PART 75—ECONOMIC OPPORTUNITIES FOR LOW- AND VERY LOW-INCOME PERSONS Authority: 12 U.S.C. 1701u; 42 U.S.C. 3535(d). Source: 85 FR 61562, Sept. 29, 2020, unless otherwise noted. 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. 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. (1) Public housing financial assistance. (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. et seq. et seq. (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 Federal Register (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. (c) Indian and Tribal preferences. (d) Other HUD assistance and other Federal assistance. § 75.5 Definitions. The terms HUD, Public housing, Public Housing Agency (PHA) 1937 Act et seq. Contractor (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 Low-income person Material supply contracts Professional services Public housing financial assistance Public housing project Recipient Section 3 Section 3 business concern (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 Section 3 worker (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 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 Service area or the neighborhood of the project Small PHA Subcontractor Subrecipient Targeted Section 3 worker Very low-income person YouthBuild programs § 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. (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. (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. (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; (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] § 75.13 Section 3 safe harbor. (a) General. (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. Federal Register. Federal Register, (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 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. (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. (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., (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., (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. (d) Reporting by Small PHAs. § 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 § 75.19 Requirements. (a) Employment and training. (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. (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 (ii) YouthBuild programs. § 75.21 Targeted Section 3 worker for housing and community development financial assistance. (a) Targeted Section 3 worker. (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. (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. Federal Register. Federal Register, (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). (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. (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 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. (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., (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., (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. § 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. § 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 8-assisted housing; (iii) Certification from a PHA, or the owner or property manager of project-based Section 8-assisted housing, or the administrator of tenant-based Section 8-assisted 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 project-based Section 8-assisted housing, or the administrator of tenant-based Section 8-assisted 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. (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. (b) Complaints. (c) Monitoring.