based on the
characteristics of the locality. One
commenter wrote that the one-mile
radius is too limiting and that residents
within the community should be
considered.
Some commenters suggested that
HUD define service area to be ‘‘the area
within or contiguous to a PHA’s
jurisdictional boundaries.’’ Other
commenters suggested that HUD define
‘‘service area’’ or ‘‘neighborhood’’ in the
following tiered manner: (1) PHA
residents in project area; (2) Section 3
residents in project area; (3) extremely
low-income or homeless individuals in
project area; (3) YouthBuild in project
area; and (5) next closest PHA in project
area.

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One commenter suggested that HUD
should give preference to eligible
residents of the neighborhood
surrounding the PHA before other
residents of the metropolitan area and
should utilize the language in Subpart C
§ 75.19 reading ‘‘Section 3 workers
residing within the service area or the
neighborhood of the project.’’ One
commenter stated that Section 3
Employment Priorities, as written, is
very clear as to the order of Section 3
applicant priorities, starting with
residents in closest proximity to the
construction project, but disagreed that
the one mile and 5,000 population
radius is an appropriate geographic,
using two PHA examples of Cayce Place
and Edgehill to show that these metrics
would be skewed based upon the close
proximity to those earning twice the
AMI and with property values in the
hundreds of thousands of dollars.
HUD Response: As noted above, the
neighborhood or service area
requirement applies to the prioritization
of effort with respect to housing and
community development financial
assistance, not public housing funds,
and the focus in this context is on
residents of the geographic area in
which the work is being done. HUD
believes that its proposed framework of
counting individuals who live within
one mile of the worksite and within an
expandable circle centered around the
worksite that encompasses 5,000 people
provides a definitive means of
determining who counts as a Targeted
Section 3 worker within the service area
or the neighborhood of the project. HUD
believes the proposed Section 3
regulation takes the varied geographical
areas into account and provides a
streamlined framework that more
specifically determines who might
benefit from employment and training
opportunities available within the area
surrounding a Section 3 project. Where
the radius or circle centered around the
worksite has less than 5,000 people, the
radius would be expanded outwardly to
achieve the desired population of 5,000
people. All Targeted Section 3 workers
identified by the geographic radius must
also qualify as Section 3 workers, so this
would not include higher-income
workers within the neighborhood or
service area.
Rural Areas and Contractors
Several commenters noted concerns
about the effect of the proposed ‘‘service
area’’ definition on Section 3
implementation in rural areas. One
commenter stated it would be
unrealistic and burdensome for
employers in rural areas to administer
and monitor the one-mile radius, and

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that it does not reflect the realities of
construction employment in small rural
states where the service area is the
entire state. One commenter also stated
that in areas of low population density,
there often will not be sufficient
residents or businesses that are capable
of performing the work required for
housing and community development
projects. Other commenters wrote that,
given chronic and widespread labor
shortages, it is inadvisable to have such
a small geographic restriction on the
labor pool of Section 3 workers.
Other commenters accepted the onemile radius definition of ‘‘service area’’
or ‘‘neighborhood,’’ but stated the 5,000person population radius is too large for
rural areas. Another commenter noted
that the population threshold could
increase the service area size
exponentially in cities and counties
where the population is less than 5,000.
One commenter in Utah opposed the
proposed definition, arguing that
changing the definition of
‘‘neighborhood’’ to 5,000 people would
not work because of the state’s very
large rural geographic area. The
commenter stated HUD’s determination
that most (77%) current CPD projects
had a population of 5,000 people within
one mile of the project site is not
applicable in Utah, which has only 29
counties. The commenter detailed that
70% of Utah’s population resides its 4
urban counties, and Utah’s CDBG
projects are part of the 23% that do not
have 5,000 people within a one-mile
radius of a project site.
One commenter mentioned the
impact of the proposed definition on
small contractors or those outside the
immediate service area, noting that
CBDG and HOME funds are often
financing projects completed by small
contractors who need to travel outside
of a service area to complete work on a
project. Another commenter rejected the
proposed definition, suggesting that for
small town jurisdictions, the ‘‘service
area’’ or ‘‘neighborhood’’ should apply
within the recipient’s jurisdiction,
which may be an entire county. One
commenter mentioned that finding
Section 3 contractors or businesses is
already challenging and should not be
limited by a ‘‘service area’’ or
‘‘neighborhood’’ definition.
HUD Response: HUD acknowledges
and has carefully considered the
concerns of commenters representing
small and rural areas regarding the
proposed definition of neighborhood/
service area. As previously stated, HUD
supports the proposed framework of
counting individuals who live within
one mile of the worksite and within an
expandable circle centered around the

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worksite that encompasses 5,000
people. This concept was designed
specifically to address the unique needs
and challenges facing rural and small

communities. The graphic provides an
example on how a circle centered
around a worksite with fewer than 5,000
people may be expanded until the

desired population goal of 5,000 people
is met or eligible Targeted Section 3
workers are counted.

The text as written will provide a
definitive means of determining who
counts as a Targeted Section 3 worker
within the service area or the
neighborhood of the project. HUD
believes the proposed Section 3
regulation takes the varied geographical
areas into account and provides a
streamlined framework that more
specifically determines who might
benefit from employment and training
opportunities available within the area
surrounding a Section 3 project. HUD
also notes that over time, as outcome
results are reported to HUD, the
benchmarks may be tailored to certain
types of projects and geographies by
notice, with the explicit intention that it
may be appropriate to set different
benchmarks for rural areas given the

availability of labor and the patterns of
contracting work in rural areas.

encompasses Targeted Section 3
workers, some commenters still argued
for a broader definition and geographic
areas that define Targeted Section 3
workers. Some commenters thought the
web tool would not alleviate burden
from the contractor that would still need
to determine if a worker meets the
requirements to be in the geographically
defined area.
HUD Response: HUD agrees with the
suggestion to provide a web tool to aid
in the process of determining a
geographic neighborhood/service area.
As stated in the proposed rule, HUD
will create and provide this tool at the
issuance of the final rule to aid
recipients, subrecipients, contractors,
and subcontractors to determine the
geographic area that encompasses
Targeted Section 3 workers under this

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Web Tool
Some commenters noted that HUD’s
proposal to provide a web tool to aid in
the process of determining a geographic
service area would be helpful. One
commenter urged HUD to provide the
proposed web tool that will help
determine the geographic area that
encompasses Targeted Section 3
workers before it proceeds with the
current definition and finalizes the rule.
Commenters requested that HUD
provide it to state and local recipients,
sub-recipients, contractors, and
subcontractors for testing before
implementation. Though encouraged by
the prospect of a web tool to help
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definition. HUD will also explore the
option of creating a mobile tool to help
recipients with monitoring and
compliance determinations.

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Exceptions
Commenters suggested the proposed
definition should not apply to Puerto
Rico considering its geographic
composition.
HUD Response: HUD has decided to
retain the proposed definition for all
recipients, including Puerto Rico. HUD
believes the proposed regulation takes
the varied geographical areas into
account and provides a streamlined
framework that will enable eligible
workers to benefit from employment
and training opportunities available
within the area surrounding a Section 3
project.
YouthBuild Participants
Some commenters were in favor of or
not opposed to expanding the definition
to include previous YouthBuild workers
that are under 24 years of age and those
who are still eligible to participate in
YouthBuild but may have graduated out
of the program. One commenter was
opposed to expanding the definition on
the grounds that it would require
onerous and complex background
checks and research to determine
whether a participant meets the
alternate definition. One commenter
recommended that the definition be
changed to include previous
YouthBuild workers who successfully
graduated from the program and are
either under age 24 or are otherwise still
eligible for YouthBuild programs. Other
commenters proposed that the
definition of YouthBuild participant
should be as broad as possible,
regardless of age, while other
commenters proposed the definition to
include other programs which teach
relevant skills, such as Service and
Conservation Corps participants and
graduates, participants/graduates of
‘‘pre-apprenticeship’’ training programs,
participants/graduates of ‘‘youth corps,’’
VFW Local Program participants, and
AmeriCorps participants.
HUD Response: HUD appreciates the
commenters’ support of the YouthBuild
program, and after careful deliberation,
has decided to keep the definition
consistent with the current regulations
and current YouthBuild participants.
See 29 U.S.C. 3226; 24 CFR 135.5. HUD
determined that given the work required
to certify current YouthBuild workers,
that adding a longer-term duration
would create an additional paperwork
requirement on both the person
claiming the status and the entity
reporting the status. It may also cause

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confusion using a certain period of time.
Additionally, a YouthBuild worker can
still qualify for 5 years if they are
employed at the end of their YouthBuild
experience.
Applicability and Scope
One commenter supported the rule’s
change to applicability. Another
commenter supported Section 3 as an
important mechanism to strengthen
communities, reduce poverty, and
increase residents’ economic selfsufficiency. One commenter proposed
that these rules should apply to all
developers, contractors, and subcontractors; all professional, skilled,
unskilled, technical, and consulting
service contracts compensated partially
or fully by HUD funds—no exceptions.
Another commenter suggested these
rules shall be applicable to all
professional, skilled, unskilled,
technical, and consulting service
contracts line items.
Other commenters suggested that
HUD should clarify that owners and
managers of HOPE VI, Choice
Neighborhoods and Mixed-Financed
Developments are subject to Section 3
Hiring and Contracting requirements in
their own operations and should extend
this requirement to Rental Assistance
Demonstration (RAD) converted
projects. One commenter supported
HUD’s separation of PHA requirements
from non-PHA requirements because it
did not make sense for non-PHAs to
follow regulations intended for PHAs.
A commenter supported HUD’s
clarification regarding Section 3
applicability to projects receiving HUD
assistance of $200,000 or greater.
Another commenter warned that this
rule states that Section 3 will apply
when the amount of HUD assistance is
greater than $200,000 on a per-project
basis, which would potentially exempt
projects where the HUD funding is less
than $200,000, even though the
combined total funding is much higher,
leading to a decrease in number of
projects subject to Section 3.
One commenter suggested that PBV
and PBRA contracts should be exempt
from Section 3 compliance. Another
commenter suggested that, rather than a
per-project basis, it would be simpler to
apply Section 3 to individual contracts
for housing and public construction
funded with HUD assistance.
HUD Response: HUD shares the view
that Section 3 is an important
mechanism to strengthen communities,
reduce poverty, and increase economic
self-sufficiency. HUD seeks to focus
Section 3’s applicability where it can
have a real impact, and to exempt from
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applicability imposes burdens not
commensurate with outcomes. HUD has
concluded that in certain circumstances,
particularly professional services, there
are very few opportunities for Section 3
outcomes. The proposed definitions
defined the scope of programs subject to
Section 3 requirements but did not
expand such coverage beyond what
HUD’s existing regulations already
required for compliance. HUD proposed
the $200,000 threshold for housing
rehabilitation, housing construction and
other public construction projects
because work below that amount would
likely not trigger long-term employment
opportunities for which the recipient
could show measurable labor hours.
HUD disagrees that Section 3 should be
applied to all types of work, without
exception, and reaffirms in the final rule
the exception for professional services.
The proposed rule does, however, give
credit in the reporting for opportunities
that are created in the professional
services context by including
professional services labor hours in the
numerator, and not in the denominator,
of the reported outcome ratios. The final
rule applies Section 3 in a manner
consistent with the statute. HUD has
determined that monthly rental
assistance payments, such as those
provided under Section 8 project-based
voucher or project-based rental
assistance housing assistance payment
contracts, are not covered by the statute.
Properties converted to Section 8 rental
assistance through the RAD are covered
by the rules applicable to Section 8.
However, the RAD governing notice
does apply Section 3 requirements to
those activities occurring after the date
of the RAD conversion which are
contractually obligated as part of the
RAD conversion.
Employment Priorities § 75.9 / § 75.19
Some commenters supported
separating the agencies which fund
Section 3 projects from PHAs and
mirroring the statute. Other commenters
felt that the priorities should be the
same for both Section 3 projects and
PHA financial assistance. Other
commenters suggested that HUD give
preferences to certain groups, while
other commenters thought HUD should
consider adding geographic
considerations into the definition. One
commenter suggested that the last
priority level should be expanded to any
person if the PHA can reasonably
demonstrate there are not sufficient
Section 3 residents with the requisite
job skills within a project’s geographic
area. Commenters also asked HUD to
clarify that otherwise eligible workers of
PHAs, even if under private

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management, are included in this
category, as well as recipients of Section
8 assistance or voucher assistance
residing in properties managed by other
entities. One commenter suggested HUD
change the regulatory language to insert
the word ‘‘priority’’ in § 75.19 to clarify
the requirement and make the sections
consistent with § 75.9.
HUD Response: HUD appreciates the
comments that supported the
employment prioritizations. These
prioritizations follow the statutory
prioritizations, and HUD is including
that language for clarity for recipients
implementing the regulations. HUD has
rephrased § 75.19 to include the word
‘‘priority,’’ consistent with the language
of the statute. While HUD appreciates
the alternative suggestions, these
regulations are meant to streamline the
Section 3 process to make it consistent
with the statute and easier to
implement. HUD believes that the
existing regulatory text does that and is
making no changes to this section. HUD,
however, encourages the HUD financial
assistance recipients to consider all the
diverse suggestions provided when
working on outreach to persons who are
low- and very low-income persons to
meet the Section 3 benchmarks
including residents of PHAs under
private management such as those
residing in a mixed-finance
development project.
Reporting § 75.15 / § 75.25
Consolidated Plan Regulations
A commenter recommended that the
Consolidated Plan regulations at 24 CFR
91.520(a) be amended to specifically
include Section 3 reporting; PIH will
need to develop a Section 3 reporting
format.
HUD Response: HUD will review
Department-level strategies on how to
effectively incorporate Section 3
reporting into current systems and data
collection tools, including the
Consolidated Plan. As a result, HUD
will issue sub-regulatory guidance on
reporting per program area and provide
technical assistance to recipients for
Section 3 compliance.

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Systems
A commenter warned that HUD will
need to modify IDIS to allow CDBG and
HOME recipients to report on their
Section 3 actions annually because
CDBG and HOME recipients will report
on their Section 3 actions in IDIS using
a similar form as HUD Form 60002 that
has been modified to capture labor
hours worked. This commenter stated
that this move will eliminate

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redundancy and ease the administrative
burden for grantees.
HUD Response: HUD agrees that the
Integrated Disbursement and
Information System (IDIS) and DRGR
should be modified to ensure accurate
Section 3 compliance reporting for
CDBG and HOME recipients. HUD will
also adjust our data collection systems
as necessary to ease administrative
burden for grantees and to eliminate
redundancy.
Report Through Action Plan and/or
CAPER and Effective Date
A commenter supported HUD’s effort
and recommended reporting through the
Action Plan and/or the Consolidated
Annual Performance Evaluation Report
(CAPER), only on completed projects.
One commenter recommended that the
final rule be effective for funds granted
in the next Federal fiscal year after
publication of the final rule so there is
time for contracts/written agreements
with sub-awardees to be amended, and
in order to avoid having CAPER
reporting requirements from annual
federal years with two separate program
requirements.
HUD Response: HUD supports
efficient and effective Section 3
compliance reporting through current
mechanisms, such as the Annual Action
Plan and/or CAPER, for applicable HUD
programs. As stated in the proposed
rule, HUD believes that requiring
reporting annually, but consistent with
timeframes that PHAs and other
recipients of other housing financial
assistance are already using to submit
documents to HUD, will relieve existing
burden. HUD may also look into
reporting into other existing systems
rather than requiring PHAs and other
recipients to log into and report under
a separate system, such as the existing
SPEARS.
Double Counting
A commenter stated that reporting
responsibilities when multiple
government agencies provide HUD CPD
funds are unclear and requested HUD
determine whether agencies will be
responsible for reporting outcomes for
each federal investment or whether
HUD will prevent double counting by
limiting reporting to one funding agency
per Section 3 project.
HUD Response: Section 75.29(b)
specifies that when there is funding
from multiple programs that exceed the
threshold in § 75.3(a)(2), the recipient
will report to the applicable HUD
program office. Some HUD systems
allow for indicating when there are
multiple HUD funds so that reporting
can be limited to one system. However,

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not all HUD systems provide for that
type of designation. HUD will provide
additional guidance to recipients that
have multiple funding sources on the
proper process for reporting Section 3
project completion.
Separate Reporting by Funding Source
One commenter requested HUD
clarify whether PHAs will still be
required to report separately by funding
source (e.g., Operating Funds and
Capital Funds) or whether the hires
report will be aggregated to report only
on PHA total funds. This decision will
impact how PHAs currently collect and
track Section 3 hires. A commenter
supported elimination of separate
reporting on contracting with Section 3
business concerns. Other commenters
stated that the reporting and monitoring
required to remove professional services
labor hours from overall labor hours
would add additional administrative
burden to PHAs and could prove
challenging in the overall reporting
process.
HUD Response: Under the final rule,
for non-MTW agencies, reporting
initially will remain at the grant or
individual program level, but HUD may
explore agency-level reporting where
possible to streamline and simplify.
PHAs will still be required to report by
separate funding source or in the
aggregate for MTW agencies. For ease in
administration, the rule will provide
separate definitions for these types of
funding and separate subparts relating
to: (1) Public housing financial
assistance, which covers (a)
development assistance provided
pursuant to Section 5 of the United
States Housing Act of 1937 (the 1937
Act), (b) operations and management
assistance provided pursuant to Section
9(e) of the 1937 Act (Operating Fund),
and (c) development, modernization,
and management assistance provided
pursuant to Section 9(d) of the 1937 Act
(Capital Fund); and (2) Section 3
projects, which means housing
rehabilitation, housing construction and
other public construction projects
assisted with HUD housing and
community development assistance
when the amount of the assistance to
the project exceeds $200,000, or
$100,000 where the assistance is from
HUD’s Lead Hazard Control and Healthy
Homes programs. There are no current
plans to aggregate the information or
eliminate reporting on contracting with
Section 3 business concerns. Small
PHAs with less than 250 public housing
units will be permitted to report
qualitatively. HUD is exploring how
best to implement qualitative reporting
for small PHAs, and as indicated above

