NAHMA HUD Update: HUD Finalizes Revised Section 3 Rule and Provides Benchmarks

September 29, 2020

Dear NAHMA Members,

Today, the Department of Housing and Urban Development (HUD) announced the release of the final rule implementing the Section 3 statute that requires that recipients of certain HUD funds make economic opportunities available for low- and very low-income individuals. An interim rule has been in effect since 1994. 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 low-income 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. Key changes in the rule and in HUD’s implementation include:

·         Focusing on key outcome metrics, such as the sustained employment of individuals in targeted populations.

·         Crediting retention of low- and very low-income employees and successful sustained employment in the reporting metrics.

·         Aligning Section 3 reporting with standard business practices and payroll tracking methods.

·         Allowing for tailored outcome benchmarks for different geographies and/or different projects.

·         Reducing reporting requirements for grantees who are meeting outcome benchmarks.

·         Integrating Section 3 oversight into the work of the program offices who are in regular contact with the grantees.

·         Promoting the newly created portal to connect low- and very low-income people, who need jobs most, with businesses who have Section 3 job opportunities in their area.

The final rule also includes a requirement that HUD set Section 3 benchmarks. If a recipient complies with the statutory priorities regarding effort and meets the outcome benchmarks, HUD will presume the recipient is following Section 3 requirements, absent evidence to the contrary. The final rule implementing the Section 3 statute will go into effect on 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.

The Enhancing and Streamlining the Implementation of Section 3 Requirements for Creating Economic Opportunities for Low- and Very Low-Income Persons and Eligible Businesses Final Rule is attached and also available here.

The Section 3 Benchmarks for Creating Economic Opportunities for Low- and Very Low-Income Persons and Eligible Businesses are attached and also available here.