HUD Section 3 - Overview
Increasing Economic Opportunities for Low-Income Residents
on HUD-Funded Projects
Jack Stucker, Esq.
Regional Housing Legal Services
Housing Alliance of PA
Employment Opportunity in HUDFunded and LIHTC Housing
Developments
April 13, 2017
RHLS
RHLS is a non-profit law
firm whose mission is to
create housing and
economic opportunity
in under-served
communities in
Pennsylvania and to
effect systemic change
for the benefit of lowerincome households
statewide.
HUD Section 3
Section 3 of the U.S. Housing and
Urban Development Act of 1968
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Purpose: To ensure that economic opportunities
generated by HUD funding will, to the greatest
extent feasible, be directed to low- and very lowincome persons
Rationale: Increasing incomes will help reduce
reliance on HUD programs
Regulations: 24 CFR Part 135
HUD Portal:
https://portal.hud.gov/hudportal/HUD?src=/prog
ram_offices/fair_housing_equal_opp/section3/se
ction3
HUD Section 3
Covered Projects
Rule of Thumb: it is probably covered
Public housing
All development, operating, and modernization is
covered – no monetary thresholds
HUD-funded housing/community development
Contracts worth over $100,000 on
construction or rehabilitation projects by agencies
receiving over $200,000 in Section 3 funds
Includes:
CDBG, HOME, ESG, HOPWA, Section 108, NSP, EDI
24 C.F.R. 135.3
Basic Requirements
Covered Projects, Cont’d
Thresholds are per agency, NOT per activity
Example: City receives $210,000 in CDBG funds,
but expends only $180,000 for housing rehab. The
housing rehab project is covered.
Section 3 applies to the entire project/activity
Example: $1 million construction project with
$250,000 in CDBG funds. The “total value of all
contracts awarded” is $1 million, not $250,000.
24 C.F.R. 135.3 and FAQ
Basic Requirements
“Greatest Extent Feasible”
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“Greatest extent feasible” means every effort
must be made
Recipients must meet or exceed HUD safe harbor
thresholds in order to demonstrate compliance
Meeting the thresholds creates a presumption of
compliance
Failing to meet thresholds creates a presumption
of non-compliance
24 C.F.R. 135.30 and HUD Section 3 FAQ
HUD Section 3
Section 3 Safe Harbor Thresholds
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Hiring: At least 30% of all new hires must be
Section 3 residents
Construction Contracting: At least 10% of the
dollar amount of all construction contracts
awarded must be awarded to Section 3
business concerns
Non-construction Contracting: At least 3%
of the dollar amount of all non-construction
contracts awarded must be awarded to
Section 3 business concerns
24 C.F.R. 135.30(d)and HUD Section 3 FAQ
HUD Section 3
“Section 3 Resident”
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A resident of public housing or a low-income
resident of the metro area or non-metropolitan
county where the project is located
Sample HUD 2016 income limits:
80% AMI
1 person 2 persons 3 persons 4 persons Ea. add’l.
Philadelphia MSA
45,000
51,400
57,850
64,250
5,150
Pittsburgh HMFA
39,900
45,600
51,300
56.950
4,550
Scranton/Wilkes
Barre MSA
33,850
38.650
43,500
48,300
3,900
Erie MSA
32,450
37,050
41,700
46,300
3,700
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www.huduser.gov
HUD Section 3
“Section 3 Business Concern”
Category 1
Owned by Section 3 residents (51%+)
Category 2
Employs Section 3 residents (30% or more of all
permanent, full-time employees)
Category 3
Subcontracts with category 1 or category 2
businesses (at least 25% of the dollar amount of
all subcontracts)
24 C.F.R. 135.5
Responsibilities
Recipient Responsibilities
Each recipient must itself comply and ensure
compliance by its contractors. Specifically:
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Notify residents and businesses about opportunities
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Inform contractors of their obligations
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Facilitate training, employment and contracting
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Obtain compliance by contractors and refrain
from contracting with violators
Document and report Section 3 compliance
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Quick Guide on Reporting Link:
https://portal.hud.gov/hudportal/documents/huddoc
?id=spearsquickguide.pdf
24 C.F.R. 135.32
Enforcement
Enforcement
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Administrative complaint (filed by a Section 3
business or representative organization with HUD
FHEO)
Examples: Long Beach, CA; St. Paul, MN
HUD compliance review (initiated by HUD HQ)
Examples: Kansas City, MO; HACM (Milwaukee)
Litigation
Example: Mannarino v. Morgan Twp., 2003 WL
1972491 (3rd Cir. 2003)
Enforcement
Procedure on Complaint
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Safe harbor presumptions determine whether
the recipient or the complaining party has the
burden of proof
If HUD determines noncompliance, HUD, the
recipient and the complaining party negotiate
a Voluntary Compliance Agreement (VCA)
Sanctions include disbarment, suspension and
limited denial of participation
24 C.F.R. 135.76 and FAQ
Employment Opportunities in
Low Income Housing Tax Credit (“LIHTC”)
Communities
April 13, 2017
Presented by Holly Glauser
www.phfa.org
LIHTC Program
• Enacted under the Tax Reform Act of 1986
• Section 42 of the Internal Revenue Code, as amended
• PHFA - allocating agency in Pennsylvania
• Funds allocated pursuant to a “Qualified Allocation
Plan”
LIHTC Allocation Plan
• Provides PHFA’s selection criteria for awarding Low
Income Housing Tax Credits (LIHTCs)
• Includes Set-Asides and Preferences
• Extremely Competitive (25%-30% of applications
historically receive an award of LIHTCs)
• Roughly $30 million in LIHTCs allocated each year
Employment Opportunities Preference in the
2016 and 2017/2018 QAP
The Agency may also provide a preference to
developments using Commonwealth-sponsored pilot
programs, developments providing employment
opportunities for property or community residents,
developments or Applicants evidencing meaningful
participation in Section 811 program or meeting specific
market needs or Agency housing goals.
