U.S. Department of Housing U.S. Department of Housing and Urban Developmentand Urban Development

Fair Housing and Equal Fair Housing and Equal OpportunityOpportunity

Office of Economic Office of Economic OpportunityOpportunity

Section 3Section 3Economic Opportunities for Low and Economic Opportunities for Low and

Very Low-income PersonsVery Low-income Persons

June 10, 2009June 10, 2009

Tampa, FloridaTampa, Florida

Candace M. TapscottCandace M. Tapscott

Miami FHEO Center DirectorMiami FHEO Center Director

3

Section 3Section 3Summary of CourseSummary of Course

Historical perspectiveHistorical perspective General provisionsGeneral provisions Regulation – 24 CFR § 135Regulation – 24 CFR § 135 DefinitionsDefinitions ApplicabilityApplicability Recipient responsibilitiesRecipient responsibilities Preferences and contractingPreferences and contracting Complaints and compliance reviewComplaints and compliance review Reporting and record keepingReporting and record keeping

4

History/BackgroundHistory/Background 1968 – Became a provision of the 1968 – Became a provision of the

HUD Act (12 U.S.C. 1701u - HUD Act (12 U.S.C. 1701u - Section 3)Section 3)

1969 - Expanded coverage to 1969 - Expanded coverage to other HUD programsother HUD programs

1974 – CDBG Program Included1974 – CDBG Program Included 1980 – Amended to change 1980 – Amended to change

location preferencelocation preference 1992 – Clarified coverage and 1992 – Clarified coverage and

facilitated implementing facilitated implementing regulationsregulations

5

History – History – (continued)(continued)

1992 Amendments:1992 Amendments: Identified intended Identified intended

beneficiariesbeneficiariesEstablished priorities for Established priorities for

preferencespreferences

1994– Interim Rule issued to 1994– Interim Rule issued to establish standards and establish standards and procedures: 24 CFR § 135procedures: 24 CFR § 135

6

Purpose of Section 3Purpose of Section 3

To ensure that economic To ensure that economic opportunities resulting from opportunities resulting from HUD financial assistance will HUD financial assistance will be directed to low and very be directed to low and very low-income persons - low-income persons - particularly those receiving particularly those receiving government assistance for government assistance for housing.housing.

§ 135.1§ 135.1

7

ApplicabilityApplicability

Public and Indian HousingPublic and Indian Housing Development assistanceDevelopment assistance Operating assistanceOperating assistance Modernization assistanceModernization assistance

Housing and Community Housing and Community DevelopmentDevelopment Housing rehabilitation (including lead-based paint Housing rehabilitation (including lead-based paint

abatement)abatement) Housing constructionHousing construction Other public constructionOther public construction

§ 135.3§ 135.3

8

ThresholdsThresholds

Public and Indian Housing Public and Indian Housing Threshold: Threshold: NoneNone

(no threshold for PIH Authorities)(no threshold for PIH Authorities)

Housing and Community Housing and Community Development Threshold: Development Threshold:

Recipient/Project - $200KRecipient/Project - $200K Contractor/Subcontractor - $100KContractor/Subcontractor - $100K

§ 135.3(a)3§ 135.3(a)3

9

Applicability to Entire Applicability to Entire Project Project

Section 3 requirements apply to Section 3 requirements apply to the entire project or activity, the entire project or activity, regardless of whether it is fully or regardless of whether it is fully or partially funded.partially funded. (Example: leveraged private funds associated with (Example: leveraged private funds associated with HOPE VI or CDBG.)HOPE VI or CDBG.)

Section 3 requirements also apply Section 3 requirements also apply to Indian Housing Authorities.to Indian Housing Authorities.

§ 135.3(b)§ 135.3(b)

10

DefinitionsDefinitions

Employment opportunities generated Employment opportunities generated by section 3 covered assistanceby section 3 covered assistance

PIH assistance: PIH assistance: All employment All employment opportunities.opportunities.

Housing & Community Dev.: Housing & Community Dev.: Employment associated with building tradesEmployment associated with building trades, , iincluding management and administrative ncluding management and administrative support, architectural, engineering and support, architectural, engineering and professional servicesprofessional services

§ 135.5§ 135.5

11

Definitions (continued)Definitions (continued)

Section 3 Resident:Section 3 Resident: Public Housing Resident, orPublic Housing Resident, or Resident of metro area or non metro Resident of metro area or non metro

county in which the Section 3 covered county in which the Section 3 covered assistance is expended, and who assistance is expended, and who qualifies as a low-income or very low-qualifies as a low-income or very low-income person.income person.