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may study whether other reporting
methods should be contemplated in the
future. As stated in the final rule, HUD
believes that tracking labor hours
consistent with existing tracking for
prevailing wage requirements would
reduce burden on recipients. HUD also
believes that tracking labor hours will
better allow HUD to determine if longterm employment opportunities are
being generated.
Exempt Commodity Purchases, NonConstruction, and Professional Services
Commenters strongly agreed with the
change to exempt both commodities
purchases (material supply contracts) as
well as professional services (contracts
for legal, accounting, financial
consulting, environmental assessment,
A&E services and other professional
services) from the calculation of
contract dollars and new hires for
reporting. One commenter supported
exclusion of Section 3 requirements on
non-construction professional services
(e.g., legal, accounting, and engineering)
but has concerns that not all Section 3
workers want careers in the
construction field and some
employment is generated in nonconstruction contracts.
HUD Response: The final rule
maintains the exemption of material
supply contracts and maintains the
structure presented in the proposed rule
which does not require separate
reporting of contracting with Section 3
business concerns. HUD is providing
clarification on the exemption for
professional services in the definition of
‘‘professional services’’ in this final rule,
by defining professional as services that
require an advanced degree or
professional licensing.
HUD acknowledges that many lowincome workers seek employment in
jobs other than construction. However,
data indicate that there are relatively
few opportunities for Section 3 hiring in
professional services fields such as legal
services and civil engineering. Many of
the positions within these professional
services fields require specialized
degrees and in many cases the hiring is
not directly tracked to a specific
federally funded project or activity. The
reporting structure in the rule allows a
recipient to count as Section 3 labor
hours and as Targeted Section 3 labor
hours any work performed by a Section
3 worker or a Targeted Section 3 worker
(i.e., in the numerator of the
calculation), even when the professional
services as a whole are not counted in
the baseline reporting (i.e., in the
denominator of the calculation). The
effect of this reporting structure is to
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to report Section 3 hires in the
professional services context.
Frequency of Reporting
Commenters stated that annual
reporting does not facilitate capture and
correcting of non-compliance. Some
commenters recommended all PHAs
should provide Section 3 reports
quarterly instead of at the end of the
fiscal year. Another commenter
recommended that reporting should be
done on a monthly basis.
One commenter strongly supported a
return to annual reporting and
integration of reporting with other
funding program reporting
requirements. Another commenter
supported annual reporting for reducing
administrative burden of more frequent
reporting. Another commenter
supported the proposed change to
annual reporting on projects completed
within the reporting year.
HUD Response: The reporting
requirements represents a balance
between frequent reporting, effective
reporting, and administrative burden.
Frequent reporting allows HUD to keep
a closer eye on compliance, and early
oversight can result in identification of
non-compliant actors when there is still
opportunity to influence change.
Frequent reporting also risks identifying
as non-compliant those endeavors
where the Section 3 opportunities are
sequenced later in the effort’s timeline,
resulting in ineffective reporting. This is
often the case in construction efforts
that begin with heavy machinery work
and end with trades where Section 3
opportunities are more commonly
created. Additionally, there is an
administrative burden for the reporting
entity, and an oversight responsibility
for HUD, each time Section 3 reports
must be submitted. HUD notes the
variety of opinion represented in the
comments, with suggestions of monthly,
quarterly, and annual reporting, as well
as the project-based reporting permitted
in the proposed rule. HUD has
determined not to revise the rule. As a
result, reporting is on an annual basis
for ongoing endeavors such as PHA
operations or multi-year infrastructure
or disaster recovery efforts. For discrete
projects such as development of a
singular multifamily apartment
building, the reporting is on a project
basis, and reported to HUD in the
recipient’s annual report corresponding
to the year of the project’s completion.
Acknowledging the value of early
intervention, the final rule also shifts
oversight of Section 3 from a centralized
HUD office, which typically does not
have visibility into whether the funding
recipient is embracing and effectively

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implementing its Section 3 obligations,
to the program office which is in regular
communication with the funding
recipient. Part of HUD’s intention with
respect to this shift in oversight is to
integrate discussions of Section 3
compliance into regular oversight
discussions so that there are
opportunities to influence improvement
in Section 3 performance on an ongoing
basis.
Submission Timing
Commenters recommended that HUD
should provide further guidance on how
and when annual reports will be
submitted and stated that meeting the
current January 10th deadline is a
challenge for PHAs because end-of-year
hires may be undercounted because
paperwork may still be in process in
January. Commenters stated that if the
new regulations require reporting
consistent with the timeframes that
PHAs are already using, it will assist
PHAs in providing the most accurate
and up-to-date information. The
commenters recommended that HUD
refine the proposed reporting frequency
regulations to read: ‘‘recipients must
report annually after the end of their
reporting year to HUD . . .’’ and HUD
should provide PHAs 90 days from the
end of their reporting year to have
sufficient time to collect and aggregate
data.
Another commenter noted that MTW
PHAs provide annual reports based on
the past fiscal year and updating the
system to include such Section 3
reporting would be easier to use. This
commenter also noted that it needs to be
clarified how the reporting would deal
with differing timelines for annual
reporting versus the duration of projects
with funds triggering Section 3
reporting.
HUD Response: As noted above, HUD
will issue sub-regulatory guidance on
reporting by program area. HUD
anticipates that it may be able to
integrate Section 3 reporting into the
funding recipients’ other, programmatic,
reporting structures, which already have
existing time frames for submission of
reports. The rule does specify that
reporting is based on the recipient’s
fiscal year, which language has not been
changed. Section 3 requirements may
not be waived by MTW agencies. MTW
only provides flexibility for
requirements promulgated under the
1937 Act, while Section 3 is a provision
of the Housing and Urban Development
(HUD) Act of 1968. Since HUD has a
specific online system to collect Section
3 data—SPEARS—all PHAs, including
MTW agencies, should report into that
system. HUD will consider providing

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training specific to MTW agencies, in
addition to training for a more general
audience, on how to use the SPEARS
system.

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Major Construction Project
Administrative Burdens
Commenters warned that large
workforces and the use of multiple
subcontractors on major construction
projects would lead to heavy
administrative burdens which may
discourage subrecipients or contractors
from bidding. These commenters
recommended contractors be allowed to
self-certify to relieve administrative
burdens.
HUD Response: HUD appreciates the
commenters’ concerns but determined
that self-certification would not provide
HUD with an adequate compliance
oversight mechanism. There is no
provision in the rule for selfcertification of meeting the benchmark
requirements.
Increasing Costs
One commenter stated that the
requirements are already burdensome to
their local governments, administrators,
contractors and sub-contractors and the
proposed rule would increase the
burden, leading to fewer contractors
willing to participate in CDBG projects,
driving up costs, and leading to smaller
projects and fewer beneficiaries. One
commenter supported keeping reporting
requirements to a minimum because
both PHAs and HUD staff have limited
capacity for reporting and providing
constructive feedback.
One commenter stated the ability to
identify workers individually rather
than relying on the business concern to
meet Section 3 definitions provides
additional opportunity to demonstrate
Section 3 compliance where there was
none before, but this creates an
additional burden to document safe
harbor, particularly for Lead Hazard and
Healthy Homes projects where a lower
project dollar threshold is imposed. The
commenter went on to suggest HUD
consider providing additional funding
for contractors to meet the financial
impact of the paperwork burden of
documenting compliance. Similarly,
other commenters noted that under the
previous rule the dollar threshold is
zero, whereas under the proposed rule,
despite the type of HUD funds received,
every penny contracted, invested, or
applied to any contract project,
regardless of ownership, would have
triggered full Section 3 compliance.
Commenters also expressed concern
for the burden on contractors to meet
hourly benchmarks while working
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and potential costs to the owner if a new
hire fails to meet job requirements. One
commenter stated that a significant
increase in Federal funding would be
required to fund the increased
administrative burden of the proposed
rule. Other commenters stated that due
to the lack of resources many PHAs
have, HUD should ask for increased
funding for public housing so that PHAs
can sufficiently meet Section 3’s
intended goals. Commenters suggested
HUD consider creating Section 3
technical assistance funding that can be
used to build PHAs’ technical
knowledge and capacity.
HUD Response: HUD will continue to
look for ways to reduce the impact of
Section 3 reporting requirements using
existing reporting and compliance
systems that decrease administrative
burden on recipients. HUD believes the
use of labor hours, rather than new
hires, will reduce costs as many
construction contractors already track
labor hours to meet prevailing wage
requirements. This practice is proposed
to provide a consistent labor hour
tracking mechanism that will make
compliance with Section 3 easier not
only for recipients of HUD assistance,
but also for contractors and
subcontractors. HUD anticipates a
reduction in reporting and
recordkeeping burdens equal to
approximately 64,270 hours, or $2.4
million annually. This rule will not
have any impact on the level of funding
for covered HUD programs. Funding is
determined independently by
Congressional appropriations,
authorizing statutes and regulatory
formulas that set the amounts of Federal
financial assistance provided by HUD
grants. HUD is exploring ways to build
upon ongoing Section 3 technical
assistance and capacity building
activities for recipients.
Disaster Recovery
A commenter warned that additional
reporting requirements will be
problematic for those managing disaster
recovery and requested additional
guidance for flexibility with the CDBG–
DR program. Another commenter
recommended HUD provide outreach
and guidance on using CDBG–DR funds
for job training and hiring initiatives
during rebuilding efforts.
HUD Response: Reporting
requirements already exist for reporting
Section 3 compliance for CDBG–DR
program activities. The proposed
Section 3 rule will change the reporting
scope, such as reporting hours instead
of new hires. The rule, however, does
not create additional reporting
requirements. Like current practice, the

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size of a grant award and project scope
will dictate the length of time it takes to
complete reporting. Technical
assistance on using CDBG–DR funds for
job training and hiring initiatives during
rebuilding efforts, as well as other
Section 3 topics, will be provided to
grantees upon request and as part of the
ongoing grant management process.
Reporting Should Be on Projects
Underway
One commenter recommended CPD
project reporting should be based on
projects underway, not only those
projects completed during the program
year. The rule is unclear on how Safe
Harbor is met for Section 3 projects,
though Reporting § 75.25 states HUD
requires a compilation of data through
the recipient’s fiscal year. Commenter
recommends Section 3 compliance be
measured by combining all workers for
all Section 3 projects. If percentages of
Section 3 workers and Targeted Section
3 workers are met, this will show intent
to comply.
HUD Response: HUD believes that
CPD project reporting should be based
on those projects completed during a
program year. HUD anticipates that CPD
programs will continue to report on
Section 3 through CPD’s current data
collection mechanism. At minimum,
CPD programs are required to report
annually, but many programs update
status more frequently during a
recipient’s fiscal year. HUD intends to
issue guidance on the Section 3
requirements and provide technical
assistance on a program-by-program
basis.
Special Oversight Role of States in State
Programs
One commenter recommended that
the proposed Section 3 rule be amended
to acknowledge the special oversight
role of states in State programs. The
current Section 3 regulation provides
guidance on this point, while the
proposed rule fails to include such
guidance. Any final rule should include
such guidance. See 24 CFR 135.32(f)
and 24 CFR 570.
HUD Response: HUD supports
retaining the current proposed rule’s
language. HUD believes the proposed
language does fully address the roles
and responsibilities of Section 3
recipients and provides adequate
guidance to implement, monitor, and
enforce Section 3 requirements.
Qualitative Form
One commenter recommended that
HUD should provide the form for
qualitative reporting required of small

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PHAs to allow commenters to provide
informed feedback.
HUD Response: HUD will provide a
form for Small PHAs and others to use
for qualitative reporting when an entity
does not meet the benchmark. The form
will be issued consistent with Section
3507 of the Paperwork Reduction Act of
1995, 44 U.S.C. Chapter 35, and HUD
will provide the opportunity for the
public to provide comments on the
form.

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Recordkeeping (§ 75.31)
One commenter recommended
moving § 75.31 to Subpart A where it
would have general applicability to all
recipients.
HUD Response: Subpart A and
Subpart D provisions apply across the
board. The rule is structured so that
Section 3’s general requirements are in
Subpart A. Subpart B and C only apply
depending on funding source. Other
detailed requirements that apply across
the board, such as recordkeeping and
compliance, are in Subpart D. HUD
believes this structure makes sense and
is consistent with other rule structures.
Administrative and Compliance Costs
According to one commenter, this
section implies the responsibility for
ensuring workers meet the defined
requirements in § 75.5, such as Census
tract designation and annualized wage
calculations, for CDBG Section 3
projects will lie with contractors, which
will therefore be costly for contractors
who lack the capacity or are already
burdened by paperwork. The
commenter suggested it may be easier to
have recipients bear this burden.
In contrast, one commenter noted
contractors would have to provide a
personnel profile that includes, at a
minimum, income, current address,
address at time of hire, and YouthBuild
status to establish whether an employee
of a non-Section 3 business concern
meets any of these criteria. Contractors
and employees may balk at a request for
this type of personal information, which
may become public record. The
additional administrative burden placed
on otherwise qualified contractors may
reduce contractor participation, thereby
increasing costs and lessening the
impact of Section 3 covered programs
on their intended beneficiaries.
HUD Response: HUD believes the rule
will not impose additional
administrative and/or compliance costs
for contractors. Administrative and
compliance costs associated with
Section 3 requirements should be
properly resourced within a contractor’s
bid for a project and are already
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with existing Section 3 requirements.
Contrary to the comments, contractors
do not have to provide a personnel
profile or any sort of personally
identifiable information. HUD has never
requested this detailed information and
this rule does not change that; the data
is only reported in aggregate, and
records are maintained for verification
only. Recipients may, but are not
required to, assist contractors who lack
capacity to adequately implement the
Section 3 requirements.
Contracting Provision § 75.17 and
§ 75.27
Commenters urged HUD to retain
standard Section 3 language to be
included in contracts because the use of
consistent language makes it easier for
contractors to be certain of their
obligations, limits the possibility of
confusion for contractors working on
multiple projects, and decreases
administrative burden for agencies.
Other commenters expressed concern
about whether the Voluntary
Compliance Agreement clause will
continue to exist in contracts and who
will enforce it.
HUD Response: HUD considered
commenters’ requests for standard
contract language; however, the contract
language must be customized depending
upon the contract and the program.
HUD anticipates providing sample
language and/or discussion of
contracting best practices but
determined that the recipient is in the
best position to determine what contract
language is appropriate in each context.
Multiple Funding Sources/
Recordkeeping for Multiple Funding
§ 75.29 / § 75.31
Clear Standards and Secure Online Tool
Other commenters recommended that
there should be clear standards for
reporting on Section 3 regardless of the
funding source to reduce the possibility
of errors and to eliminate the need to
report in different formats. These
commenters suggested that if HUD
defers to localities, the agency that is the
primary recipient of HUD funding
should determine which option of
reporting should be used by
subrecipients to allow for consistency in
reporting approach. These commenters
also recommended that public housing
financial assistance guidelines should
dictate reporting requirements for PHAs
administering projects with multiple
funding sources. For projects that are
mix-funded with PHA and other HUD
funding, § 75.29(a) says that the other
HUD funding stream (e.g. CDBG) may
report using the PHA criteria.

