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HUD Section 3 Compliance Workshop

Understanding Workforce & Economic Opportunity Requirements Under 24 CFR Part 75

History of HUD Section 3

Section 3 was established under the Housing and Urban Development Act of 1968. The law was created to ensure that the economic opportunities generated by federal housing and community development funding benefit the residents living in the communities receiving that investment.

Before Section 3 existed, large federal housing projects often brought construction and infrastructure investment into neighborhoods without providing employment or contracting opportunities for the local residents. Congress created Section 3 to ensure those opportunities were directed toward the people most impacted by housing and economic hardship.

In 2020, HUD implemented the modern Final Rule under 24 CFR Part 75. The rule updated how compliance is measured and simplified reporting by focusing on workforce participation and economic opportunities created through HUD-funded development.

Purpose of Section 3

The purpose of Section 3 is to ensure that federal housing investments produce direct economic benefits for low-income individuals and communities.

HUD requires recipients of covered financial assistance to make efforts to provide employment, training, and contracting opportunities to Section 3 workers and Section 3 businesses whenever possible.

This means that when HUD funds are used for construction, housing rehabilitation, infrastructure, or community development projects, those projects should help create:

  • Local employment opportunities
  • Workforce development and skills training
  • Contracting opportunities for small and local businesses
  • Long-term economic growth in underserved communities

Who Section 3 Applies To

Section 3 requirements apply to many organizations that receive or administer HUD funding. These entities are referred to as Recipients and Contractors.

Examples include:

  • Public Housing Authorities (PHAs)
  • Local governments receiving Community Development Block Grants (CDBG)
  • Developers using HOME Investment Partnership funds
  • Nonprofit housing organizations
  • Contractors and subcontractors performing HUD funded construction or rehabilitation

Section 3 also applies to subcontractors hired by prime contractors when they are performing work connected to the HUD-funded project.

Who Qualifies as a Section 3 Worker

A Section 3 Worker is generally someone whose income falls below HUD income limits or someone who lives in HUD-assisted housing.

This typically includes:

  • Low-income individuals based on HUD income limits
  • Residents of public housing
  • Residents receiving Section 8 housing assistance

A Targeted Section 3 Worker is a subset of Section 3 workers who meet additional criteria such as:

  • Living within the service area or neighborhood of the project
  • Working for a Section 3 Business Concern
  • Participating in HUD-approved workforce development programs

Section 3 Coverage Calculator

Enter funding amount to determine if Section 3 applies

Important Compliance Note

Public Housing Authority (PHA) funded projects do not have a minimum funding threshold.

This means Section 3 compliance requirements apply regardless of project size whenever a PHA administers the funding.

Section 3 Worker Self-Certification

To qualify as a Section 3 worker, your income must fall below HUD limits for your area. Check the official limits here: HUD Income Limits

Section 3 Resource Library

HUD Section 3 Guidebook Sample Worker Certification Form Section 3 Business Concern Certification

Safe Harbor Compliance – Qualitative Efforts

If workforce benchmarks are not fully achieved, HUD allows recipients to demonstrate compliance through documented qualitative efforts designed to create opportunity for Section 3 workers and businesses.

  • Hosting job fairs targeting public housing residents
  • Partnering with workforce development organizations
  • Advertising employment opportunities locally
  • Providing training, apprenticeships, or internships
  • Maintaining records of outreach and recruitment efforts
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