Employment Opportunities Preference in the
2016 and 2017/2018 QAP
• Evidence of commitment may include: (Tab 46)
• Outreach plan by GC to provide employment
during construction/rehabilitation
• Certification of GP/Manager that residents will
have first preference for maintenance and
service positions
• Other evidence as applicable to the property
• Examples of 2016 Proposals
Timeline for 2017/2018 LIHTC Applications
• Pre-Application Meeting – May 10, 2017
• Intent to Submit – July 7, 2017
• Submission of Full Application – September 8, 2017
More information – www.phfa.org
HUD Section 3 - Implementation
Increasing Economic Opportunities for Low-Income Residents
on HUD-Funded Projects
Robert Damewood, Esq.
Regional Housing Legal Services
Housing Alliance of PA
Employment Opportunity in HUDFunded and LIHTC Housing
Developments
April 13, 2017
Section 3 Case Studies
McKees Rocks Terrace Phase 1
Clairton Townhomes
HOPE VI, LIHTC
HOME, LIHTC
$10 million construction cost
(on-site prime + off-site)
$7 million construction cost
(same GC as McKees Rocks)
112 townhouse units
44 townhouse units
14 residents hired
17 residents hired
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pre-construction training
or OJT
1
worked for duration of job
retained or otherwise
employed in construction two
years after job was finished
received 7-week
classroom and 6-month OJT
8
worked for duration of job
retained or otherwise
employed in construction two
years after job was finished
Section 3 Case Studies
Clairton Townhomes Sec. 3 Details
6 month OJT for 10 residents
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Pre-construction classroom training – 7 Saturdays
2 OJT framing crews w/one instructor/foreman each
Trainees paid journeyman wage for carpenters (21.75/hr)
Graduates referred to subs on various trades
7 residents hired outside of OJT
2 admitted to painting/drywall apprenticeship program
CDC recruited heavily, knew applicants, and referred
those who would take advantage of opportunities
Sec. 3 Coordinator provided mentoring, evaluation and
case management
Section 3 Contracting
HUD Section 3 Registry
https://portalapps.hud.gov/Sec3BusReg/BRegistry/
BRegistryHome
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Nationwide registry of Section 3 business concerns
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Searchable by trade
and location
Businesses self-certify
their eligibility
37 businesses in PA
Section 3 Contracting
Contracting with Non-Local
Section 3 Businesses
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Contracting with non-local Section 3 firms
counts toward HUD’s safe harbor thresholds
Recipients must give a preference for local
Section 3 firms over non-local
Income eligibility is based on the location of
the business, not the project
Probably wouldn’t satisfy PHFA preference
HUD Section 3 FAQ
Section 3 Contracting
Self-Certification Disclaimer
“HUD has not verified the information submitted
by businesses listed in this registry and does not
endorse the services that they provide. Users of
this database are strongly encouraged to perform
due diligence by verifying Section 3 eligibility
before providing preference or awarding
contracts to firms that have self-certified their
Section 3 status with the Department.”
HUD Section 3 Business Registry
Section 3 Contracting
Allegheny County Business
Certification Program
http://dbrcpittsburgh.org
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County wide registry of Section 3 business concerns
 RHLS created in 2012,
handing off to RCI this
month
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Documents eligibility for
businesses seeking Section 3
preference in Allegheny
County
25 certified businesses
currently
Resources
Resources
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Pennsylvania QAP:
http://www.phfa.org/mhp/developers/lihtc.aspx
HUD Section 3:
www.hud.gov/section3
https://portalapps.hud.gov/Sec3BusReg/BRegistry/B
RegistryHome
http://hud.gov/offices/fheo/section3/FAQ08.pdf
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Riverside Center for Innovation DBRC:
http://dbrcpittsburgh.org
Q&A
For More Information
Robert Damewood, Esq.
[email protected]
RHLS Pittsburgh Office
Center
710 Fifth Avenue, Suite 1000
Pittsburgh, PA 15219
phone: (412) 201-4301
fax: (412) 281-9987
Judy McNeill
[email protected]
RCI Diversity Business Resource
700 River Avenue, Suite 510
Pittsburgh, PA 15212
phone: (412) 322-3272
fax: (412) 322-3513