Low-income - 80% median area Low-income - 80% median area incomeincome

Very low-income 50% median area Very low-income 50% median area incomeincome

§ 135.5§ 135.5

12

Baltimore, MD MSA Income Baltimore, MD MSA Income Limits*Limits*

Very LowVery Low LowLow 1 person - $ 1 person - $ 24,00024,000

2 person - $ 2 person - $ 27,45027,450

3 person - $ 3 person - $ 30,85030,850

4 person - $ 4 person - $ 34,30034,300

5 person - $ 5 person - $ 37,05037,050

6 person - $ 6 person - $ 39,80039,800

______________

*FY 2004*FY 2004

1 person - $ 1 person - $ 38,40038,400

2 person - $ 2 person - $ 43,90043,900

3 person - $ 3 person - $ 49,40049,400

4 person - $ 4 person - $ 54,90054,900

5 person - $ 5 person - $ 59,25059,250

6 person - $ 6 person - $ 63,65063,650

13

Definition (continued) Definition (continued)

Section 3 Business ConcernSection 3 Business Concern 51%51% or more owned by Section 3 or more owned by Section 3

Residents, orResidents, or

30%30% of employees are Section 3 of employees are Section 3 Residents; orResidents; or

25%25% of subcontracts committed of subcontracts committed to Section 3 Businesses.to Section 3 Businesses.

§ 135.5§ 135.5

14

Requirements for HUD NOFAsRequirements for HUD NOFAs

All notices of funding availability All notices of funding availability issued by HUD covered by issued by HUD covered by Section 3 include a provision Section 3 include a provision stating its applicability.stating its applicability.

Applicants must certify Applicants must certify compliance with Section 3 compliance with Section 3 regulations.regulations.

§ 135.9§ 135.9

15

Procurement StandardsProcurement Standards

Section 3 regulations do not supersede Section 3 regulations do not supersede the general requirement that (material the general requirement that (material only) procurement transactions be only) procurement transactions be conducted in a competitive manner.conducted in a competitive manner.

Consistent with 24 CFR § 85.36(c)(2), Consistent with 24 CFR § 85.36(c)(2), Section 3 encourages a geographic Section 3 encourages a geographic preference in the evaluation of bids. preference in the evaluation of bids.

§ 135.11(a)§ 135.11(a)

16

Federal Labor StandardsFederal Labor Standards

Trainees hired under Section 3 Trainees hired under Section 3 may work subject to HUD may work subject to HUD determined prevailing wage determined prevailing wage rates and ratios of apprentices rates and ratios of apprentices to journeymen in approved to journeymen in approved training programs.training programs.

§ 135.11(c)§ 135.11(c)

17

Minority Business EnterpriseMinority Business Enterprise

A minority business enterprise A minority business enterprise shall be required to present shall be required to present Section 3 certification to receive Section 3 certification to receive preference.preference.

Section 3 of the HUD act is Section 3 of the HUD act is race-race-neutralneutral..

The preference provided by this The preference provided by this federal act is based on income federal act is based on income and location.and location.

18

Collective Bargaining UnionsCollective Bargaining Unions

Contracts awarded on Contracts awarded on Section 3 governed projects Section 3 governed projects are made without regard to are made without regard to affiliation to any Collective affiliation to any Collective Bargaining Union.Bargaining Union.

19

Executive Order 11246Executive Order 11246

The recipient shall ensure full The recipient shall ensure full compliance with E.O. 11246 - equal compliance with E.O. 11246 - equal treatment without regards to race, treatment without regards to race, religion, color or ethnic background.religion, color or ethnic background.

The recipient shall ensure that all The recipient shall ensure that all contractors and subcontractors contractors and subcontractors participating on Section 3 governed participating on Section 3 governed projects comply with E. O. 11246.projects comply with E. O. 11246.

§ 135.11(e)§ 135.11(e)

20

Numerical GoalsNumerical Goals

Goals apply to the entire amount Goals apply to the entire amount of Section 3 covered assistance of Section 3 covered assistance awarded to a recipient in any awarded to a recipient in any Federal Fiscal Year.Federal Fiscal Year.

Goals represent minimum Goals represent minimum numerical targets.numerical targets.