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Commenters recommended that
compliance documentation be
accessible in a secure online tool or
standard form which would measure
new hires, hours percentages and
training persons and hours. These
commenters went on to suggest
developing a form for contractors or
subcontractors to complete to confirm
workers’ Section 3 eligibility, which
would ease administration and will
foster consistency. With respect to the
self-certifications discussed in proposed
§ 75.31, it would be helpful if HUD were
to provide a form for this purpose.
HUD Response: HUD thanks the
commenters for their recommendation
and notes that there will be a standard
set of data reporting regardless of which
system is used for reporting. The same
data will be collected across programs
for consistency; the only difference will
be how it looks when reported.
Benchmarks for Section 3 Workers and
Targeted Section 3 Workers
Many commenters supported
including benchmarks for Section 3
workers and Targeted Section 3
workers. Some commenters supported
HUD’s initial benchmarks, as a starting
point, and focus on labor hours.
Additional commenters supported using
both benchmarks stating that limiting
the benchmark to only Targeted Section
3 workers would fail to encourage hiring
of other Section 3 workers. Another
commenter supported elimination of the
3% goal for non-construction contracts
to be Section 3 business concerns. Other
commenters supported the benchmarks
with the caveat that HUD retain the new
hire framework for PHAs or the tracking
of the labor hours if they do not have
an hour tracking system already in
place. These commenters suggested
evaluating the efficacy of this approach
and revising as necessary if data
indicates the change is not supporting
sustained employment.
Other commenters stated that HUD’s
benchmark that Targeted Section 3
workers make up 5 percent of the total
number of labor hours is too low. The
commenters proposed that at least 15
percent of labor hours worked be the
benchmark for Targeted Section 3
workers. The commenters stated that the
Section 3 statute clearly prioritizes
employment for residents of public
housing and other HUD-assisted
housing programs.
Some commenters noted that the
benchmark for labor hours is too
ambitious and unreasonable.
Commenters cited to the fact that lowincome workers are not necessarily
qualified for construction jobs, even
those jobs at the lower end of the

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construction pay scale, and finding lowincome workers who are both qualified
for the positions and willing to work in
construction is much harder than
identifying the number of potentially
eligible low-wage workers. Commenters
also noted that many low-income
persons have childcare and
transportation challenges and many
contractors do not have open positions
to fill by low-income persons.
Another comment opposed the 5%
Targeted Section 3 goal, stating it was
unrealistic given most PHA residents
are seniors, have some form of
disability, or already work. Commenters
also noted that the benchmarks will be
especially difficult to achieve in rural
locations.
One commenter opposed the two
categories of Section 3 workers, noting
the pool of workers is already small, and
makes achievement of benchmarks
challenging. While the additional
categorization provides data collection
value, it creates additional burden and
goes beyond the statute’s requirement.
The commenter noted that the
benchmark fails to recognize many other
initiatives to assist residents to work
towards long-term employment and selfsufficiency (such as Family SelfSufficiency (FSS) programs).
Commenters also noted the current
benchmarks have been difficult to meet,
and that the new bar would likely
require that all positions engaged, rather
than only new hires, go to Section 3
workers. The commenter recommends
that in an environment of under-funding
and over-regulating that HUD establish
a modest benchmark that recognizes
training and adjust upward later, if
necessary. The commenter noted the
current recommendation is extremely
aggressive and unreasonable; and would
result in few agencies meeting the mark.
Additionally, it would fail to reduce
reporting burdens, align regulations
with standard business practices, or
increase Section 3 successes.
Other commenters focused on the
Targeted Section 3 worker benchmark,
noting that the category complicates
tracking and decreases the likelihood of
meeting benchmarks. The commenter
suggested taking an alternate approach
to tracking Targeted Section 3 workers
without establishing a separate
benchmark. One commenter stated that
the benefits and goals of the Section 3
statute would be difficult to measure by
tracking only Targeted Section 3
workers in that it would fail to represent
the value of providing economic
opportunities to individuals who are
low-income but may live outside the
immediate project area, who otherwise
still qualify for Section 3 preference.

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Other commenters stated that for
Subpart C, HUD should only measure
compliance of Section 3 with overall
Section 3 worker tracking and should
not apply Targeted Section 3 workers
metrics or benchmarks. The commenters
stated support for retaining the existing
30 percent benchmark for all Section 3
new hires but that it should not be
required to be disaggregated between
Section 3 and Targeted Section 3
workers. The commenters stated that
this approach would keep the
benchmarks in line with the goals of
Section 3 while providing contractors
and administering agencies with the
ability to tailor implementation
depending on the composition of the
local workforce and specific project
needs.
A commenter noted that they ran
numbers with the new metric, along
with other PHAs, and they all reported
much lower percentages, in most cases
half of the proposed numbers. The
commenter raised a concern with
employee displacement if contractors
are required to meet this new ratio,
which is inconsistent with the goal of
Section 3 to create new jobs rather than
displace existing employees or inflate
project costs. The commenter noted that
recipients hiring contractors instead of
replacing or hiring more employees
could game the system or add
significant costs by hiring additional but
unnecessary Section 3 workers for the
project life.
HUD Response: The statute requires
Section 3 prioritization and this rule’s
goal is to ensure statutory adherence
and streamlined reporting. HUD created
the Targeted Section 3 worker category
to include both the statutory priorities
and policy priorities, for example,
tracking the hiring of public housing
residents where public housing
assistance is involved and tracking the
residents of the neighborhood or service
area when other housing and
community development assistance is
used. Prioritization is meaningless
without the categorical distinction and
HUD believes that technology enables
better tracking compared to at the
statute’s inception. As for the
benchmarks, HUD will establish the
benchmarks via Federal Register Notices
which will allow them to change over
time, as data is reported and gathered.
HUD believes 5% is a reasonable
estimate from the Office of Policy
Development and Research (PD&R) data.
Additionally, compliance can be
evaluated qualitatively if the hours
benchmark cannot be met. Under this
rule, both measurements are
permissible, and the requirements for
qualitative evaluation are laid out in the

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rule. HUD believes this flexibility will
deter any incentive to hire unnecessary
Section 3 workers.
Qualitative Measurement
One commenter supported changes to
reporting requirements and appreciated
the ability to report qualitative efforts if
benchmarks are not met. One
commenter stated that compliance
should be evaluated qualitatively rather
than using hours as a benchmark.
Commenters stated that the proposed
certification related to prioritization of
Section 3 hiring efforts would be
burdensome to agencies and contractors.
The commenter wrote that HUD should
require agencies to certify what efforts
they have implemented to achieve the
goals of the Section 3 program to be
considered in compliance. This
approach would maintain the benefits
and incentives of the program and
provide HUD with a tool for
accountability.
HUD Response: The statute requires
agencies and contractors to prioritize
their hiring efforts according to the
statute’s terms. The rule requires
funding recipients to certify that they
have acted in compliance with the
statute, and to report on the quantitative
outcomes of their efforts relative to the
benchmarks. HUD does not consider it
burdensome for a recipient of HUD
funding to certify that they have acted
in compliance with the statute.
Furthermore, compliance can be
evaluated qualitatively if the hours
benchmark cannot be met. Under this
rule, both measurements are
permissible, and the requirements for
qualitative evaluation are laid out in the
rule. If reporting is above the
benchmark, then HUD will presume
compliance with the regulatory
requirements; HUD wants to see actual
positive outcomes rather than just a
recipient’s inputs. HUD appreciates the
request for additional compliance tools
but believes that requiring such
reporting for all agencies would be
overly burdensome.
Safe Harbor
Commenters stated that the proposed
rule is not clear on how Safe Harbor
would be met for Section 3 projects. The
commenters questioned what type of
data collection would be used to assure
accurate reporting and how to meet the
percentages of Section 3 and Targeted
Section 3 workers. The commenters
asked whether there would be a tool to
assist with this data collection.
HUD Response: HUD will issue subregulatory guidance and provide
technical assistance on a program-byprogram basis to assist recipients with

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clearly understanding the Section 3 safe
harbor parameters. Recipients will
provide data regarding Section 3 and
Targeted Section 3 workers through
existing HUD information systems, as
defined by each covered program. HUD
will not impose additional data
collection burdens on recipients
because of the rule.
Small PHAs Should Have a Separate
Benchmark
One commenter recommended that
Safe Harbor benchmarks should be
established for small PHAs and
suggested HUD establish a minimum
threshold of work-able and non-working
residents. Another commenter stated
that some smaller businesses do not
usually track labor hours performed on
specific projects, and it can be a struggle
for them to learn how to do so. On
Davis-Bacon projects, contractors are
required to submit certified payroll;
however, some projects may be subject
to Section 3 that are not subject to
Davis-Bacon and related acts. The
commenter stated that requiring the
tracking and reporting of labor hours
could pose a significant additional
burden to small contractors.
HUD Response: One of HUD’s goals
through this rule is to ensure that
employment and other economic
opportunities generated by Federal
financial assistance for housing and
community development programs are,
to the greatest extent feasible, directed
toward low- and very low-income
persons, particularly (though not
exclusively) those who receive
government assistance for housing. HUD
believes that it is essential to achieving
this goal that small PHAs report on their
efforts to comply with Section 3 but
acknowledges that small PHAs may
have more difficulty achieving the
quantitative benchmarks and
consequently has permitted a qualitative
reporting alternative for small PHAs.
HUD is considering further ways to
streamline and ease qualitative
reporting by creating a tracking form
and timing submission deadlines
consistently with timeframes that PHAs
and other recipients of public housing
financial assistance are already using to
submit documents to HUD. HUD has
established that small PHAs with less
than 250 public housing units will not
be required to report labor hours or meet
benchmarks, but instead will be
permitted to submit qualitative reports
on their efforts to involve residents in
job-seeking and training endeavors.
HUD recognizes the challenge when
small PHAs have very few work-able,
non-working residents that would make
meeting benchmarks very difficult.

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Alternatives
One commenter suggested limiting
the benchmark to only Targeted Section
3 workers in order to provide a more
streamlined approach to reporting. The
commenter stated that if the benchmark
is narrowed to Targeted Section 3
workers, then tracking data for Section
3 workers should not be required. Other
commenters recommended removing
the Targeted Section 3 worker
benchmark. One commenter stated that
if labor hours are tracked, the
requirement should be limited to
Section 3 workers in general and that
the benefits of adding the Targeted
Section 3 worker subcategory are not
apparent enough to outweigh the
complications. One commenter
supported giving PHAs and entities
using housing and community
development assistance a choice to use
either targeted Section 3 workers or
Section 3 workers as their benchmark.
Other commenters recommended
other benchmarking alternatives. Some
commenters recommended that the
benchmark include a focus on Section 3
business concerns, such that 3% of all
contracts are for Section 3 business
concerns. One commenter stated
benchmarks should ensure that local
jobs are provided to local persons to
reduce commute times and
recommended using geographically
determined numbers. The commenter
noted that many factors can affect
regions and a national number can skew
the worker availability distribution. One
commenter suggested that such regional
benchmarks allow HUD to forecast how
many PHAs and Section 3 projects
could meet the benchmarks assuming
agencies are using their ‘‘best efforts’’ to
hire Section 3 workers and Section 3
projects are hiring and contracting with
Section 3 workers and business
concerns to the ‘‘greatest extent
feasible.’’ According to comments,
regional benchmarks can help account
for uneven distribution of potential
Section 3 workers throughout the
country. Geographic standards may also
help address differences between union
and non-union states. If HUD were to set
regional standards, there should be a
national level appeals process.
Commenters also suggested allowing
use of local adjustment factors and
economic data when establishing
compliance benchmarks, especially
unemployment rates which affect the
ability to meet benchmarks.
One commenter stated the benchmark
does not ensure Section 3 workers are
engaged in a mix of job categories or
trades, or opportunities for upward
mobility; 30% of hours worked should

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be measured for each job category/trade
and protected classes. Other
commenters suggested HUD consider
the type of public housing financial
assistance or other variables. The
commenter recommended that in
addition to different types of
benchmarks HUD should maintain a
ceiling for these benchmarks. The
commenter noted a goal of 80% of
entities meeting the benchmarks would
be appropriate.
Other commenters stated that in order
to fulfill the statutory objectives of
Section 3 to direct the financial
opportunities to low- and very lowincome persons and recipients of
housing assistance, the final rule must:
(1) Set benchmarks in a way that
actually prioritizes HUD tenants; and (2)
employ a definition of Section 3 worker
and Targeted Section 3 worker that
includes exclusively low-income
individuals. Commenters also proposed
separate benchmarks for public housing
projects and non-public housing
projects and provided a specific
hierarchy of workers. Other commenters
noted proposed benchmarks for PHAs
should reflect the law’s emphasis on
providing opportunities for public and
assisted housing recipients.
Commenters suggested an alternative
approach for workforce utilization
setting goals for all construction and
other blue-collar employment, such as
landscaping and janitorial. The
commenters suggested that labor hours
also consider demographics, length of
project, geography, and size of
contractors.
One commenter recommended that
the determination of Section 3
compliance be measured by combining
all workers for all Section 3 projects to
get an overall picture of the number of
low-income workers being paid with
these federal dollars. If the percentages
of Section 3 and Targeted Section 3
workers are met, this better shows intent
to comply with the spirit of Section 3.
HUD Response: HUD appreciates the
suggestions and has considered multiple
benchmarking options. Creating
separate benchmarks would make
projects with co-funding difficult; the
commenter’s suggestions increase both
complexity and the burden of reporting.
HUD believes the current benchmark is
a good starting place and notes that the
regulation permits adjusting the
benchmarks via Federal Register
publication. HUD program staff will
evaluate the level of effort expended by
those recipients that fail to meet the
benchmark safe harbor, and thus will
ensure that the statutory terms are being
properly enforced. HUD is most
interested in strong outcomes for

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Section 3 employees. In addition, HUD
has no programs that align with specific
regions and intends to see reporting data
before making any additional
distinctions, if appropriate.
Compliance (§ 75.33)

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General
A comment stated HUD needs to
strike a balance between the limits of
state and local agency resources and
Section 3’s goals to provide more
effective resources to foster compliance.
Similarly, another comment suggested
HUD utilize Community Compass
technical assistance funds to create best
practice resources and employ
contractors to provide Section 3
compliance support to those
jurisdictions and PHAs without
designated staff for this purpose.
Another comment recommended HUD
simplify the compliance requirements
by establishing a ‘‘presumed eligibility’’
criteria for businesses or residents
located in HUD-approved Neighborhood
Revitalization Strategy Areas, Choice
Neighborhood target areas, Promise
Zones, Empowerment Zones and
Enterprise Communities, Opportunity
Zones and other areas defined at 24 CFR
part 570.208(a)(1)(vii).
A commenter suggested states and
entitlement communities be required to
develop Section 3 Plans that become
part of the 5-year Consolidated Plan to
allow time for compliance with the
labor hours percentages while requiring
demonstrated improvement over time.
The plan should track Section 3
performance and demonstrate labor
partnerships, construction, and training
programs to target and find workers and
an environment that promotes Section 3
goals. HUD should describe the plan’s
components, including how to notify
the public of opportunities for
involvement in designing the plan, how
and when to notify the public when
Section 3 employment and bidding
opportunities arise, how to inform
workers of their rights, and complaint
processes. Commenters recommended
HUD establish ethics standards for
organizations who have a fiduciary
responsibility over Section 3 funds.
Other commenters suggested
compliance failures to adhere to Section
3 business concern criteria should be
cured within two payroll periods or be
terminated; terminated contractors
should be banned from receiving HUD
funds for 3 years from the termination
date; and that persons found to have
falsified their residence to qualify as a
Section 3 worker should be suspended
from participation for 3 years.

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Commenters stated HUD should:
provide greater clarity on the obligations
created by § 75.33(a), especially since
the preceding section, § 75.31, imposes
highly specific recordkeeping
requirements; explain whether the
recordkeeping obligation in § 75.33 is a
restatement of the recordkeeping
obligations set forth in § 75.31, or
whether additional records are required
to demonstrate compliance; and HUD
should provide guidance on
documentation and recordkeeping
related to ‘‘best efforts’’ or ‘‘greatest
extent feasible’’ efforts.
HUD Response: This rule is intended
to strike a balance and foster
compliance with Section 3’s goals and
will result in a reporting and
recordkeeping burden reduction. HUD
wants to ensure employers are invested
in keeping Section 3 workers employed,
and that there is enough opportunity to
build skills and experience so that
Section 3 workers may develop selfsufficiency and compete for other jobs
in the future. HUD will review
Department-level strategies on how to
effectively incorporate Section 3
reporting into current systems and data
collection tools, including the
Consolidated Plan. HUD will issue subregulatory guidance on reporting by
program area and provide technical
assistance to recipients for Section 3
compliance. HUD appreciates the
suggestions and notes that there will be
standardized compliance procedures
across programs, and this will include
ethics standards. Section 75.33 is a
reaffirmation of the recordkeeping
requirement set forth in § 75.31, as
recipients of HUD funding will need to
have the records described in § 75.31
available if HUD needs to do a
compliance review of a recipient’s
Section 3 performance. HUD
determined not to define the difference
between ‘‘best efforts’’ or ‘‘greatest
extent feasible,’’ but rather to increase
the emphasis on outcomes as a result of
these efforts. Please see the ‘‘Best
efforts’’ and ‘‘greatest extent feasible’’
section above. A recipient’s reported
results will be compared to the outcome
metrics defined in the benchmark
Notice. HUD program staff will evaluate
the level of effort expended by those
recipients that fail to meet the
benchmark safe harbor, and thus will
ensure that the statutory terms are being
properly enforced.
Complaints and Monitoring
Commenters stated each HUD
program should have a detailed
complaint process. A commenter
supported the integration of Section 3
into each program area but noted the

