Section 3 and Vicinity Hiring Preference Webinar August 2 ...assistance shall, to the greatest...

U.S. Department of Housing and Urban Development

Section 3 and Vicinity Hiring Preference Webinar

August 2, 20112:00 – 4:00 PM EST

U.S. Department of Housing and Urban Development • Community Planning and Development

Introductions• Speakers

– Carole Burchette, Cloudburst Group• [email protected]

– Julia Pierson, Cloudburst Group• [email protected]

• From HUD NSP Team– John Laswick

• [email protected]

• Best Practice Presenters

– Lesley Edmond- Washington, DC – Department of Housing and Community Development


– Rebecca Wiener – Community Resources & Housing Development Corp.


2U.S. Department of Housing and Urban Development • Community Planning and Development

mailto:[email protected]�



Webinar Objectives• Clarify Section 3 responsibilities by providing tips

to:–Increase understanding of the objectives of

the Section 3 regulations;–Ensure compliance with annual reporting

requirements; and–Provide guidance for NSP3 vicinity hiring

preference • Presentation Slides available now on:

– http://hudnsphelp.info/index.cfm?do=viewFindaResourceDetails&resourceID=908


http://hudnsphelp.info/index.cfm?do=viewResource&ResourceID=908

Purpose of Section 3

• “To ensure that employment and other economic opportunities generated by certain HUD financial assistance shall, to the greatest extent feasible, and consistent with existing Federal, State and local laws and regulations, be directed to low-and very low-income persons, particularly those who are recipients of government assistance for housing, and to business concerns which provide economic opportunities to low- and very low-income persons.” (quoted from 24 CFR part 135.1(a))


“To the Greatest Extent Feasible”

What does this mean?


The Times Have Changed

• Today’s discussion is “how to creatively implement Section 3 requirements to get results”

• Perhaps we need a new sub-title: “Local Jobs Initiative”


What Section 3 is NOT…..• Not race or gender specific• Not an entitlement for eligible individuals and

businesses• Not only applicable to direct recipients• Not optional – It’s the Law!


Applicability for Housing & Community Development Programs - 135.3(3)(ii)

• Threshold: $200,000 for grantees and subrecipients$100,000 for contractors and subcontractors

• Housing rehabilitation (including lead-based paint abatement)

• Housing construction• Demolition• Other public construction


Activities Covered

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NSPA. FinancingB. Purchase & Rehab √C. Land BanksD. Demolition √E. Redevelopment √

CDBGHousing Rehabilitation √Infrastructure √Public ServicesPublic Facilities √

HOMEHousing Rehabilitation √New Construction √


Applicability to Entire Project -135.3(b)

• Section 3 requirements apply to the entire project or activity that is funded with Section 3 covered assistance, regardless of whether it is fully or partially funded with Section 3 Covered assistance. – Example: leveraged private funds with other

programs If a project budget is $500,000, and of that,

$250,000 is NSP, $150,000 is state funded, and $100,000 is private bank loans, Section 3 requirements will apply.


Definitions - 135.5

• Housing & Community Development Programs -Employment associated with building trades


Building Trades:– Carpentry– Masonry– Plumbing– Electrical– Demolition

Professional Services:– Architectural– Engineering– Legal– Management and

Administrative Support

Definitions

• Section 3 resident– Public Housing resident, or– Resident of metro area or non-metro county in

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


Definitions• Section 3 business concern:

– 51% or more owned by Section 3 residents, OR

– 30% of employed staff are Section 3 residents, OR

– 25% of subcontracts committed to Section 3 businesses


Eligibility for Employment and Contracting

• A Section 3 Resident must meet the qualifications of the position to be filled -

135.34(c) • A Section 3 Business Concern must have the

ability and capacity to perform - 135.36(c)


Numerical Goals - 135.30(b-c)• Employment:

– 30 percent (30%) of new full-time hires annually (means 1 out of 3 new hires should be qualified Section 3 residents)

• Contracts:– 10 percent (10%) of the total $ amount of all

Section 3 covered contracts for building trades work

– Three percent (3%) of the total dollar amount to all other contracts, like professional services contracts

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PHA and the NSP Program

• Public and Indian housing assistance has different Section 3 requirements than those for housing and community development assistance providers

• As a participant in NSP activities either as a grantee, subrecipient, or consortium member, PHAs must track their Section 3 goal achievements separately than those goals for the PHA activities


Responsibilities - 135.32• Implement procedures designed to meet Section

3 requirements – have a plan• Notify Section 3 residents and business

concerns about training and employment opportunities

• Notify contractors and incorporate the Section 3 clause language

• Facilitate training and employment of residents• Award contracts to Section 3 businesses• Document actions to comply• Submit Annual Summary Report


Annual Summary Report• Annual Summary Report of Section 3 Activity – Applies

to all HUD funded housing activities

– Regulation 24 CFR 135.90 states all grantees of Section 3 covered funds must submit form HUD 60002 annually to HUD HQ Fair Housing Equal Opportunity Office (FHEO)

– Due at the time CAPER Report is submitted

– If no CAPER is required to be submitted to HUD, then the Annual Summary Report is due by Jan. 10 of each year or within 10 days of project completion

– However, FHEO would prefer that the Annual Summary Report be online at: http://www5.hud.gov:63001/apps/po/e/srs/Public/form.cfm


Consequences of Non-Compliance

• Non-compliance with HUD’s regulations in 24 CFR Part 135 may result in:– Sanctions,– Termination of contract for default,– Debarment, and– Suspension from future HUD contracts


Break for Questions and Answers


How Does Section 3 Apply?• A contractor is awarded 5 separate contracts of

$60,000 each to rehab 5 houses.