§ 135.30(e)§ 135.30(e)

21

Numerical Goals Numerical Goals (continued)(continued)

Employment: Employment: 30 percent 30 percent of new hires annually of new hires annually (counted for up to 3 years).(counted for up to 3 years).

Applies to:Applies to: PIH ProgramsPIH Programs Firms managing 500+ units w/housing Firms managing 500+ units w/housing

assistanceassistance Community DevelopmentCommunity Development AssistanceAssistance

§ 135.30(b)§ 135.30(b)

22

Numerical Goals Numerical Goals (continued)(continued)

ContractsContracts10 percent10 percent of the total $ amount of of the total $ amount of all Section 3 covered contracts for all Section 3 covered contracts for building trades work.building trades work.

3 percent3 percent of the total $ amount of of the total $ amount of all other Section 3 covered contracts.all other Section 3 covered contracts.

§ 135.30(c)§ 135.30(c)

23

Safe Harbor and Compliance Safe Harbor and Compliance

A recipient that meets numerical goals A recipient that meets numerical goals will be considered in compliance.will be considered in compliance.

A recipient that has not met the A recipient that has not met the numerical goals has the burden of numerical goals has the burden of demonstrating why. demonstrating why.

All documented efforts taken to assist All documented efforts taken to assist Section 3 residents and businesses Section 3 residents and businesses will be considered.will be considered.

§ 135.30(d)§ 135.30(d)

24

Recipient ResponsibilitiesRecipient Responsibilities

Notifying residentsNotifying residents Notifying contractors and Notifying contractors and

incorporating Section 3 clauseincorporating Section 3 clause Facilitating training and employment Facilitating training and employment

of residentsof residents Awarding contracts- Sec 3 Bus.Awarding contracts- Sec 3 Bus. Assisting with compliance among Assisting with compliance among

contractorscontractors Documenting actions to complyDocumenting actions to comply Attempt to reach numerical goalsAttempt to reach numerical goals

§ 135.32§ 135.32

25

Preference for Training and Preference for Training and EmploymentEmployment

Order of Priority for PIH ProgramsOrder of Priority for PIH Programs

Category 1 – Residents of the housing Category 1 – Residents of the housing developmentdevelopment

Category 2 – Residents of other housing Category 2 – Residents of other housing developments managed by the Housing Authoritydevelopments managed by the Housing Authority

Category 3 – Participants in HUD’s Youthbuild Category 3 – Participants in HUD’s Youthbuild programprogram

Category 4 – Other Section 3 ResidentsCategory 4 – Other Section 3 Residents

§ 135.34(a)(1)§ 135.34(a)(1)

26

Preference for Training and Preference for Training and EmploymentEmployment

Order of priority for Housing and Order of priority for Housing and Community Development ProgramsCommunity Development Programs

Category 1 – Residents in the service area or Category 1 – Residents in the service area or neighborhoodneighborhood

Category 2 – Participants in HUD’s Youthbuild Category 2 – Participants in HUD’s Youthbuild programprogram

Category 3 -Homeless persons in the service areaCategory 3 -Homeless persons in the service area

Category 4 – Other Section 3 ResidentsCategory 4 – Other Section 3 Residents

§ 135.34(a)(2)§ 135.34(a)(2)

27

Preference for Training and Preference for Training and EmploymentEmployment

Order of priority for Programs funded by Order of priority for Programs funded by the McKinney Actthe McKinney Act

Category 1 – Homeless persons in the Category 1 – Homeless persons in the service areaservice area

Category 2 – Residents in the service area Category 2 – Residents in the service area or neighborhoodor neighborhood

Category 3 - Participants in HUD’s Category 3 - Participants in HUD’s Youthbuild programYouthbuild program

Category 4 – Other Section 3 ResidentsCategory 4 – Other Section 3 Residents

§ 135.346(a)(2)§ 135.346(a)(2)

28

Preference for Section 3 Preference for Section 3 Business ConcernsBusiness ConcernsOrder of priority for PIH programs.Order of priority for PIH programs.

Category 1 – Section 3 businesses that Category 1 – Section 3 businesses that are owned or staffed by residents of are owned or staffed by residents of the housing development.the housing development.

Category 2 – Section 3 businesses that Category 2 – Section 3 businesses that are owned or staffed by residents of are owned or staffed by residents of other housing dev. managed by the HA.other housing dev. managed by the HA.