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lack of detailed complaint provisions,
and suggested the final rule require each
HUD program to have a detailed
complaint process, with enforcement
assigned to Davis-Bacon and Labor
Relations (DBLR), Office of Field Policy
and Management (FPM), or the Office of
Fair Housing and Equal Opportunity
(FHEO).
Commenters supported removing
Section 3 enforcement from FHEO but
strongly suggested HUD identify an
office independent of the program
offices to monitor and enforce Section 3
requirements, such as FPM, or a new
Section 3 office fully funded and trained
to work on Section 3. Giving
responsibility for Section 3 compliance
to the program that is responsible for
funding that triggers Section 3
obligations is problematic because (1)
HUD program staff have in the past
referred to PHAs and jurisdictions, not
the residents who are supposed to
benefit from HUD programs, as their
‘‘constituents,’’ (2) there is currently no
process for accepting and reviewing
complaints in the proposed rule, (3)
significant training and resources will
be required to prepare program staff to
oversee Section 3 compliance since they
are not currently engaged in it. HUD
should require that Section 3 policies,
plans, procedures, and complaints are
made publicly available by both the
recipient and on HUD’s website.
Other commenters agreed with the
proposed shift of oversight from FHEO
to program offices and believed this will
improve oversight because program
offices already monitor recipients on a
day-to-day basis, thus Section 3
monitoring will become part of normal
overall monitoring. Another commenter
stated transferring oversight and
compliance from FHEO to program
offices is an appropriate change on the
condition that oversight practices are
standardized across program offices.
Another commenter was concerned
about the Section 3 complaint process
for residents; HUD program areas do not
have detailed provisions for residents to
file complaints on the part of PHAs or
jurisdictions that do not meet program
requirements. At a minimum, if HUD
defers to grantees to field complaints
from individuals, the process should
require a grantee to inform HUD of the
resolution of each complaint much like
CPD does with CDBG–DR complaints.
A further commenter stated it is not
clear how the public will make
complaints if the current complaint
process is removed and asked how they
will know which program office to
contact. Other commenters suggested
the final rule require a detailed
complaint process identical or similar to

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what is in the current rule. Further
commenters expressed that HUD should
keep the existing complaint process
until it adopts a new one after public
review and comment. Other
commenters were concerned about the
958 Complaint Form’s elimination and
the impact on residents who will be left
without protections or a process for
monitoring and overseeing contractors
who are violating Section 3
requirements. One commenter felt that
to move the review process from FHEO
to local HUD CPD would be disastrous.
A commenter noted that HOME and
CDBG recipients do not seem to
understand the importance of Section 3
and the compliance enforcement—
appropriate remedies are not in place.
According to one commenter, the
promise of Section 3 has not yet been
realized, largely due to the fact that
none of the entities responsible for its
administration—HUD, state and local
governments, PHAs—have been
sufficiently resourced to implement,
monitor, and enforce Section 3
requirements. The HUD program offices
responsible for funding all are currently
under-resourced and could better fulfill
their obligations in monitoring and
enforcing Section 3 with dedicated staff.
One commenter had concerns about
moving Section 3 regulations from 24
CFR part 135 under FHEO to the new
part 75 under the Office of the
Secretary; the commenter assumed
Office of Field Policy and Management
would have oversight of Section 3 under
the proposed rule amendment and
expressed concern over FPM’s lack of
capacity and technical knowledge to
oversee monitoring and enforcement of
Section 3. The commenter argued HUD
has never seriously monitored and
enforced the statute and that HUD
program staff treat PHAs and
jurisdictions as their constituents, not
the residents who are the intended
beneficiaries. Additionally, alternative
procurement provisions should be
created to help Section 3 business
concerns compete with larger more
established businesses.
One commenter was concerned about
different program offices providing
conflicting information and hoped HUD
would provide standardization and
clear guidance; others suggested HUD
request adequate funding to hire the
necessary headquarters and field office
staff to provide Section 3 technical
assistance and to robustly monitor and
enforce Section 3, as well as seeking
adequate funding so that all
jurisdictions and PHAs can hire and
retain staff to serve as Section 3
coordinators and to monitor and enforce
Section 3 obligations. A commenter has

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received conflicting guidance from
different program offices, resulting in
findings and fines on several occasions.
HUD should provide further detail as
to what standards each program office
would be using to provide oversight and
what procedures are in place to ensure
that PHAs receive consistent oversight
across offices. Further clarification is
also needed as to how the responsible
program office would be designated for
oversight when a project uses multiple
funding sources and triggers oversight
from multiple program offices.
A commenter recommended HUD
strengthen its compliance practices to
incentivize performance while
recognizing legitimate constraints. The
commenter also recommends stating in
the rule that HUD will deduct points in
relevant HUD program Notices to
applicants for competitive HUD funding
who have not achieved Section 3
benchmarks and allowing applicants the
ability to provide justifications for
failure to meet benchmarks despite good
faith efforts. The commenter also
recommended allowing program offices
to incentivize Section 3 compliance in
funding Notices but have a Departmentwide entity focus on all aspect of
compliance (reporting, analysis, and
information technology systems).
HUD Response: HUD took the
concerns about the complaint process
under advisement, and § 75.33(b) has
been amended to include ‘‘or local HUD
field office.’’ HUD believes Section 3’s
objectives will be better achieved by
moving Section 3 oversight into the
program offices so that HUD staff who
are actively engaged with recipients in
their program planning and activities
will bring Section 3 concerns and
considerations into their routine
interactions with the recipients. HUD
will provide external and internal
technical guidance on complaint
handling and routing. The Office of
Field Policy and Management (FPM)
will be taking a greater role at the field
level by filtering complaints to the
corresponding office, rather than every
HUD program office having its own
complaint process. The local HUD field
office is part of the FPM organizational
structure, and also provides individuals
with a complaint venue when the
complainant does not know which
program office would be responsible.
There will be variation in what
guidance and/or compliance looks like
for each program office, but HUD will
provide support to the extent it is
standardized across program offices.
Enforcement
Commenters stated any contractor or
Section 3 resident found to falsify data

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in order to receive benefits from HUD
funded training, contracting, and
employment should be immediately
removed and/or barred from
participation in Section 3 programs for
ten years. Violations should be posted
and made available to the public for
review. Every PHA should have a
written Section 3 Plan-Policy in place
and attached to any Request for
Proposals for bids.
HUD Response: HUD believes that
recipients should have the flexibility to
determine how to implement Section 3.
HUD also believes this new regulation
will make such implementation easier.
While the final rule does not require
recipients to have Section 3 plans or
policies, HUD views having them as a
best practice that will aid recipients in
achieving the Section 3 benchmarks. As
for the concern about potential fraud,
program offices will continue to monitor
compliance with Section 3 requirements
through evaluation of qualitative or
quantitative reporting, complaint
review, and program audits, if
appropriate.
General Comments
One commenter said all policies
should be expressed in ‘‘simple’’ terms
for all stakeholders, especially residents,
to understand. Commenters stated there
is little point in creating policies and
programs that produce only six-week or
six-month jobs, or jobs that do not lead
workers out of poverty. HUD recipients
have difficulty in assisting residents in
obtaining and maintaining any jobs, let
alone high-wage jobs that will lead to
careers and help residents leave poverty
behind.
A commenter expressed the Section 3
rule is ‘‘of great benefit to have in effect
and keep up to date.’’ Section 3 funding
recipients should be mandated to
actively seek employment at all times to
the best of their ability and report an
employment log to track job
applications.
One commenter indicated many of the
proposed changes do not reflect the
construction trade’s current realities and
would impose costly new obligations on
PHAs without a funding source to pay
for those requirements. Another
commenter argued Section 3 is ‘‘just
another burdensome regulation’’ that
‘‘doesn’t produce a positive outcome.’’
One commenter stated the proposed
rule would have an adverse impact on
the Section 3 participation that HUD
desires, whereas others supported the
proposed rule amendments.
One commenter stated public housing
living conditions are poor; Section 3
programs are practically non-existent in
the commenter’s area; and the way that

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public housing residents’ income is
calculated is problematic.
A commenter stated Section 3 is one
of HUD’s most important
responsibilities since it creates the
standards for employment, training, and
contracting opportunities generated
from HUD financial assistance. This
commenter felt a stronger Section 3 rule
can lead to increased hiring and
contracting opportunities; overall the
proposed rule has many merits and is an
improvement. Similarly, another
commenter stated the potential benefits
of Section 3 have never been realized;
the improvements to the rule have
potential to improve outcomes.
According to one comment, the
proposed rule amendments try to
address Section 3 program
implementation difficulties but still
present incongruities; HUD should
consider methods to enact preferences
or incentives. A commenter stated it is
difficult to find Section 3 employers in
some jurisdictions, and some
jurisdictions have no active YouthBuild
program. Commenters noted most HUD
households are headed by or include
females, minorities, or female
minorities. Section 3 regulations should
be designed to give low- and very lowincome people (particularly recipients
of Federal housing assistance) a
pathway out of poverty, and PHAs
should be required to work with
organizations that have a proven track
record of successfully recruiting,
training, and retaining women and
minorities in the construction industry.
A commenter recommended HUD work
directly with the National Task Force on
Tradeswomen’s Issues.
HUD Response: HUD thanks the
commenters for their responses. This
rule is intended to strike a balance and
foster compliance with Section 3’s goals
and will result in a reduction of
reporting and recordkeeping burdens.
HUD wants to ensure employers are
invested in keeping Section 3 workers
employed, and that there is enough
opportunity to build skills and
experience so that Section 3 workers
may develop self-sufficiency and
compete for other jobs in the future.
HUD agrees that this regulation is
designed to give low- and very lowincome people (particularly recipients
of Federal housing assistance) a
pathway out of poverty. There is no
mandate in the rule for Section 3
funding recipients to constantly apply
for new jobs, nor are there requirements
for PHAs to work with certain
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Other Programs
Commenters noted opportunity
discrimination is unconstitutional; all
citizens have a right to wealth and
prosperity. States can support and
invest in their cities’ workforce through
equity and management but should first
complete a local needs assessment. One
commenter referred to Perkins V (the
Strengthening Career and Technical
Education for the 21st Century Act)
requirements for eligible recipients to
conduct a comprehensive local needs
assessment every two years. One
commenter suggested creating a Section
3 Score Card for public information to
capture grantee compliance and ensure
that contractor compliance with Section
3 requirements are considered for future
employment and contracting
opportunities, and improving the
effectiveness of the program will
enhance compliance to realistically
measure targeted outcomes.
A commenter recommended HUD
consider developing an annual
recognition program for PHAs,
subrecipients, contractors, and
subcontractors for excellence in Section
3 performance, rather than redesigning
the tracking and reporting requirements.
HUD Response: HUD thanks the
commenters for their responses. HUD
affirms that discrimination based on
protected classes is unconstitutional.
The Perkins programs noted in the
comment are administered by the U.S.
Department of Education and there are
no requirements for eligible recipients
to conduct a comprehensive local needs
assessment every two years in the rule.
There are no provisions to create a
public Section 3 Score Card or an
annual PHA recognition program at this
time.
Technical Fix
One commenter noted in the
amendment to 24 CFR 93.407(d), the
proposed rule still references 24 CFR
part 35 instead of 24 CFR part 75. The
commenter recommended that HUD
change the citation to reflect 24 CFR
part 75.
HUD Response: Thank you for your
comment, but HUD declines to change
the citation. The amendment referred to
is a technical amendment to the
regulations unrelated to the Section 3
regulations. The cross-reference to 24
CFR part 35 is in reference to records
demonstrating compliance with leadbased paint requirements, which
continue to be covered by 24 CFR part
35.
HUD Program Collaboration
Commenters stated that funding for
Section 3 coordinators, and technical

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assistance or written guidance on
coordination with other self-sufficiency
programs such as FSS would allow for
Section 3 to more effectively meet its
goals. One commenter opposed changes
to the rule stating that HUD should not
scale back its existing operations and
rule. The commenter also recommended
that HUD and other agencies ensure
coordination with benefit planners so
that people with disabilities are
involved in planning neighborhoods
and community opportunities for work.
HUD Response: HUD appreciates the
suggestion for more funding for Section
3 coordinators. HUD believes that this
rule will streamline the Section 3
regulations to create additional
incentives and streamline reporting
requirements, thereby offsetting the
need for more funding. HUD notes that
by conducting in-service trainings and
proactively engaging with appropriate
partners in the Social Security
Administration (Work Incentives
Planning Assistance), Department of
Labor (ETA & ODEP) and Health and
Human Services (CMS, ACF & ACL) to
identify best practices and model
approaches, FPM will make the
appropriate decisions regarding
potential coordination with FSS, other
self-sufficiency programs, and/or
programs for people with disabilities.
HUD continues to encourage PHAs and
recipients of HUD funds to coordinate
with other agencies and local
communities to assist in hiring Section
3 workers. This rule does not change
that. Moving the oversight of the rule to
FPM and the program offices will not
scale back HUD’s role in ensuring
compliance with Section 3
requirements. HUD believes that the
move will actually ensure better
compliance given the new location of
oversight and the new tracking
mechanisms.
Title VI
One commenter suggested the Section
3 rule should include information that
Title VI of the Civil Rights Act also
applies to Section 3, prohibits against
discrimination, and requires language
assistance.
HUD Response: Title VI applies to any
program or activity receiving Federal
financial assistance from HUD. Section
3 is a requirement, not a program that
receives HUD funding.
Extend Comment Period
One commenter recommended HUD
extend the comment period for
affordable housing developers to suggest
more effective changes.
HUD Response: HUD believes that the
60-day comment period provided ample

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opportunity for affordable housing
developers and other members of the
public to suggest changes to this rule.
Outside the Rulemaking Scope
One commenter, a stakeholder in a
major metropolitan area PHA that is
being monitored by a ‘‘Federal Monitor’’
as a result of a 958 Complaint, stated
that the appointed Federal Monitor has
no housing experience and that all
parties involved have missed the most
important purpose of Section 3, which
is economic empowerment for low and
very low-income persons residing in
local communities for HUD invested
projects.
One commenter proposed defining an
execution fee as a ‘‘percentage of
bidder’s final submitted price added by
the recipient or general contractor
because the contractor/subcontractor
provided no Section 3 benefit.’’
One commenter stated concern about
the lack of focus on higher level training
as a vehicle for individuals to develop
skills and build a better future. The
commenter stated that the proposed
benchmarks and guidelines provide no
framework for differentiating training or
skilled work classifications from general
labor, so there would be no incentive for
creating higher level opportunities. The
commenter requested that HUD provide
guidance on how to encourage this sort
of activity under the new benchmarks.
HUD Response: HUD thanks the
commenters for their suggestions,
however, these comments are outside
the scope of this rulemaking.
Miscellaneous

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Impact on Rural Areas and States
Commenters stated it is difficult to
comply with Section 3 requirements in
rural areas. The goals of Section 3 are
more feasible in densely populated
urban areas. The proposed rule does not
improve this circumstance. Section 3
eligible individuals cannot take
advantage of Section 3 opportunities in
rural areas because they are nonexistent.
There are not ample conditions to
facilitate Section 3 in small
communities and rural areas. Rural
areas have less availability of
contractors and employees and there
needs to be flexibility to engage people
outside their service area to complete
projects. One commenter noted
benchmarking methodology seems
strongly skewed toward large urban
centers and overlooks geographically
large states with relatively small rural
populations, and asked HUD to make
exceptions for jurisdictions with smaller
and more rural populations. Some
commenters noted that contractors in

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rural states rarely need to hire new
employees because the projects are
small, the contractors have limited
growth potential, or the employers have
tenured staff. The commenter further
stated that the new hire’s length of
employment coincides with the project
and terminates at project completion.
Commenters noted Section 3 is
particularly difficult for states to
administer. Another commenter
explained that as a state, it does not hire
the contractors for the CDBG projects.
The local jurisdictions do that. It has no
opportunity to promote the hiring of
Section 3 business concerns. The very
small communities with which it works
have implemented procurement policies
that award contracts to the lowest
responsible bidder. They will not award
a contract to a higher bidder just
because the bidder is a Section 3
business concern. The commenter stated
that the Section 3 regulation should
apply to the CDBG Entitlement program
and not the Small Cities program. One
commenter suggested that state CDBG
recipients should have the same
flexibility in reporting as small PHAs.
HUD Response: HUD acknowledges
that implementing Section 3 in various
geographic areas presents different
challenges for rural areas versus densely
populated urban areas. HUD believes
this has been addressed within the
proposed Section 3 regulation by using
a circle centered around the worksite
that expands until it reaches a
population of at least 5,000. HUD
further acknowledges that, in
particularly remote areas, the
expandable circle may reach a size that
may be impracticable to match those
benefiting from the project with the
Section 3 benchmark. If the recipient is
unable to meet the Section 3 benchmark
described in § 75.11, it will be required
to report in a form prescribed by HUD
on the qualitative nature of its activities
or those of its contractors and
subcontractors. This will allow the
recipient to explain in qualitative means
why it was unable to meet the Section
3 benchmark. HUD is sympathetic to the
issues raised for rural areas and will
watch implementation carefully as it
progresses, allowing for updates as
deemed necessary. HUD will also
provide sub-regulatory guidance on the
submission of qualitative reports to
enable smoother implementation of the
requirement.
Coordination With Nonprofit
Organizations and Other Agencies
Commenters suggested HUD require
PHAs and other recipients to work with
organizations with a proven record of
accomplishment of success in the