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Section 3 applies to the Grantee if the investment in the NSP project exceeded $200,000, but since each contract is under $100,000, the contractor does not share the responsibility

HOWEVER, the recipient is still responsible for meeting its Section 3 goals, so it should award 10% of its contracts to Section 3 qualified business concerns.


How Does Section 3 Apply?• A city is awarded a $1.5 million NSP3 grant and

plans to self-manage the acquisition and rehabilitation of 20 houses. It plans to hire a construction manager and a rehab inspector.

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Contracting goal: 10% of all construction contracts awarded. Reach out to contractors with employees in the vicinity hiring target area.New Hires: 1 should be a Section 3 resident living in the vicinity hiring target area.


How Does Section 3 Apply?• A subrecipient is awarded $175,000 to develop a

house and hires a general contractor for $130,000.


The subrecipient is exempt from Section 3 –The contractor is also exempt, since the subrecipient is exempt.

NSP3 & Vicinity Hiring Preference

• Required in Dodd-Frank “Wall Street Reform and Consumer Protection Act,” January 5, 2010

1497(a)(8)• Vicinity defined as: each neighborhood identified

by NSP3 grantees as being the areas of greatest need– Local approach to vicinity hiring part of NSP3

application narrative


• How does this relate to Section 3?– Does not replace your responsibilities under

Section 3– Section 3 applicability thresholds for

community development assistance apply– Numeric goals for new hires and Section 3

Business Concerns apply

NSP3 & Vicinity Hiring Preference


How is Vicinity Hiring Preference Reported?

• Good Question!• There is no “separate” reporting

requirement; possibility:—Narrative description added to Annual

Summary Report


Section 3 & NSP Hiring Priorities

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Priority NSP1 and NSP2 NSP3

First Neighborhood or Service Area (an area no greater than the unit of general local government, such as a city.)

Vicinity Preference – NSP3 Target Area

Second HUD Youthbuild participants Neighborhood or Service Area (an area no greater than the unit of general local government, such as a city.)

Third Other Section 3 residents in the metro area or non-metro county

HUD Youthbuild Participants

Fourth Other Section 3 residents in the metro area or non-metro county


Tips to Overcome Obstacles• Our contractors say that Section 3 requirements are

complicated.– Try: Review the Section 3 requirements for each

contract during the preconstruction conference. Set clear numeric goals based on the actual contract amount and number of new hires anticipated. Put this in writing.

• Our contractors do not take Section 3 seriously.– Try: Require a Section 3 report in order to release a

final draw retainage payment. For larger contracts, require a Section 3 progress report with each draw request.


Tips to Overcome Obstacles• Our contractors are small businesses and use the

same crew for all their work. They say they do not have new hires.– Try: New hires are any employees who are added to

the payroll full-time to work on a contract. – They need to “the greatest extent feasible” have 1 out

of 3 of these new hires be Section 3 residents.


Tips to Overcome Obstacles• Our Section 3 program has not resulted in any

Section 3 contracts or new hires.– Try: Partner with a workforce program, housing

authority, minority business program, small business incubator, contractor training program, community college, etc., that serves residents of your area.

– Start a pilot program the first year, then build the program over time.

– Conduct training for contractors who want to work in your target areas. Have the partner make a presentation to contractors about training opportunities.


Tips to Overcome Obstacles• In our rural county, we are working with Section 3

businesses and residents from other areas.– Try: First preference must go to those in your area,

then to Section 3 Businesses and Residents from other areas.


Strategies for Implementation • Network and collaborate with local housing authority and training

providers in target area

• Designate responsibility to "Section 3 Coordinator"

• Adopt and execute a Section 3 plan that describes:

- Section 3 purpose/policy statement

- Section 3 action plan and goals

- Contracting policy and procedures

- Certification procedures

- Training opportunities

- The evaluation of Section 3 proposals

- Reporting and recordkeeping requirements


Section 3 - 2011 Initiatives• Increase Section 3 reporting rates and overall

compliance and enforcement for noncompliance

• Provide more training/technical assistance

• Updates to Reporting Forms and online reporting

• Pilot Program - Section 3 Business Concern Registry

– Demonstration will take place in 5 cities:• Detroit• Los Angeles• Miami• New Orleans• Washington, DC


Best Practice Success Stories

– Lesley Edmond- Washington, DC –Department of Housing and Community Development• [email protected]

– Rebecca Wiener – Community Resources & Housing Development Corp.• [email protected]


Resource Information

• U.S. Department of Housing and Urban Development (HUD)– Links to Section 3 Help:

• www.hud.gov/section3– FOR NSP:

• http://hudnsphelp.info/media/resources/Section3andNSP.pdf– Section 3 Regulations:

• http://www.access.gpo.gov/nara/cfr/waisidx_98/24cfr135_98.html– HUD Form 60002:

• http://www.hud.gov/offices/adm/hudclips/forms/files/60002.pdf


http://www.hud.gov/section3�

http://hudnsphelp.info/media/resources/Section3andNSP.pdf�

http://www.access.gpo.gov/nara/cfr/waisidx_98/24cfr135_98.html�

http://www.access.gpo.gov/nara/cfr/waisidx_98/24cfr135_98.html�

http://www.hud.gov/offices/adm/hudclips/forms/files/60002.pdf�

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Section 3 and Vicinity Hiring Preference Webinar August 2 ...assistance shall, to the greatest...

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