§ 135.36(a)(1)§ 135.36(a)(1)

29

Preference for Section 3 Preference for Section 3 Business Concerns Business Concerns (continued)(continued)

Order of priority for PIH programs.Order of priority for PIH programs.

Category 3 – Youthbuild programs Category 3 – Youthbuild programs operated in the metro area.operated in the metro area.

Category 4 – Section 3 businesses Category 4 – Section 3 businesses that are owned or staffed by other that are owned or staffed by other Section 3 residents or that Section 3 residents or that subcontract in excess of 25% to subcontract in excess of 25% to Section 3 businesses.Section 3 businesses.

§ 135.36(a)(1)§ 135.36(a)(1)

30

Preference for Section 3 Preference for Section 3 Business Concerns Business Concerns (continued)(continued)

Order of priority for Housing and Order of priority for Housing and Community Development programsCommunity Development programs

Category 1 – Section 3 businesses that Category 1 – Section 3 businesses that provide jobs and training for local provide jobs and training for local residents.residents.

Category 2 –Applicants selected to Category 2 –Applicants selected to administer HUD Youthbuild programs.administer HUD Youthbuild programs.

Category 3 – Other Section 3 business Category 3 – Other Section 3 business concerns. concerns.

§ 135.36(a)(2)§ 135.36(a)(2)

Eligibility for employment Eligibility for employment and contractingand contracting

A Section 3 resident must meet A Section 3 resident must meet the qualifications of the position the qualifications of the position to be filled.to be filled.

§ 135.34(c)§ 135.34(c)

A Section 3 business concern A Section 3 business concern must have the ability and must have the ability and capacity to perform successfully capacity to perform successfully under the terms and conditions of under the terms and conditions of the proposed contract.the proposed contract.

§ 135.34(a)(2)§ 135.34(a)(2)

32

Section 3 ClauseSection 3 Clause

All section 3 covered contracts All section 3 covered contracts shall include the Section 3 shall include the Section 3 clause found at 24 CFR § 135.38 clause found at 24 CFR § 135.38 in its entirety, verbatim – parts in its entirety, verbatim – parts A through G.A through G.

§ 135.38§ 135.38

33

Compliance ReviewsCompliance Reviews

Conducted for selected recipients and Conducted for selected recipients and contractors to determine compliancecontractors to determine compliance

Consists of a comprehensive analysis Consists of a comprehensive analysis and evaluation of complianceand evaluation of compliance

Recipient will be advised of deficiencies Recipient will be advised of deficiencies for remediationfor remediation

Continued noncompliance may result in Continued noncompliance may result in debarment, suspension and limited debarment, suspension and limited denial of participation pursuant to 24 denial of participation pursuant to 24 CFR § 24CFR § 24

§ 135.74§ 135.74

34

Section 3 ComplaintsSection 3 ComplaintsWho May File a Complaint?Who May File a Complaint?

Section 3 ResidentSection 3 Resident

Section 3 Business ConcernSection 3 Business Concern

A Representative for either A Representative for either of the aboveof the above

§ 135.76(a)§ 135.76(a)

35

Where Is A Complaint Filed?Where Is A Complaint Filed?

Assistant Secretary for FHEOAssistant Secretary for FHEO

U.S. Department of HousingU.S. Department of Housing

and Urban Developmentand Urban Development

451 7th Street, Room 5100451 7th Street, Room 5100

Washington, DCWashington, DC 20410 20410

§ 135.76(b)§ 135.76(b)

36

When Must a Complaint Be When Must a Complaint Be Filed?Filed?

Not later than 180 days Not later than 180 days from the occurrence. from the occurrence.

(Unless an extension is (Unless an extension is approved by the assistant approved by the assistant secretary for fair housing and secretary for fair housing and equal opportunity)equal opportunity)

§ 135.76(c)§ 135.76(c)

37

What Information Is Needed What Information Is Needed In The Complaint?In The Complaint?

Complainant’s name and addressComplainant’s name and address Respondent’s name and addressRespondent’s name and address Description & date of complaintDescription & date of complaint Corrective action soughtCorrective action sought

NOTE:NOTE:The Department may seek The Department may seek corrective remedies to ensure corrective remedies to ensure compliance.compliance.