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recruitment, training, and retention of
women and minorities in the
construction industry and other bluecollar occupations. The Department of
Labor is already working with many of
these organizations and has a list of
apprenticeship training and technical
assistance providers to help with the
recruitment of Section 3 residents, preapprenticeship training and ongoing
support. Commenters also suggested
that HUD work directly with the many
tradeswomen organizations, and other
nonprofits already providing
construction readiness training
programs (also called preapprenticeship training) and the
National Task Force on Tradeswomen’s
Issues. In 2018, women made up only
3.4% of construction workers. While
this figure represents progress, it
demonstrates the need for HUD and its
recipients to partner with tradeswomen
and other organizations who have
expertise in successfully getting women
and minorities into the construction
trades, and, more importantly, creating
a real opportunity for careers in the
construction industry. One commenter
recommended forging closer ties with
the Tribal Employment Rights Offices
and directing the HOME and CDBG
programs to consider this approach to
ensure tribal communities’ benefit from
HUD program projects nearby. Other
commenters suggested planning grants
to form or strengthen partnerships with
Workforce Investment Boards or interagency collaborations with workforce
programs within the Department of
Labor.
HUD Response: HUD concurs that
building strong collaborations between
and among several Federal, state, and
local partners will aid Section 3’s goals.
HUD will consult with the Departments
of Labor, Health and Human Services,
Commerce, Small Business
Administration, and other agencies as
determined by the HUD Secretary to
meet the Section 3 statue’s mandate at
12 U.S.C. 1701u(f). HUD will also take
the comments provided under
consideration as it looks for ways to
conduct successful outreach and
technical assistance strategies for
Section 3 implementation.
Outreach and Training
Commenters recommended that HUD
facilitate the competition for Section 3
excellence among developers and
contractors by developing an online
database of completed Section 3 covered
projects that includes the names of the
developer and general contractor, the
nature and size of the project, and the
Section 3 employment, contracting,
training and retention outcomes

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achieved. Commenters urged HUD to
create a national database of Section 3
outcomes and to facilitate the inclusion
of training and retention programs in
bid materials by collecting and sharing
best procurement practices.
One commenter suggested HUD
should explicitly require PHAs and
CDBG recipients to make reasonable
efforts to connect Section 3 workers and
Targeted Section 3 workers with local
workforce development and career and
technical education training. Another
commenter recommended that the rule
should give emphasis to training
opportunities as is emphasized in the
Section 3 statute because training is a
potential response for recipients who
are submitting qualitative reports for
failure to meet Section 3 benchmarks.
One commenter stated there are no
provisions in the rule regarding training.
Similarly, another commenter noted the
benchmark fails to recognize the
statutory reference to training and
employment opportunities. Likewise,
commenters requested HUD clarify
whether it is proposing new ways to
track or report on Section 3 training. In
the discussion of proposed §§ 75.15 and
75.25, HUD states that one of the
qualitative measures a locality could use
is paying for apprenticeship programs
and/or offsite job training. One
commenter welcomes any opportunity
to expand these programs and
recommends that HUD make job
training an economic development
activity instead of public service under
the CDBG regulations. Alternatively,
HUD could consider raising the public
service cap for CDBG funds in order to
accommodate additional job training
programs.
A commenter recommended HUD
provide outreach on training,
employment and asset building
programs to HUD assisted residents,
including Family Self Sufficiency, Jobs
Plus, and the Resident Opportunity and
Self-Sufficiency programs. HUD should
create resource guides on how CDBG
has been used to support effective job
training programs. A commenter
suggested HUD should design a Section
3 worker’s rights poster with input from
HOME and CDBG grantees. Commenters
noted changes to Section 3 reporting
and tracking requirements may require
additional resources for administering
agencies, particularly PHAs in receipt of
public housing assistance funds. HUD
funding for the implementation of an IT
system to enhance the current system
and integrate with contractors would be
particularly welcome to ease Section 3
monitoring and reporting for all parties.
Having dedicated funding for the overall
program, including support for resident

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training, IT system enhancements, and
other related measures, would help to
further Section 3 goals while limiting
potential administrative burdens.
One commenter stated PHAs noted
they are most successful in helping
residents find employment when they
can offer employment services and
trainings to help them gain the skills
necessary to access jobs. However,
additional funding is needed for
programs like Family Self Sufficiency,
Resident Opportunities and SelfSufficiency, Jobs-Plus Initiative, and the
Public Housing Operating Fund. One
commenter recommended that HUD
provide recipients the addresses of all
public housing, PBRA projects, and
Housing Choice Voucher projects by
counties to assist in matching workers’
addresses and automatically designating
them as Section 3 workers; that HUD
assist Section 3 workers in housing
assistance; that Section 3 workers
receive a living wage; that HUD help
provide life skills such as budget
counseling; and that HUD be proactive
in supporting and developing (in
conjunction with the Department of
Labor) apprenticeship and other training
programs for assisted housing residents
and other low-income people.
One commenter recommended that
HUD incentivize widespread replication
of successful mentorship programs;
create regional programs patterned after
successful mentorship programs that
smaller PHAs can access cooperatively;
ensure the program allows for a tiered
approach that allows Section 3
contractors to gain vital experience on
smaller projects then graduate up to
increased responsibility; and ensure that
the Section 3 program continues to
allow PHAs to use Section 3 contractors
to complete work at all levels, including
very small projects. One commenter
suggested HUD request that the
President’s Budget include adequate
funding to enable HUD to hire the
necessary headquarters and field office
staff to provide Section 3 technical
assistance and to robustly monitor and
enforce Section 3. Also, the President’s
Budget should seek adequate funding so
that all jurisdictions and PHAs can hire
and retain staff to serve as Section 3
coordinators and to monitor and enforce
Section 3 obligations.
HUD Response: HUD thanks the
commenters for their suggestions; as
HUD updates its systems, HUD will take
the suggestions under advisement. HUD
encourages CDBG recipients to
collaborate with local workforce
development boards and training
providers to create effective connections
between them and Section 3 and
Targeted Section 3 workers. HUD will

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also provide sub-regulatory guidance
and technical assistance promoting
career and technical education training.
HUD believes tracking labor hours
provides a picture as to the success of
providing job opportunities with HUD
financial assistance, but as noted in the
proposed rule the qualitative reporting
will consider training. Reporting entities
may consider training to help meet its
employment goals and provide such
information if goals are not met and
entities are required to respond
qualitatively. HUD will not provide a
separate funding source; however, HUD
will build on this final rule by providing
technical assistance guidance for all
HUD Section 3 programs. HUD will
consider such guidance in creating
materials for use by grantees. PHAs
should already be tracking labor hours
for Davis-Bacon or wage requirements
and should not be doing anything more
than what they did before to verify
Section 3 workers as new hires. This
rule just lays out the process for such
verification. Once a PHA determines a
Section 3 worker or Targeted Section 3
worker is hired or currently employed,
the PHA would just report those hours
as the numerator over the total labor
hours funded with Operating and
Capital Funds as the denominator.
HUD appreciates the input on ways
HUD can help residents and is
continuing to look at ways to make
programs like Family Self Sufficiency,
Resident Opportunities and SelfSufficiency, Jobs-Plus Initiative more
effective. HUD will be sure to consider
those recommendations in future
rulemaking. Section 3, however, is
focused on how to provide job
opportunities created by HUD federal
financial assistance and does not have
funding directly associated with it that
can be used for those programs.
Reporting entities may consider training
to help meet their employment goals
and provide such information if goals
are not met and entities are required to
respond qualitatively. HUD does not
think it is appropriate to provide access
to a list of all public housing, PBRA
projects and Housing Choice Voucher
residents to the public; such data
sharing would implicate privacy
concerns. Additionally, the PHA would
have that information for seeking to hire
such persons as Targeted Section 3
workers for public housing assistance.
HUD appreciates the suggestions and
will consider them in providing
guidance and technical assistance by
both FPM and the program offices. HUD
believes that there will be adequate
funding for Section 3 technical
assistance and monitoring in FPM. The
FY2020 President’s Budget Request

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Congressional Justification specifically
requested: ‘‘$51.5 million to support 334
FTEs, consistent with the estimated
2019 Annualized CR level. Resources
will support ongoing community
engagement, monitoring and technical
assistance pertaining to Section 3,
compliance with the Davis-Bacon and
Related Acts, enhancement of the
overall customer experience and
disaster recovery responsiveness at the
state and local levels for clients and
customers.’’ 6 Federal financial
assistance recipients should make their
own determinations about staffing levels
necessary to implement the assistance
received.

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Rental Assistance Demonstration (RAD)
Commenters recommended the RAD
Notice should be amended to indicate
that Section 3 obligations be extended
post-conversion to PBV because
currently Section 3 no longer applies
unless additional Federal financial
assistance is later used for
rehabilitation. Commenters also asked
for further clarification regarding RAD
conversion applicability during and
after construction. Eliminating RAD
projects from Section 3 applicability
will reduce contract awards that can
provide opportunities to Section 3
residents. HUD should revise the rule to
expand the definition of Targeted
Section 3 worker to cover RAD and
other HUD assisted tenants, and should
require owners and managers of RADconverted projects to hire, train, and
contract with Section 3 residents to the
greatest extent feasible in their own
operations.
HUD Response: The Section 3 statute
does not apply to properties that are
recipients of Section 8 rental assistance
unless they are recipients of other
Federal funding covered by the Section
3 statute. A RAD transaction is a
conversion at a moment in time and,
subsequent to the conversion, the
property is governed by the Section 8
requirements. HUD has administratively
applied Section 3 during the RADrelated construction period even though
not required by the RAD statute or the
Section 3 statute. See RAD Notice
Revision 4 and RAD program
documents.7 HUD has declined to
extend Section 3 to the Section 8
portfolio, as that would be a significant
expansion of the Section 3 statute’s
parameters. HUD has defined ‘‘Targeted
6 HUD’s FY2020 Congressional Justification for
President’s Budget, https://www.hud.gov/sites/
dfiles/CFO/documents/2020HUDCongressional
Justifications4-2-19.pdf.
7 Rental Assistance Demonstration—Final
Implementation, Revision 4 Notice H–2019–09
PIH–2019–23 (HA), issued September 5, 2019.

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Section 3 workers’’ to include residents
of public housing and Section 8
housing, which means that HUD
funding recipients must report on hiring
of these types of HUD-assisted tenants,
which includes tenants of RADconverted Section 8 properties.
Notice of Funding Availability (NOFA)
One commenter wrote in support of
the NOFA certification’s removal.
Several commenters supported the
current requirement that NOFA
applicants submit a certification of
intent to comply with Section 3
requirements along with a statement of
their proposed Section 3 activities.
Commenters noted that performance
among PHAs, developers, and
contractors varies greatly when it comes
to meeting Section 3 requirements. One
commenter gave an example where a
contractor might merely hold a job fair
and interview any qualified Section 3
residents who apply, while another
might make Section 3 hiring a condition
of all major subcontract awards, contract
with a community organization to
conduct outreach and referral services,
establish a pre-construction and/or onthe-job training program, provide job
coaching and other supports, and retain
Section 3 workers after completion of
the Section 3 project. Commenters went
on to state that using a bidder’s past
Section 3 performance and the quality
of their proposed Section 3 plan can
have a profound effect on the quality of
economic opportunities provided to
Section 3 residents.
HUD Response: HUD decided to
continue with the change in the
proposed rule and to omit specific
requirements for Notices of Funding
Availability (NOFA) in the final rule;
however, the final rule will require that
all NOFAs issued by HUD that
announce the availability of funding
covered by section 75.3 will include
notice that part 75 is applicable to the
funding and may include, as
appropriate for specific NOFAs, points
or bonus points for Section 3 plans.
Where Section 3 is applicable, the
inclusion of specific requirements in the
regulation regarding the NOFA does not
change the recipient’s obligation to have
a compliant Section 3 implementation
strategy. Similarly, where Section 3 is
not applicable, the regulatory language
would not apply. The presence or
absence of the NOFA clause in the
regulation has no effect on applicability
of Section 3. HUD anticipates that
program offices will include scoring for
Section 3 plans where relevant and
exclude Section 3 scoring where the
nature of the grant being awarded is
incompatible with Section 3 endeavors

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(such as funding for sweat-equity
homeownership initiatives). HUD is in
the process of developing improved
databases to inform program offices,
funding recipients, and the public-atlarge regarding Section 3-covered
projects and the outcomes achieved.
HUD hopes that these databases, plus
anticipated technical assistance to
disseminate information regarding
Section 3 best practices, will provide a
foundation for more impactful
implementation of Section 3 over time.
Professional Services Exclusion
Commenters stated HUD should
retain the 3% benchmark for
professional services contracts, as it is
not uncommon for professional services
companies to meet the qualifications of
a Section 3 business concern. It helps
businesses who employ workers who
were low-income when they were hires
or businesses who were started by lowincome or public housing residents that
have grown professionally to provide
employment opportunities to other lowincome people.
Other commenters noted excluding
professional services positions—
typically higher paying, higher career
growth—would effectively limit Section
3 workers to construction services,
diminishing the potential positive
impact of the statute. Ultimately, it will
not provide HUD with adequate data on
positive or negative impacts of Section
3’s intended goals. The intended goal of
the Section 3 statute is to positively
impact the lives of HUD assisted
residents through meaningful job
placement and training that will
ultimately lead to greater selfsufficiency. The current rule includes a
goal of 30% of new hires in
management and administrative jobs,
technical, professional, building trades,
and non-construction jobs and all levels.
Professional service jobs include
accounting, legal services, financial
consulting, architectural and
engineering services. The proposed rule
indicates that professional services will
be excluded from benchmarking
requirements, but HUD will allow
voluntary reporting of these workers. A
commenter suggested maintaining the
current rule’s requirement of reporting
on professional services but moving to
total labor hours worked in both
construction and non-construction
services, and better tracking this data
through streamlined reporting systems.
Other commenters supported
excluding professional services from
benchmarking requirements while
allowing voluntary reporting of such
workers; excluding certain types of
contracts such as material and supply,

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and professional service; and excluding
professional services from covered
activities and suggested adding a
benchmark for training activities. One
commenter noted it experienced the
same challenges as other HUD partners
in meeting Section 3 goals when
working with professional service
vendors. However, the commenter
noticed that in some cases vendors can
carve out small segments of highly
skilled work or training for low-income
residents (e.g., providing an internship
or hiring a recent graduate to perform a
small scope of work.) While the rule
allows voluntary participation of
professional service vendors,
commenter suggests that HUD give
discretion to recipients to mandate
Section 3 participation by these
partners, without necessarily holding
them to specific benchmarks like
contractors.
HUD Response: HUD acknowledges
that there are occasions when employers
can create opportunities for Section 3
employment in the professional services
context, and HUD lauds these efforts. At
the same time, data indicate that there
are relatively few such opportunities for
Section 3 hiring in professional services
fields such as legal services and civil
engineering. Many of the positions
within these professional services fields
require specialized degrees and in many
cases the hiring is not directly tracked
to a specific Federally funded project or
activity. To ensure that the carve-out for
professional services is relatively
narrow, however, HUD has revised the
definition of professional services.
While keeping the modified exclusion
for professional services in the final
rule, HUD notes that the reporting
structure in the proposed rule allows a
recipient to count as Section 3 labor
hours and as Targeted Section 3 labor
hours any work performed by a Section
3 worker or a Targeted Section 3 worker
(i.e., in the numerator of the
calculation), even when the professional
services as a whole are not counted in
the baseline reporting (i.e., in the
denominator of the calculation). The
effect of this reporting structure is to
give a recipient a bonus if they are able
to report Section 3 hours in the
professional services context. As
referenced in the comments, vendors
can sometimes create opportunities in
the professional services context, and
HUD seeks to reward this behavior. In
addition, recipients are provided
significant discretion in how they seek
to implement their Section 3
obligations. A recipient could elect to
require, at the local level, additional
Section 3 obligations with respect to

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professional services through the terms
of the funding contract.
V. Findings and Certifications
Regulatory Review—Executive Orders
12866 and 13563
Under Executive Order 12866
(Regulatory Planning and Review), a
determination must be made whether a
regulatory action is significant and,
therefore, subject to review by the Office
of Management and Budget (OMB) in
accordance with the requirements of the
order. Executive Order 13563
(Improving Regulations and Regulatory
Review) directs executive agencies to
analyze regulations that are ‘‘outmoded,
ineffective, insufficient, or excessively
burdensome, and to modify, streamline,
expand, or repeal them in accordance
with what has been learned.’’ Executive
Order 13563 also directs that, where
relevant, feasible, and consistent with
regulatory objectives, and to the extent
permitted by law, agencies are to
identify and consider regulatory
approaches that reduce burdens and
maintain flexibility and freedom of
choice for the public.
This rule was determined to be a
‘‘significant regulatory action’’ as
defined in Section 3(f) of the order
(although not an economically
significant regulatory action under the
order). Consistent with Executive Order
13563, this rule creates new part 75
regulations that would replace the part
135 regulations, with the intention to
make compliance with Section 3 more
effective and less burdensome, and
therefore, help to contribute to job
creation for low- and very low-income
persons. HUD has prepared a Regulatory
Impact Analysis (RIA) that addresses the
rule’s costs and benefits. HUD’s RIA is
part of the docket file for this rule.
The docket file is available for public
inspection in the Regulations Division,
Office of the General Counsel, Room
10276, 451 7th Street SW, Washington,
DC 20410–0500. Due to security
measures at the HUD Headquarters
building, please schedule an
appointment to review the docket file by
calling the Regulations Division at 202–
402–3055 (this is not a toll-free
number). Individuals with speech or
hearing impairments may access this
number via TTY by calling the Federal
Relay Service at toll-free 800–877–8339.
Environmental Impact
The final rule does not direct, provide
for assistance or loan and mortgage
insurance for, or otherwise govern or
regulate, real property acquisition,
disposition, leasing, rehabilitation,
alteration, demolition, or new

