Section 3 Program

Final Rule (9/29/2020), salient issues

Section 3 “Goals” and “Benchmarks” changed from 30% of New Hires to 25% of total labor hours for all Section 3 workers and 5% of total hours for “Targeted Section 3 Workers” (a new designation). 

https://www.federalregister.gov/d/2020-19185  

https://ecfr.federalregister.gov/current/title-24/subtitle-A/part-75#section-75

Although the Final Rule (24 CFR 75) became effective November 30, 2020, compliance must be implemented pursuant to these regulations starting no later than July 1, 2021.  For HRD and its awardee, the goal to implement these regulations is Spring 2021.  This compliance will include reporting percentages of work hours prescribed in the Rule, among other new requirements.

More guidance will follow, as obtained from HUD.

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What is Section 3?
Section 3 is a provision of the Housing and Urban Development (HUD) Act of 1968, federal regulation §24 CFR 135.  The City of Detroit is committed to their Section 3 Program to foster local economic development, neighborhood economic development, and individual self-sufficiency.  Section 3 Program requires recipients of certain HUD covered projects and activities, to the greatest extent feasible, to provide employment and job training for Section 3 residents and contracting opportunities to Section 3 businesses in connection with projects and activities in their neighborhoods.

What is a Section 3 Resident?
A Section 3 Resident is an individual: (1) receiving public housing assistance or (2) that meets the requirement of household income listed below and resides in the Detroit-Warren-Livonia Metropolitan Statistical Area (MSA), which includes the following counties:  Lapeer, Macomb, Oakland, St. Clair, and Wayne. 

FY2020 - 2021 $78,500 Median Family Income

Family Size 1 Person 2 Persons 3 Persons 4 Persons 5 Persons 6 Persons 7 Persons 8 Persons
Income $44,000 $50,250 $56,550 $62,800 $67,850 $72,850 $77,900 $82,900

(source:  Income limits subject to change per fiscal year, July 1 - June 30; Detroit-Warren-Livonia MI HUD METRO FMR AREA Income Limits as of 07/01/2020; )

What is a Section 3 Business Concern?
A Section 3 Business Concern meets one of the following criteria:

  • Fifty-one percent (51%) or more of the business is owned by Section 3 residents; OR
  • Thirty percent (30%) or more current permanent full-time employees are Section 3 residents or within 3 years of the date of 1st employment with the business concern were Section 3 residents; OR
  • Business can provide a firm commitment to subcontract in excess of twenty-five percent (25%) or more of the total dollar amount of contracts to Section 3 business concerns.

Section 3 Compliance
The first step in compliance is submitting a Section 3 Plan.  A Section 3 Plan is submitted when a company is bidding on or has been pre-approved for a HUD funded covered project.  When awarded HUD funds for a covered Section 3 project, the Section 3 Plan is used as a baseline for meeting the minimum goal requirements as stated under Section 3 Goals.  Compliance documents:

  • Section 3 Plan
  • Workforce Form
  • Verification of Income Form
  • Section 3 Summary Form

Section 3 Goals
The goals for each developer, contractor and subcontractor on a covered Section 3 project must acknowledge and actively seek to achieve the following Section 3 goals:

  • At least thirty percent (30%) of all new hires needed to complete the project shall be Section 3 Residents; and
  • At least ten percent (10%) of the total Detroit dollar amount awarded of all covered construction contracts shall be awarded to Section 3 Business Concerns; and
  • At least three percent (3%) of the total Detroit dollar amount awarded of all covered non-construction (including routine maintenance, HVAC servicing, re-painting, lawn care, and professional services – architectural, engineering, legal services, accounting, marketing, etc.) contracts shall be awarded to Section 3 Business Concerns.

Section 3 Business Concern Certification
Any business seeking to be placed on the City of Detroit certified Section 3 Business list must complete the Section 3 application for certification.