Section 3 of the Housing and Urban Development (HUD) Act of 1968 seeks to encourage local economic 
development by providing funded occupational training and contracts to those businesses that substantially employ low-income residents of public housing. This rule last underwent regulatory change in 1994, with an interim rule that has managed to survive to this day. The proposed rule change will amend Section 3 and its enforcement rules.
The purpose of the proposed amendments is to clarify and settle several important terms and issues with the current state of the section which had previously been left open to interpretation. Public housing and community development under housing are typically two of the largest avenues for federal funding reaching communities through grants, loans, entitlements and allocations. The HUD’s proposed rule suggests new standards and interpretations of various terms as well as lay out best practices.
Here are some of the new standards proposed in the change to the interim rule by the HUD:
Standards for Demonstrating Compliance:
The existing interim regulation provides two standards: “best efforts” and “to the greatest extent feasible.” The proposed change removes the distinction and suggests using only the “to the greatest extent feasible” standard. This is geared towards removing the confusion that the different language suggests.
Definition of “New Hire:”
The current form of the regulation on Section 3 sets as a goal that Section 3 residents comprise 30 percent of all new hires and this is to be done without regard to the length of employment. The new proposed regulation would redefine a “new hire” as a Section 3 resident who works at least half the time of the average hours worked for the category of work he is hired for, and the average is calculated with respect to the project being looked at. Therefore, for a new hire painter to be counted towards the employer’s numbers, he must work at least half the time that an average painter on the project works on it. This is to avoid companies taking advantage of the funding by adding employee numbers and then giving them little or no work to reduce the pay provided to them.
For more on these terms and interpretations that have been clarified in this proposed update to the regulation – join expert speaker Paul Flogstad, in a Live Webinar titled “Procurement and Section 3”. During the session, Paul will review the proposed updated rule in detail and examine the effect of the proposed rule in time for public comment by May 2016. Understanding these changes and what they mean for your business and receiving the benefits under Section 3 will be extremely vital, moving forward.