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construction, or establish, revise, or
provide for standards for construction or
construction materials, manufactured
housing, or occupancy. Accordingly,
under 24 CFR 50.19(c)(1), this rule is
categorically excluded from
environmental review under the
National Environmental Policy Act of
1969 (42 U.S.C. 4321).
Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act
of 1995 (2 U.S.C. 1531–1538) (UMRA)
establishes requirements for Federal
agencies to assess the effects of their
regulatory actions on State, local, and
tribal governments and on the private
sector. This proposed rule does not
impose a Federal mandate on any state,
local, or tribal government, or on the
private sector, within the meaning of
UMRA.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) generally requires an
agency to conduct a regulatory
flexibility analysis of any rule subject to
notice and comment rulemaking
requirements, unless the agency certifies
that the rule will not have a significant
economic impact on a substantial
number of small entities. As has been
discussed in this preamble, this rule
updates HUD’s Section 3 regulations
and replace them with a new 24 CFR
part 75, for which the objective is to
increase employment opportunities for
low- and very low-income persons and
businesses that are owned by or employ
such persons. These entities generally
are small and therefore strengthening
the requirements of Section 3 should
benefit small businesses that are Section
3 business concerns. This rule also
considers the burden on small public
housing agencies (PHAs), defined in this
rule as a PHA that manages or operates
fewer than 250 public housing units,
and reduces the burden on them
through a new streamlined reporting
process that would not require them to
report labor hours or new hires. There
are approximately 2,950 PHAs, of which
approximately 2,250 are small.
As more fully discussed in the
accompanying RIA, the number of
economic opportunities generated for
Section 3 residents and businesses will
not increase to the degree that this rule
would have a significant economic
impact on a substantial number of small
entities. In addition, for those small
entities that must comply with this rule,
the changes made by this proposed rule
are designed to reduce burden on them,
as well as all recipients. The current
recordkeeping and reporting
requirements for Section 3 is 90,180

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hours with a cost of $1,817,000. HUD
estimated that this new rule will reduce
the number of hours by 68 percent to
25,910 hours. The biggest reduction will
be for small PHAs that will no longer
need to do quantitative analysis with a
total estimated time saving of 12,375
hours with a cost of $281,036, or
approximately $125 for small PHAs.
HUD also anticipates an across the
board savings in recordkeeping given
the time savings resulting from less time
reporting new hires as a separate metric.
For these reasons, HUD has determined
that this rule would not have a
significant economic impact on a
substantial number of small entities.
Executive Order 13132, Federalism
Executive Order 13132 (entitled
‘‘Federalism’’) prohibits an agency from
publishing any rule that has federalism
implications if the rule either: (1)
Imposes substantial direct compliance
costs on State and local governments
and is not required by statute, or (2)
preempts State law, unless the agency
meets the consultation and funding
requirements of Section 6 of the
Executive Order. This final rule does
not have federalism implications and
does not impose substantial direct
compliance costs on State and local
governments nor preempt state law
within the meaning of the Executive
Order.
Paperwork Reduction Act
Currently, 24 CFR part 135 requires
that all recipients track and report
Section 3 information to HUD, includes
prescriptive contractual language,
requires compliance by contractors of
the Section 3 requirements, contains
reporting and recordkeeping
requirements, and provides for the filing
of Section 3 complaints. SPEARS is the
main site in which HUD captures the
number of Section 3 residents hired and
the number of contracts awarded to
Section 3 business concerns. The
existing information collection
requirement for these requirements has

Number of
respondents

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Information collection
§ 75.15(a) Labor Hour or New Hire Reporting for PHA .....................................
§ 75.15(a) Labor Hour or New Hire Reporting for Contractors or Subcontractors of PHAs .........................................
§ 75.15(b)–(d) Qualitative Reporting for
PHAs ....................................................
§ 75.25(a) Labor Hour Reporting for Section 3 Projects ......................................
§ 75.25(a) Labor Hour Reporting for Contractors and Subcontractors on Section
3 Projects .............................................

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been approved by the Office of
Management and Budget (OMB) under
the Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520) and assigned
OMB control number 2529–0043.
The rule would change the existing
reporting requirement to decrease
qualitatively those who need to report,
excluding small PHAs and recipients of
Section 3 projects under the $200,000
threshold, and require reporting only
once a year by recipients of completed
projects. HUD provides in §§ 75.15 and
75.25 that recipients would be required
to submit reports to HUD annually
either in a qualitative form or
quantitative form. HUD includes all the
large PHAs in the § 75.15(a) reporting
number for reporting on the Section 3
benchmarks and estimates 2 hours to
track and report annually given the
amount of funds handled by these
PHAs. HUD also estimates that a PHA
will employ approximately seven
contractors or subcontractors each fiscal
year that would need to track and report
up to the PHA, each at one-half an hour
for reporting time. Lastly, HUD
estimates that 5 percent of the 700 large
PHAs may fail the Section 3
benchmarks and would need to report
on their qualitative efforts along with
the 2,250 small PHAs and estimates that
such reporting would take one-half an
hour.
As for § 75.25(a), HUD estimates that
66 percent of most program recipients
would complete projects in a fiscal year
that need to be reported except that for
the HOME program, HUD estimates that
90 percent of HOME recipients would
complete projects in a fiscal year, at an
estimate of 3,600 recipients. Given these
projects are more diverse in size, HUD
estimates that the average time to report
on the Section 3 benchmarks for
recipients would be 1 hour. HUD also
estimates that a Section 3 project will
engage approximately five contractors or
subcontractors each fiscal year that
would also need to track and report up
to the Section 3 project recipient, each

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Frequency of
response per
annum

Burden hour
per
response

at one-half an hour for reporting time.
Lastly, HUD estimates that 5 percent of
the 3,600 recipients may fail the Section
3 benchmarks and would need to report
on their qualitative efforts and estimates
that such reporting would take one-half
an hour.
HUD also notes that the rule no longer
requires the inclusion of prescriptive
contractual language. See §§ 75.17 and
75.27. HUD believes that this change
will result in a de minimis upfront
burden related to updating contracts, if
recipients, subrecipients, and
contractors chose to do so, but that
removing the requirement will actually
reduce burden on recipients,
subrecipients, and contractors on a
sustained basis by giving them
flexibility to use alternative or existing
contractual language. HUD also
provides for recordkeeping
requirements at § 75.31 and believes
that the maintaining of records by
recipients will take a recipient
approximately 2 hours. However, HUD
notes that some programs, such as
HOME, already have recordkeeping
requirements that are part of existing
approved Information Collection
Requests and, thus, excludes those
programs from the burden matrix.
Lastly, HUD maintains the option for
individuals to file complaints and
retains the frequency number that was
in the existing Section 3 reporting
burden.
In accordance with the Paperwork
Reduction Act, an agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information, unless the collection
displays a currently valid OMB control
number. The current recordkeeping
requirements for Section 3 is 90,180
hours with a cost of $1,817,000. HUD
estimates that this new rule will reduce
the number of hours by 68 percent to
25,910 hours for a total cost savings of
approximately $1.2 million. The overall
reporting and recordkeeping burden is
estimated as follows:

Annual burden
hours

Hourly cost
per
response

Annual cost

700

1

2

1,400

$22.71

$31,794.00

4,900

1

0.5

2,450

22.71

55,639.50

2,300

1

0.5

1,150

22.71

26,116.50

3,600

1

1

3,600

22.71

81,756.00

10,800

1

0.5

5,400

22.71

122,634.00

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Federal Register / Vol. 85, No. 189 / Tuesday, September 29, 2020 / Rules and Regulations
Number of
respondents

Information collection

Burden hour
per
response

Annual burden
hours

Hourly cost
per
response

Annual cost

§ 75.25(b) Qualitative Reporting for Section 3 Projects ......................................
§ 75.31 Recordkeeping ............................
§ 75.33 Complaints ..................................

180
5,900
20

1
1
1

0.5
2
1

90
11,800
20

22.71
22.71
10.00

2,043.90
267,978.00
200.00

Total ..................................................

........................

........................

........................

25,910

........................

588,161.90

24 CFR Part 91

HUD will update the appropriate
OMB control number 2529–0043 to
reflect this reduction in burden.
Congressional Review of Final Rules
The Office of Information and
Regulatory Affairs has determined that
this final rule is not a major rule, as
defined by 5 U.S.C. 804, for purposes of
congressional review of agency
rulemaking pursuant to the
Congressional Review Act, Public Law
104–121, sec. 251, 110 Stat. 868, 873
(codified at 5 U.S.C. 804). This rule will
not result in an annual effect on the
economy of $100 million or more; a
major increase in costs or prices; or
significant adverse effects on
competition, employment, investment,
productivity, innovation, or the ability
of U.S.-based companies to compete
with foreign-based companies in
domestic and export markets.

Aged, Grant programs-housing and
community development, Homeless,
Individuals with disabilities, Low- and
moderate-income housing, Reporting
and recordkeeping requirements.
24 CFR Part 92
Administrative practice and
procedure, Low- and moderate-income
housing, Manufactured homes, Rent
subsidies, Reporting and recordkeeping
requirements.
24 CFR Part 93
Administrative practice and
procedure, Grant programs-housing and
community development, Low- and
moderate-income housing,
Manufactured homes, Rent subsidies,
Reporting and recordkeeping
requirements.

List of Subjects

24 CFR Part 135

24 CFR Part 5

Administrative practice and
procedure, Community development,
Equal employment opportunity,
Government contracts, Grant
programs—housing and community
development, Housing, Loan
programs—housing and community
development, Reporting and
recordkeeping requirements, Small
businesses.

Administrative practice and
procedure, Aged, Claims, Crime,
Government contracts, Grant programshousing and community development,
Individuals with disabilities,
Intergovernmental relations, Loan
programs-housing and community
development, Low- and moderateincome housing, Mortgage insurance,
Penalties, Pets, Public housing, Rent
subsidies, Reporting and recordkeeping
requirements, Social security,
Unemployment compensation, Wages.
24 CFR Part 14
Claims, Equal access to justice,
Lawyers, Reporting and recordkeeping
requirements.
24 CFR Part 75

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Frequency of
response per
annum

61561

Administrative practice and
procedure, Community development,
Government contracts, Grant
programs—housing and community
development, Housing, Loan
programs—housing and community
development, Reporting and
recordkeeping requirements, Small
businesses.

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24 CFR Part 266
Intergovernmental relations, Low- and
moderate-income housing, Mortgage
insurance, Reporting and recordkeeping
requirements.
24 CFR Part 570
Administrative practice and
procedure, American Samoa,
Community development block grants,
Grant programs-education, Grant
programs-housing and community
development, Guam, Indians, Loan
programs-housing and community
development, Low- and moderateincome housing, Northern Mariana
Islands, Pacific Islands Trust Territory,
Puerto Rico, Reporting and
recordkeeping requirements, Student
aid, Virgin Islands.

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24 CFR Part 576
Community facilities, Grant programshousing and community development,
Grant programs-social programs,
Homeless, Reporting and recordkeeping
requirements.
24 CFR Part 578
Community development,
Community facilities, Grant programshousing and community development,
Grant programs-social programs,
Homeless, Reporting and recordkeeping
requirements.
24 CFR Part 905
Grant programs-housing and
community development, Public
housing, Reporting and recordkeeping
requirements.
24 CFR Part 964
Grant programs-housing and
community development, Public
housing, Reporting and recordkeeping
requirements.
24 CFR Part 983
Grant programs-housing and
community development, Low- and
moderate-income housing, Rent
subsidies, Reporting and recordkeeping
requirements.
24 CFR Part 1000
Aged, Community development block
grants, Grant programs-housing and
community development, Grant
programs-Indians, Indians, Individuals
with disabilities, Public housing,
Reporting and recordkeeping
requirements.
Accordingly, for the reasons described
in the preamble, under the authority 12
U.S.C. 1701u; 42 U.S.C. 3535(d), HUD
amends 24 CFR parts 5, 14, 75, 91, 92,
93, 135, 266, 570, 576, 578, 905, 964,
983, and 1000 as follows:
PART 5—GENERAL HUD PROGRAM
REQUIREMENTS; WAIVERS
1. The authority for part 5 is revised
to read as follows:

■

Authority: 12 U.S.C. 1701u and 1701x; 42
U.S.C. 1437a, 1437c, 1437d, 1437f, 1437n,
3535(d); Sec. 327, Pub. L. 109–115, 119 Stat.
2936; Sec. 607, Pub. L. 109–115, 119 Stat.

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3051 (42 U.S.C. 14043e et seq.); E.O. 13279,
67 FR 77141, 3 CFR, 2002 Comp., p. 258; and
E.O. 13559, 75 FR 71319, 3 CFR 2010 Comp.,
p. 273.
§ 5.105

[Amended]

2. Amend § 5.105(a) by removing ‘‘;
section 3 of the Housing and Urban
Development Act of 1968 (12 U.S.C.
1701u) and implementing regulations at
24 CFR part 135.’’

■

PART 14—IMPLEMENTATION OF THE
EQUAL ACCESS TO JUSTICE ACT IN
ADMINISTRATIVE PROCEEDINGS
3. The authority for part 14 continues
to read as follows:

■

Authority: 5 U.S.C. 504(c)(1); 42 U.S.C.
3535(d).
§ 14.115

[Amended]

4. Amend § 14.115 by removing and
reserving paragraph (a)(5).
■ 5. Add part 75 to read as follows:
■

PART 75—ECONOMIC
OPPORTUNITIES FOR LOW- AND
VERY LOW-INCOME PERSONS
Subpart A—General Provisions
Sec.
75.1 Purpose.
75.3 Applicability.
75.5 Definitions.
75.7 Requirements applicable to HUD
NOFAs for Section 3 covered programs.
Subpart B—Additional Provisions for Public
Housing Financial Assistance
75.9 Requirements.
75.11 Targeted Section 3 worker for public
housing financial assistance.
75.13 Section 3 safe harbor.
75.15 Reporting.
75.17 Contract provisions.
Subpart C—Additional Provisions for
Housing and Community Development
Financial Assistance
75.19 Requirements.
75.21 Targeted Section 3 worker for
housing and community development
financial assistance.
75.23 Section 3 safe harbor.
75.25 Reporting.
75.27 Contract provisions.
Subpart D—Provisions for Multiple Funding
Sources, Recordkeeping and Compliance
75.29 Multiple funding sources.
75.31 Recordkeeping.
75.33 Compliance.

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Authority: 12 U.S.C. 1701u; 42 U.S.C.
3535(d).

Subpart A—General Provisions
§ 75.1

Purpose.

This part establishes the requirements
to be followed to ensure the objectives
of Section 3 of the Housing and Urban
Development Act of 1968 (12 U.S.C.

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1701u) (Section 3) are met. The purpose
of Section 3 is to ensure that economic
opportunities, most importantly
employment, generated by certain HUD
financial assistance shall be directed to
low- and very low-income persons,
particularly those who are recipients of
government assistance for housing or
residents of the community in which
the Federal assistance is spent.
§ 75.3

Applicability.

(a) General applicability. Section 3
applies to public housing financial
assistance and Section 3 projects, as
follows:
(1) Public housing financial
assistance. Public housing financial
assistance means:
(i) Development assistance provided
pursuant to section 5 of the United
States Housing Act of 1937 (the 1937
Act);
(ii) Operations and management
assistance provided pursuant to section
9(e) of the 1937 Act;
(iii) Development, modernization, and
management assistance provided
pursuant to section 9(d) of the 1937 Act;
and
(iv) The entirety of a mixed-finance
development project as described in 24
CFR 905.604, regardless of whether the
project is fully or partially assisted with
public housing financial assistance as
defined in paragraphs (a)(1)(i) through
(iii) of this section.
(2) Section 3 projects. (i) Section 3
projects means housing rehabilitation,
housing construction, and other public
construction projects assisted under
HUD programs that provide housing and
community development financial
assistance when the total amount of
assistance to the project exceeds a
threshold of $200,000. The threshold is
$100,000 where the assistance is from
the Lead Hazard Control and Healthy
Homes programs, as authorized by
Sections 501 or 502 of the Housing and
Urban Development Act of 1970 (12
U.S.C. 1701z–1 or 1701z–2), the LeadBased Paint Poisoning Prevention Act
(42 U.S.C 4801 et seq.); and the
Residential Lead-Based Paint Hazard
Reduction Act of 1992 (42 U.S.C. 4851
et seq.). The project is the site or sites
together with any building(s) and
improvements located on the site(s) that
are under common ownership,
management, and financing.
(ii) The Secretary must update the
thresholds provided in paragraph
(a)(2)(i) of this section not less than once
every 5 years based on a national
construction cost inflation factor
through Federal Register notice not
subject to public comment. When the
Secretary finds it is warranted to ensure

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compliance with Section 3, the
Secretary may adjust, regardless of the
national construction cost factor, such
thresholds through Federal Register
notice, subject to public comment.
(iii) The requirements in this part
apply to an entire Section 3 project,
regardless of whether the project is fully
or partially assisted under HUD
programs that provide housing and
community development financial
assistance.
(b) Contracts for materials. Section 3
requirements do not apply to material
supply contracts.
(c) Indian and Tribal preferences.
Contracts, subcontracts, grants, or
subgrants subject to Section 7(b) of the
Indian Self-Determination and
Education Assistance Act (25 U.S.C.
5307(b)) or subject to tribal preference
requirements as authorized under 101(k)
of the Native American Housing
Assistance and Self-Determination Act
(25 U.S.C. 4111(k)) must provide
preferences in employment, training,
and business opportunities to Indians
and Indian organizations, and are
therefore not subject to the requirements
of this part.
(d) Other HUD assistance and other
Federal assistance. Recipients that are
not subject to Section 3 are encouraged
to consider ways to support the purpose
of Section 3.
§ 75.5

Definitions.