§ 135.76(d)§ 135.76(d)

Section 3Section 3 Complaint Register Complaint Register

Form HUD-958Form HUD-958

39

Issues For Non-ComplianceIssues For Non-Compliance

Failure to:Failure to: Meet numerical goals;Meet numerical goals; Ensure that contractors and Ensure that contractors and

subs comply with Section 3;subs comply with Section 3; Notify Section 3 Business Notify Section 3 Business

Concerns about contracting Concerns about contracting opportunities;opportunities;

Notify potential contractors Notify potential contractors about Section 3 requirements;about Section 3 requirements;

40

Issues For Non-Compliance Issues For Non-Compliance (continued)(continued)

Failure to:Failure to: Incorporate the Section 3Incorporate the Section 3 Clause Clause in solicitations or contracts;in solicitations or contracts; Train and/or employ Section 3 Train and/or employ Section 3

Residents;Residents; Award contracts to Section 3 Award contracts to Section 3

Business ConcernsBusiness Concerns Provide preference for Section 3 Provide preference for Section 3

Residents and Section 3 BusinessesResidents and Section 3 Businesses

41

Resolution of ComplaintResolution of Complaint

The recipient has The recipient has 30 days30 days after after receipt of complaint to submit a receipt of complaint to submit a written response if they believe the written response if they believe the complaint complaint lacks meritlacks merit..

The recipient has The recipient has 60 days60 days to resolve to resolve

the matter with the complainant if the matter with the complainant if they determine the complaint they determine the complaint has has meritmerit. .

§ 135.76(e)§ 135.76(e)

42

Resolution of ComplaintResolution of Complaint(continued)(continued)

HUD will dismiss the complaint if it HUD will dismiss the complaint if it fails to present a valid allegation.fails to present a valid allegation.

HUD will attempt to obtain a voluntary HUD will attempt to obtain a voluntary resolution if the complaint is valid.resolution if the complaint is valid.

HUD will impose a resolution if HUD will impose a resolution if voluntary resolutions fail.voluntary resolutions fail.

Resolution(s) may be appealed within Resolution(s) may be appealed within 15 days for further consideration.15 days for further consideration.

§ 135.76(f) § 135.76(f)

43

Resolution of ComplaintResolution of Complaint(continued)(continued)

Sanctions that may be imposed Sanctions that may be imposed include debarment, suspension and include debarment, suspension and limited denial of participation.limited denial of participation.

HUD may investigate a complaint HUD may investigate a complaint directly.directly.

Retaliatory acts against the Retaliatory acts against the complainant are prohibited.complainant are prohibited.

Complainant may exercise the right Complainant may exercise the right to seek redress through judicial to seek redress through judicial procedures.procedures.

§ 135.76(g) to (j)§ 135.76(g) to (j)

44

Reporting & RecordkeepingReporting & Recordkeeping

Recipients are required to submit Recipients are required to submit an annual report for the purpose of an annual report for the purpose of determining the effectiveness of determining the effectiveness of Section 3. (HUD Form 60002)Section 3. (HUD Form 60002)

HUD shall have access to all HUD shall have access to all records, reports and other records, reports and other documents that are maintained to documents that are maintained to demonstrate compliance with demonstrate compliance with Section 3.Section 3.

§ 135.90 to 135.92§ 135.90 to 135.92

45

Collaboration for SuccessCollaboration for Success

Appendix to Regulations:Appendix to Regulations: 20 examples of efforts to provide 20 examples of efforts to provide

training and employment training and employment opportunities;opportunities;

22 examples of efforts to award 22 examples of efforts to award contracts to Section 3 business contracts to Section 3 business concerns; andconcerns; and

3 examples of procurement 3 examples of procurement procedures to provide preference procedures to provide preference for Section 3 business concerns.for Section 3 business concerns.

§ 135, Appendix§ 135, Appendix

46

Where to get more Where to get more informationinformation

HUD’s Office of Economic HUD’s Office of Economic Opportunity – (202) 708-3633Opportunity – (202) 708-3633

Local HUD Field Office (305) 536-Local HUD Field Office (305) 536-44794479

Regulation 24 CFR Part135: Regulation 24 CFR Part135: www.gpoaccess.gov/cfr/index.htmlwww.gpoaccess.gov/cfr/index.html

HUD Website- HUD Website- www.hud.gov/offices/fheo/section3/section3.cfmwww.hud.gov/offices/fheo/section3/section3.cfm

QuestionsQuestionsandand

AnswersAnswers