The terms HUD, Public housing, and
Public Housing Agency (PHA) are
defined in 24 CFR part 5. The following
definitions also apply to this part:
1937 Act means the United States
Housing Act of 1937, 42 U.S.C. 1437 et
seq.
Contractor means any entity entering
into a contract with:
(1) A recipient to perform work in
connection with the expenditure of
public housing financial assistance or
for work in connection with a Section
3 project; or
(2) A subrecipient for work in
connection with a Section 3 project.
Labor hours means the number of
paid hours worked by persons on a
Section 3 project or by persons
employed with funds that include
public housing financial assistance.
Low-income person means a person as
defined in Section 3(b)(2) of the 1937
Act.
Material supply contracts means
contracts for the purchase of products
and materials, including, but not limited
to, lumber, drywall, wiring, concrete,
pipes, toilets, sinks, carpets, and office
supplies.
Professional services means nonconstruction services that require an

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advanced degree or professional
licensing, including, but not limited to,
contracts for legal services, financial
consulting, accounting services,
environmental assessment, architectural
services, and civil engineering services.
Public housing financial assistance
means assistance as defined in
§ 75.3(a)(1).
Public housing project is defined in
24 CFR 905.108.
Recipient means any entity that
receives directly from HUD public
housing financial assistance or housing
and community development assistance
that funds Section 3 projects, including,
but not limited to, any State, local
government, instrumentality, PHA, or
other public agency, public or private
nonprofit organization.
Section 3 means Section 3 of the
Housing and Urban Development Act of
1968, as amended (12 U.S.C. 1701u).
Section 3 business concern means:
(1) A business concern meeting at
least one of the following criteria,
documented within the last six-month
period:
(i) It is at least 51 percent owned and
controlled by low- or very low-income
persons;
(ii) Over 75 percent of the labor hours
performed for the business over the
prior three-month period are performed
by Section 3 workers; or
(iii) 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.
(2) The status of a Section 3 business
concern shall not be negatively affected
by a prior arrest or conviction of its
owner(s) or employees.
(3) Nothing in this part shall be
construed to require the contracting or
subcontracting of a Section 3 business
concern. Section 3 business concerns
are not exempt from meeting the
specifications of the contract.
Section 3 project means a project
defined in § 75.3(a)(2).
Section 3 worker means:
(1) Any worker who currently fits or
when hired within the past five years fit
at least one of the following categories,
as documented:
(i) The worker’s income for the
previous or annualized calendar year is
below the income limit established by
HUD.
(ii) The worker is employed by a
Section 3 business concern.
(iii) The worker is a YouthBuild
participant.
(2) The status of a Section 3 worker
shall not be negatively affected by a
prior arrest or conviction.
(3) Nothing in this part shall be
construed to require the employment of

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someone who meets this definition of a
Section 3 worker. Section 3 workers are
not exempt from meeting the
qualifications of the position to be
filled.
Section 8-assisted housing refers to
housing receiving project-based rental
assistance or tenant-based assistance
under Section 8 of the 1937 Act.
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.
Small PHA means a public housing
authority that manages or operates fewer
than 250 public housing units.
Subcontractor means any entity that
has a contract with a contractor to
undertake a portion of the contractor’s
obligation to perform work in
connection with the expenditure of
public housing financial assistance or
for a Section 3 project.
Subrecipient has the meaning
provided in the applicable program
regulations or in 2 CFR 200.93.
Targeted Section 3 worker has the
meanings provided in §§ 75.11, 75.21, or
75.29, and does not exclude an
individual that has a prior arrest or
conviction.
Very low-income person means the
definition for this term set forth in
section 3(b)(2) of the 1937 Act.
YouthBuild programs refers to
YouthBuild programs receiving
assistance under the Workforce
Innovation and Opportunity Act (29
U.S.C. 3226).
§ 75.7 Requirements applicable to HUD
NOFAs for Section 3 covered programs.

All notices of funding availability
(NOFAs) issued by HUD that announce
the availability of funding covered by
§ 75.3 will include notice that this part
is applicable to the funding and may
include, as appropriate for the specific
NOFA, points or bonus points for the
quality of Section 3 plans.
Subpart B—Additional Provisions for
Public Housing Financial Assistance
§ 75.9

Requirements.

(a) Employment and training. (1)
Consistent with existing Federal, state,
and local laws and regulations, PHAs or
other recipients receiving public
housing financial assistance, and their
contractors and subcontractors, must
make their best efforts to provide
employment and training opportunities
generated by the public housing

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financial assistance to Section 3
workers.
(2) PHAs or other recipients, and their
contractors and subcontractors, must
make their best efforts described in
paragraph (a)(1) of this section in the
following order of priority:
(i) To residents of the public housing
projects for which the public housing
financial assistance is expended;
(ii) To residents of other public
housing projects managed by the PHA
that is providing the assistance or for
residents of Section 8-assisted housing
managed by the PHA;
(iii) To participants in YouthBuild
programs; and
(iv) To low- and very low-income
persons residing within the
metropolitan area (or nonmetropolitan
county) in which the assistance is
expended.
(b) Contracting. (1) Consistent with
existing Federal, state, and local laws
and regulations, PHAs and other
recipients of public housing financial
assistance, and their contractors and
subcontractors, must make their best
efforts to award contracts and
subcontracts to business concerns that
provide economic opportunities to
Section 3 workers.
(2) PHAs and other recipients, and
their contractors and subcontractors,
must make their best efforts described in
paragraph (b)(1) of this section in the
following order of priority:
(i) To Section 3 business concerns
that provide economic opportunities for
residents of the public housing projects
for which the assistance is provided;
(ii) To Section 3 business concerns
that provide economic opportunities for
residents of other public housing
projects or Section-8 assisted housing
managed by the PHA that is providing
the assistance;
(iii) To YouthBuild programs; and
(iv) To Section 3 business concerns
that provide economic opportunities to
Section 3 workers residing within the
metropolitan area (or nonmetropolitan
county) in which the assistance is
provided.
§ 75.11 Targeted Section 3 worker for
public housing financial assistance.

(a) Targeted Section 3 worker. A
Targeted Section 3 worker for public
housing financial assistance means a
Section 3 worker who is:
(1) A worker employed by a Section
3 business concern; or
(2) A worker who currently fits or
when hired fit at least one of the
following categories, as documented
within the past five years:
(i) A resident of public housing or
Section 8-assisted housing;

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(ii) A resident of other public housing
projects or Section 8-assisted housing
managed by the PHA that is providing
the assistance; or
(iii) A YouthBuild participant.
(b) [Reserved]

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§ 75.13

Section 3 safe harbor.

(a) General. PHAs and other
recipients will be considered to have
complied with requirements in this part,
in the absence of evidence to the
contrary, if they:
(1) Certify that they have followed the
prioritization of effort in § 75.9; and
(2) Meet or exceed the applicable
Section 3 benchmarks as described in
paragraph (b) of this section.
(b) Establishing benchmarks. (1) HUD
will establish Section 3 benchmarks for
Section 3 workers or Targeted Section 3
workers or both through a document
published in the Federal Register. HUD
may establish a single nationwide
benchmark for Section 3 workers and a
single nationwide benchmark for
Targeted Section 3 workers, or may
establish multiple benchmarks based on
geography, the type of public housing
financial assistance, or other variables.
HUD will update the benchmarks
through a document published in the
Federal Register, subject to public
comment, not less frequently than once
every 3 years. Such notice shall include
aggregate data on labor hours and the
proportion of PHAs and other recipients
meeting benchmarks, as well as other
metrics reported pursuant to § 75.15 as
deemed appropriate by HUD, for the 3
most recent reporting years.
(2) In establishing the Section 3
benchmarks, HUD may consider the
industry averages for labor hours
worked by specific categories of workers
or in different localities or regions;
averages for labor hours worked by
Section 3 workers and Targeted Section
3 workers as reported by recipients
pursuant to this section; and any other
factors HUD deems important. In
establishing the Section 3 benchmarks,
HUD will exclude professional services
from the total number of labor hours as
such hours are excluded from the total
number of labor hours to be reported per
§ 75.15(a)(4).
(3) Section 3 benchmarks will consist
of the following two ratios:
(i) The number of labor hours worked
by Section 3 workers divided by the
total number of labor hours worked by
all workers funded by public housing
financial assistance in the PHA’s or
other recipient’s fiscal year.
(ii) The number of labor hours worked
by Targeted Section 3 workers, as
defined in § 75.11(a), divided by the
total number of labor hours worked by

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all workers funded by public housing
financial assistance in the PHA’s or
other recipient’s fiscal year.
§ 75.15

Reporting.

(a) Reporting of labor hours. (1) For
public housing financial assistance,
PHAs and other recipients must report
in a manner prescribed by HUD:
(i) The total number of labor hours
worked;
(ii) The total number of labor hours
worked by Section 3 workers; and
(iii) The total number of labor hours
worked by Targeted Section 3 workers.
(2) Section 3 workers’ and Targeted
Section 3 workers’ labor hours may be
counted for five years from when their
status as a Section 3 worker or Targeted
Section 3 worker is established pursuant
to § 75.31.
(3) The labor hours reported under
paragraph (a)(1) of this section must
include the total number of labor hours
worked with public housing financial
assistance in the fiscal year of the PHA
or other recipient, including labor hours
worked by any contractors and
subcontractors that the PHA or other
recipient is required, or elects pursuant
to paragraph (a)(4) of this section, to
report.
(4) PHAs and other recipients
reporting under this section, as well as
contractors and subcontractors who
report to PHAs and recipients, may
report labor hours by Section 3 workers,
under paragraph (a)(1)(ii) of this section,
and labor hours by Targeted Section 3
workers, under paragraph (a)(1)(iii) of
this section, from professional services
without including labor hours from
professional services in the total number
of labor hours worked under paragraph
(a)(1)(i) of this section. If a contract
covers both professional services and
other work and the PHA, other
recipient, contractor, or subcontractor
chooses not to report labor hours from
professional services, the labor hours
under the contract that are not from
professional services must still be
reported.
(5) PHAs and other recipients may
report on the labor hours of the PHA,
the recipient, a contractor, or a
subcontractor based on the employer’s
good faith assessment of the labor hours
of a full-time or part-time employee
informed by the employer’s existing
salary or time and attendance based
payroll systems, unless the project or
activity is otherwise subject to
requirements specifying time and
attendance reporting.
(b) Additional reporting if Section 3
benchmarks are not met. If the PHA’s or
other recipient’s reporting under
paragraph (a) of this section indicates

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that the PHA or other recipient has not
met the Section 3 benchmarks described
in § 75.13, the PHA or other recipient
must report in a form prescribed by
HUD on the qualitative nature of its
Section 3 compliance activities and
those of its contractors and
subcontractors. Such qualitative efforts
may, for example, include but are not
limited to the following:
(1) Engaged in outreach efforts to
generate job applicants who are
Targeted Section 3 workers.
(2) Provided training or
apprenticeship opportunities.
(3) Provided technical assistance to
help Section 3 workers compete for jobs
(e.g., resume assistance, coaching).
(4) 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.
(5) Held one or more job fairs.
(6) Provided or referred Section 3
workers to services supporting work
readiness and retention (e.g., work
readiness activities, interview clothing,
test fees, transportation, child care).
(7) Provided assistance to apply for/or
attend community college, a four-year
educational institution, or vocational/
technical training.
(8) Assisted Section 3 workers to
obtain financial literacy training and/or
coaching.
(9) Engaged in outreach efforts to
identify and secure bids from Section 3
business concerns.
(10) Provided technical assistance to
help Section 3 business concerns
understand and bid on contracts.
(11) Divided contracts into smaller
jobs to facilitate participation by Section
3 business concerns.
(12) Provided bonding assistance,
guaranties, or other efforts to support
viable bids from Section 3 business
concerns.
(13) Promoted use of business
registries designed to create
opportunities for disadvantaged and
small businesses.
(14) Outreach, engagement, or
referrals with the state one-stop system
as defined in Section 121(e)(2) of the
Workforce Innovation and Opportunity
Act.
(c) Reporting frequency. Unless
otherwise provided, PHAs or other
recipients must report annually to HUD
under paragraph (a) of this section, and,
where required, under paragraph (b) of
this section, in a manner consistent with
reporting requirements for the
applicable HUD program.
(d) Reporting by Small PHAs. Small
PHAs may elect not to report under

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paragraph (a) of this section. Small
PHAs that make such election are
required to report on their qualitative
efforts, as described in paragraph (b) of
this section, in a manner consistent with
reporting requirements for the
applicable HUD program.
§ 75.17

Contract provisions.

(a) PHAs or other recipients must
include language in any agreement or
contract to apply Section 3 to
contractors.
(b) PHAs or other recipients must
require contractors to include language
in any contract or agreement to apply
Section 3 to subcontractors.
(c) PHAs or other recipients must
require all contractors and
subcontractors to meet the requirements
of § 75.9, regardless of whether Section
3 language is included in contracts.
Subpart C—Additional Provisions for
Housing and Community Development
Financial Assistance

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§ 75.19

Requirements.

(a) Employment and training. (1) To
the greatest extent feasible, and
consistent with existing Federal, state,
and local laws and regulations,
recipients covered by this subpart shall
ensure that employment and training
opportunities arising in connection with
Section 3 projects are provided to
Section 3 workers within the
metropolitan area (or nonmetropolitan
county) in which the project is located.
(2) Where feasible, priority for
opportunities and training described in
paragraph (a)(1) of this section should
be given to:
(i) Section 3 workers residing within
the service area or the neighborhood of
the project, and
(ii) Participants in YouthBuild
programs.
(b) Contracting. (1) To the greatest
extent feasible, and consistent with
existing Federal, state, and local laws
and regulations, recipients covered by
this subpart shall ensure contracts for
work awarded in connection with
Section 3 projects are provided to
business concerns that provide
economic opportunities to Section 3
workers residing within the
metropolitan area (or nonmetropolitan
county) in which the project is located.
(2) Where feasible, priority for
contracting opportunities described in
paragraph (b)(1) of this section should
be given to:
(i) Section 3 business concerns that
provide economic opportunities to
Section 3 workers residing within the
service area or the neighborhood of the
project, and

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(ii) YouthBuild programs.
§ 75.21 Targeted Section 3 worker for
housing and community development
financial assistance.

(a) Targeted Section 3 worker. A
Targeted Section 3 worker for housing
and community development financial
assistance means a Section 3 worker
who is:
(1) A worker employed by a Section
3 business concern; or
(2) A worker who currently fits or
when hired fit at least one of the
following categories, as documented
within the past five years:
(i) Living within the service area or
the neighborhood of the project, as
defined in § 75.5; or
(ii) A YouthBuild participant.
(b) [Reserved]
§ 75.23

Section 3 safe harbor.

(a) General. Recipients will be
considered to have complied with
requirements in this part, in the absence
of evidence to the contrary if they:
(1) Certify that they have followed the
prioritization of effort in § 75.19; and
(2) Meet or exceed the applicable
Section 3 benchmark as described in
paragraph (b) of this section.
(b) Establishing benchmarks. (1) HUD
will establish Section 3 benchmarks for
Section 3 workers or Targeted Section 3
workers or both through a document
published in the Federal Register. HUD
may establish a single nationwide
benchmark for Section 3 workers and a
single nationwide benchmark for
Targeted Section 3 workers, or may
establish multiple benchmarks based on
geography, the nature of the Section 3
project, or other variables. HUD will
update the benchmarks through a
document published in the Federal
Register, subject to public comment, not
less frequently than once every 3 years.
Such notice shall include aggregate data
on labor hours and the proportion of
recipients meeting benchmarks, as well
as other metrics reported pursuant to
§ 75.25 as deemed appropriate by HUD,
for the 3 most recent reporting years.
(2) In establishing the Section 3
benchmarks, HUD may consider the
industry averages for labor hours
worked by specific categories of workers
or in different localities or regions;
averages for labor hours worked by
Section 3 workers and Targeted Section
3 workers as reported by recipients
pursuant to this section; and any other
factors HUD deems important. In
establishing the Section 3 benchmarks,
HUD will exclude professional services
from the total number of labor hours as
such hours are excluded from the total
number of labor hours to be reported per
§ 75.25(a)(4).

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(3) Section 3 benchmarks will consist
of the following two ratios:
(i) The number of labor hours worked
by Section 3 workers divided by the
total number of labor hours worked by
all workers on a Section 3 project in the
recipient’s program year.
(ii) The number of labor hours worked
by Targeted Section 3 workers as
defined in § 75.21(a), divided by the
total number of labor hours worked by
all workers on a Section 3 project in the
recipient’s program year.
§ 75.25

Reporting.

(a) Reporting of labor hours. (1) For
Section 3 projects, recipients must
report in a manner prescribed by HUD:
(i) The total number of labor hours
worked;
(ii) The total number of labor hours
worked by Section 3 workers; and
(iii) The total number of labor hours
worked by Targeted Section 3 workers.
(2) Section 3 workers’ and Targeted
Section 3 workers’ labor hours may be
counted for five years from when their
status as a Section 3 worker or Targeted
Section 3 worker is established pursuant
to § 75.31.
(3) The labor hours reported under
paragraph (a)(1) of this section must
include the total number of labor hours
worked on a Section 3 project, including
labor hours worked by any
subrecipients, contractors and
subcontractors that the recipient is
required, or elects pursuant to
paragraph (a)(4) of this section, to
report.
(4) Recipients reporting under this
section, as well as subrecipients,
contractors and subcontractors who
report to recipients, may report labor
hours by Section 3 workers, under
paragraph (a)(1)(ii) of this section, and
labor hours by Targeted Section 3
workers, under paragraph (a)(1)(iii) of
this section, from professional services
without including labor hours from
professional services in the total number
of labor hours worked under paragraph
(a)(1)(i) of this section. If a contract
covers both professional services and
other work and the recipient or
contractor or subcontractor chooses not
to report labor hours from professional
services, the labor hours under the
contract that are not from professional
services must still be reported.
(5) Recipients may report their own
labor hours or that of a subrecipient,
contractor, or subcontractor based on
the employer’s good faith assessment of
the labor hours of a full-time or parttime employee informed by the
employer’s existing salary or time and
attendance based payroll systems,
unless the project or activity is

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otherwise subject to requirements
specifying time and attendance
reporting.
(b) Additional reporting if Section 3
benchmarks are not met. If the
recipient’s reporting under paragraph (a)
of this section indicates that the
recipient has not met the Section 3
benchmarks described in § 75.23, the
recipient must report in a form
prescribed by HUD on the qualitative
nature of its activities and those its
contractors and subcontractors pursued.
Such qualitative efforts may, for
example, include but are not limited to
the following:
(1) Engaged in outreach efforts to
generate job applicants who are
Targeted Section 3 workers.
(2) Provided training or
apprenticeship opportunities.
(3) Provided technical assistance to
help Section 3 workers compete for jobs
(e.g., resume assistance, coaching).
(4) 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.
(5) Held one or more job fairs.
(6) Provided or referred Section 3
workers to services supporting work
readiness and retention (e.g., work
readiness activities, interview clothing,
test fees, transportation, child care).
(7) Provided assistance to apply for/or
attend community college, a four-year
educational institution, or vocational/
technical training.
(8) Assisted Section 3 workers to
obtain financial literacy training and/or
coaching.
(9) Engaged in outreach efforts to
identify and secure bids from Section 3
business concerns.
(10) Provided technical assistance to
help Section 3 business concerns
understand and bid on contracts.
(11) Divided contracts into smaller
jobs to facilitate participation by Section
3 business concerns.
(12) Provided bonding assistance,
guaranties, or other efforts to support
viable bids from Section 3 business
concerns.
(13) Promoted use of business
registries designed to create
opportunities for disadvantaged and
small businesses.
(14) Outreach, engagement, or
referrals with the state one-stop system
as defined in Section 121(e)(2) of the
Workforce Innovation and Opportunity
Act.
(c) Reporting frequency. Unless
otherwise provided, recipients must
report annually to HUD under
paragraph (a) of this section, and, where

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required, under paragraph (b) of this
section, on all projects completed
within the reporting year in a manner
consistent with reporting requirements
for the applicable HUD program.
§ 75.27

Contract provisions.

(a) Recipients must include language
applying Section 3 requirements in any
subrecipient agreement or contract for a
Section 3 project.
(b) Recipients of Section 3 funding
must require subrecipients, contractors,
and subcontractors to meet the
requirements of § 75.19, regardless of
whether Section 3 language is included
in recipient or subrecipient agreements,
program regulatory agreements, or
contracts.
Subpart D—Provisions for Multiple
Funding Sources, Recordkeeping, and
Compliance
§ 75.29

Multiple funding sources.

(a) If a housing rehabilitation, housing
construction or other public
construction project is subject to Section
3 pursuant to § 75.3(a)(1) and (2), the
recipient must follow subpart B of this
part for the public housing financial
assistance and may follow either
subpart B or C of this part for the
housing and community development
financial assistance. For such a project,
the following applies:
(1) For housing and community
development financial assistance, a
Targeted Section 3 worker is any worker
who meets the definition of a Targeted
Section 3 worker in either subpart B or
C of this part; and
(2) The recipients of both sources of
funding shall report on the housing
rehabilitation, housing construction, or
other public construction project as a
whole and shall identify the multiple
associated recipients. PHAs and other
recipients must report the following
information:
(i) The total number of labor hours
worked on the project;
(ii) The total number of labor hours
worked by Section 3 workers on the
project; and
(iii) The total number of labor hours
worked by Targeted Section 3 workers
on the project.
(b) If a housing rehabilitation, housing
construction, or other public
construction project is subject to Section
3 because the project is assisted with
funding from multiple sources of
housing and community development
assistance that exceed the thresholds in
§ 75.3(a)(2), the recipient or recipients
must follow subpart C of this part, and
must report to the applicable HUD
program office, as prescribed by HUD.

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§ 75.31

Recordkeeping.

(a) HUD shall have access to all
records, reports, and other documents or
items of the recipient that are
maintained to demonstrate compliance
with the requirements of this part, or
that are maintained in accordance with
the regulations governing the specific
HUD program by which the Section 3
project is governed, or the public
housing financial assistance is provided
or otherwise made available to the
recipient, subrecipient, contractor, or
subcontractor.
(b) Recipients must maintain
documentation, or ensure that a
subrecipient, contractor, or
subcontractor that employs the worker
maintains documentation, to ensure that
workers meet the definition of a Section
3 worker or Targeted Section 3 worker,
at the time of hire or the first reporting
period, as follows:
(1) For a worker to qualify as a
Section 3 worker, one of the following
must be maintained:
(i) A worker’s self-certification that
their income is below the income limit
from the prior calendar year;
(ii) A worker’s self-certification of
participation in a means-tested program
such as public housing or Section 8assisted housing;
(iii) Certification from a PHA, or the
owner or property manager of projectbased Section 8-assisted housing, or the
administrator of tenant-based Section 8assisted housing that the worker is a
participant in one of their programs;
(iv) An employer’s certification that
the worker’s income from that employer
is below the income limit when based
on an employer’s calculation of what
the worker’s wage rate would translate
to if annualized on a full-time basis; or
(v) An employer’s certification that
the worker is employed by a Section 3
business concern.
(2) For a worker to qualify as a
Targeted Section 3 worker, one of the
following must be maintained:
(i) For a worker to qualify as a
Targeted Section 3 worker under
subpart B of this part:
(A) A worker’s self-certification of
participation in public housing or
Section 8-assisted housing programs;
(B) Certification from a PHA, or the
owner or property manager of projectbased Section 8-assisted housing, or the
administrator of tenant-based Section 8assisted housing that the worker is a
participant in one of their programs;
(C) An employer’s certification that
the worker is employed by a Section 3
business concern; or
(D) A worker’s certification that the
worker is a YouthBuild participant.

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(ii) For a worker to qualify as a
Targeted Section 3 worker under
subpart C of this part:
(A) An employer’s confirmation that a
worker’s residence is within one mile of
the work site or, if fewer than 5,000
people live within one mile of a work
site, within a circle centered on the
work site that is sufficient to encompass
a population of 5,000 people according
to the most recent U.S. Census;
(B) An employer’s certification that
the worker is employed by a Section 3
business concern; or
(C) A worker’s self-certification that
the worker is a YouthBuild participant.
(c) The documentation described in
paragraph (b) of this section must be
maintained for the time period required
for record retentions in accordance with
applicable program regulations or, in
the absence of applicable program
regulations, in accordance with 2 CFR
part 200.
(d) A PHA or recipient may report on
Section 3 workers and Targeted Section
3 workers for five years from when their
certification as a Section 3 worker or
Targeted Section 3 worker is
established.
§ 75.33

Compliance.

(a) Records of compliance. Each
recipient shall maintain adequate
records demonstrating compliance with
this part, consistent with other
recordkeeping requirements in 2 CFR
part 200.
(b) Complaints. Complaints alleging
failure of compliance with this part may
be reported to the HUD program office
responsible for the public housing
financial assistance or the Section 3
project, or to the local HUD field office.
(c) Monitoring. HUD will monitor
compliance with the requirements of
this part. The applicable HUD program
office will determine appropriate
methods by which to oversee Section 3
compliance. HUD may impose
appropriate remedies and sanctions in
accordance with the laws and
regulations for the program under which
the violation was found.
PART 91—CONSOLIDATED
SUBMISSIONS FOR COMMUNITY
PLANNING AND DEVELOPMENT
PROGRAMS

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Authority: 42 U.S.C. 3535(d), 3601–3619,
5301–5315, 11331–11388, 12701–12711,
12741–12756, and 12901–12912.
[Amended]

7. Amend § 91.215(j) by removing ‘‘24
CFR part 135’’ and adding, in its place
‘‘24 CFR part 75’’.

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CHAPTER I—OFFICE OF ASSISTANT
SECRETARY FOR EQUAL OPPORTUNITY,
DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT [AMENDED]

15. Under the authority of 42 U.S.C.
3535(d), in chapter I, remove designated
subchapter headings A and B.

■

§ 91.325

[Amended]

9. Amend § 91.325(a)(7) by removing
‘‘24 CFR part 135’’ and adding, in its
place ‘‘24 CFR part 75’’.

■

§ 91.425

[Amended]

PART 92—HOME INVESTMENT
PARTNERSHIPS PROGRAM
11. The authority citation for part 92
continues to read as follows:

■

Authority: 42 U.S.C. 3535(d), 12 U.S.C.
1701x and 4568.

12. Amend § 92.508 as follows:
a. Remove paragraph (a)(7)(i)(B);
b. Redesignate paragraph (a)(7)(i)(C) as
(a)(7)(i)(B); and
■ c. Add paragraph (a)(7)(xi).
The addition reads as follows:
■
■
■

§ 92.508

PART 135 —[REMOVED]
■

10. Amend § 91.425(a)(1)(vii) by
removing ‘‘24 CFR part 135’’ and
adding, in its place ‘‘24 CFR part 75’’.

■

Recordkeeping.

(a) * * *
(7) * * *
(xi) Documentation of actions
undertaken to meet the requirements of
24 CFR part 75 which implements
section 3 of the Housing Development
Act of 1968, as amended (12 U.S.C.
1701u).
*
*
*
*
*
PART 93—HOUSING TRUST FUND
13. The authority citation for part 93
continues to read as follows:

■

Authority: 42 U.S.C. 3535(d), 12 U.S.C.
4568.

14. Amend § 93.407 as follows:
a. Redesignate paragraphs (a)(5)(ii)
through (ix) as paragraphs (a)(5)(iii)
through (x);
■ b. Remove paragraph (a)(5)(i)(B);
■ c. Redesignate paragraph (a)(5)(i)(A)
as paragraph (a)(5)(ii);
■ d. In newly redesignated paragraph
(a)(5)(iv), remove ‘‘24 part 35’’ and add
in its place ‘‘24 CFR part 35’’; and
■ e. Add paragraph (a)(5)(xi).
The addition reads as follows:
■
■

§ 93.407

6. The authority citation for part 91
continues to read as follows:

■

[Amended]

8. Amend § 91.225(a)(7) by removing
‘‘24 CFR part 135’’ and adding, in its
place ‘‘24 CFR part 75’’.

■

16. Remove part 135.

PART 266—HOUSING FINANCE
AGENCY RISK-SHARING PROGRAM
FOR INSURED AFFORDABLE
MULTIFAMILY PROJECT LOANS
17. The authority citation for part 266
continues to read as follows:

■

Authority: 12 U.S.C. 1707; 42 U.S.C.
3535(d).
§ 266.220

[Amended]

18. Amend § 266.220(c) by removing
‘‘; section 3 of the Housing and Urban
Development Act of 1968 (12 U.S.C.
1701u), as implemented by 24 CFR part
135’’.

■

PART 570—COMMUNITY
DEVELOPMENT BLOCK GRANTS
19. The authority citation for part 570
continues to read as follows:

■

Authority: 12 U.S.C. 1701x, 1701 x–1; 42
U.S.C. 3535(d) and 5301–5320.
§ 570.487

[Amended]

20. Amend § 570.487(d) by removing
‘‘24 CFR part 135’’ and adding in its
place ‘‘24 CFR part 75’’.

■

§ 570.607

[Amended]

21. Amend § 570.607(b) by removing
‘‘24 CFR part 135’’ and adding in its
place ‘‘24 CFR part 75’’.

■

PART 574—HOUSING
OPPORTUNITIES FOR PERSONS WITH
AIDS
22. The authority citation for part 574
continues to read as follows:

■

Authority: 12 U.S.C. 1701x, 1701 x–1; 42
U.S.C. 3535(d) and 5301–5320.
§ 574.600

[Amended]

23. Amend § 574.600 by adding ‘‘and
part 75’’ after the phrase ‘‘24 CFR part
5’’.

■

■

§ 91.215

§ 91.225

61567

Recordkeeping.

(a) * * *
(5) * * *
(xi) Documentation of actions
undertaken to meet the requirements of
24 CFR part 75, which implements
section 3 of the Housing and Urban
Development Act of 1968, as amended
(12 U.S.C. 1701u).
*
*
*
*
*

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PART 576—EMERGENCY SOLUTIONS
GRANTS PROGRAM
24. The authority citation for part 576
continues to read as follows:

■

Authority: 12 U.S.C. 1701x, 1701 x–1; 42
U.S.C. 11371 et seq., 42 U.S.C. 3535(d).

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61568
§ 576.407

Federal Register / Vol. 85, No. 189 / Tuesday, September 29, 2020 / Rules and Regulations
Authority: 42 U.S.C. 1437d, 1437g, 1437r,
3535(d).

[Amended]

25. Amend § 576.407(a) by removing
‘‘24 CFR part 135’’ and adding in its
place ‘‘24 CFR part 75’’.

■

31. Revise § 964.320 to read as
follows:

■

PART 578—CONTINUUM OF CARE
PROGRAM
26. The authority citation for part 578
continues to read as follows:

■

■

In accordance with Section 3 of the
Housing and Urban Development Act of
1968 and the implementing regulations
at 24 CFR part 75, PHAs, their
contractors and subcontractors shall
make best efforts, consistent with
existing Federal, State, and local laws
and regulations, to give low and very
low-income persons the training and
employment opportunities generated by
Section 3 covered assistance (as this
term is defined in 24 CFR 75.3) and to
give Section 3 business concerns the
contracting opportunities generated by
Section 3 covered assistance.

Authority: 42 U.S.C. 1437g, 42 U.S.C.
1437z–2, 42 U.S.C. 1437z–7, and 3535(d).

PART 983—PROJECT-BASED
VOUCHER (PBV) PROGRAM

§ 905.308

■

Authority: 12 U.S.C. 1701x, 1701 x–1; 42
U.S.C. 11381 et seq., 42 U.S.C. 3535(d).
§ 578.99

[Amended]

27. Amend § 578.99 by removing
‘‘federal’’ in the section heading and
adding in its place ‘‘Federal’’ and
removing ‘‘24 CFR part 135’’ in
paragraph (i) and adding in its place ‘‘24
CFR part 75’’.

■

PART 905—THE PUBLIC HOUSING
CAPITAL FUND PROGRAM
28. The authority citation for part 905
continues to read as follows:

[Amended]

29. Amend § 905.308(b)(10) by
removing ‘‘24 CFR part 135’’ and adding
in its place ‘‘24 CFR part 75’’.

■

PART 964—TENANT PARTICIPATION
AND TENANT OPPORTUNITIES IN
PUBLIC HOUSING
30. The authority citation for part 964
continues to read as follows:

■

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§ 964.320 HUD Policy on training,
employment, contracting and
subcontracting of public housing residents.

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32. The authority citation for part 983
continues to read as follows:
Authority: 42 U.S.C. 1437f and 3535(d).

§ 983.4

[Amended]

§ 983.154

[Amended]

34. Amend § 983.154 by removing (c)
introductory text and paragraph (c)(1)
and redesignating paragraph (c)(2) as
paragraph (c).

■

PART 1000—NATIVE AMERICAN
HOUSING ACTIVITIES
35. The authority citation for part
1000 continues to read as follows:

■

Authority: 25 U.S.C. 4101 et seq.; 42
U.S.C. 3535(d).

36. Revise § 1000.42 to read as
follows:

■

§ 1000.42 Are the requirements of Section
3 of the Housing and Urban Development
Act of 1968 applicable?

No. Recipients shall comply with
Indian preference requirements of
Section 7(b) of the Indian SelfDetermination and Education
Assistance Act (25 U.S.C. 5307(b)), or
employment and contract preference
laws adopted by the recipient’s tribe in
accordance with Section 101(k) of
NAHASDA.
Benjamin S. Carson, Sr.,
Secretary.
[FR Doc. 2020–19185 Filed 9–28–20; 8:45 am]

33. Amend § 983.4 by removing the
definition of ‘‘Section 3—Training,
employment and contracting
opportunities in development’’.

■

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