Enhancing and Streamlining the Implementation of “Section 3” Requirements for Creating Economic Opportunities for Low- and Very Low-Income Persons and Eligible Businesses, 13177-13199 [2019-06495]
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Federal Register / Vol. 84, No. 65 / Thursday, April 4, 2019 / Proposed Rules
handicapping smaller players or newer
entrants.2
As part of our regular process of regulatory
review, the Commission first sought
comments on updating the Safeguards Rule
in September 2016.3 When asked about the
need for more specific requirements,
commenters generally asked to leave the Rule
in place, and to avoid more prescriptive
regulation. Privacy advocates and an
association owned by the largest commercial
banks sought more detailed requirements.4
Based on that record, and the adoption of
several new state laws and regulations
regarding data security of financial
institutions, the Commission today proposes
the latter course.
This approach concerns us for several
reasons. First, some of the specific proposals
track shortcomings the Commission has
identified in its data security enforcement
cases and investigations. Not all of these
shortcomings concern firms covered by the
Safeguards Rule and, in any event, they may
not represent a broader trend that warrants a
regulatory response. Therefore, it may not be
appropriate to mandate such prescriptive
standards for all market participants. To the
extent that the Commission thinks it is
appropriate to elucidate the regulation’s
reasonable care requirements, we have tools
at our disposal—including speeches,
testimony, analyses to aid public comment,
information about the factors the
Commission considered when closing
investigations, and reports. Commentary like
this can help financial institutions weigh
whether precautions are reasonable based on
the risks associated with how they use,
collect, and store data, without imposing a
one-size-fits-all approach. The question to be
answered here is whether the existing
Safeguards Rule, which addresses the
protection of financial information, is
inadequate to that purpose. Also important is
the question of how firms governed by the
Rule operate relative to ones in sectors that
are not so governed.
Second, the proposed regulations may be
premature for two reasons. They are based in
substantial part on regulations promulgated
two years ago by the New York State
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2 See,
e.g., William A. Brock & David S. Evans,
The Economics of Regulatory Tiering, 16 Rand J.
Econ. 398, 399 (1985) (‘‘[I]mposing uniform
regulatory requirements across all types of
businesses has a disparate impact on smaller
businesses because there are scale economies in
regulatory compliance. Scale economies may arise
because there are fixed costs of complying with
regulations. Larger businesses can average these
fixed costs over a larger quantity of output and
thereby achieve a competitive advantage over their
smaller rivals. [¶ ] There is evidence that scale
economies in compliance are quite extensive for
some regulatory requirements.’’) (citations omitted).
3 Standards for Safeguarding Customer
Information, 81 FR 61632 (Sept. 7, 2016) (to be
codified at 16 CFR part 314). Comments are posted
at https://www.ftc.gov/policy/public-comments/
2016/10/initiative-674. The Commission has
assigned each comment a number.
4 Electronic Privacy Information Center, Comment
Letter #30 on the Standards for Safeguarding
Customer Information (Nov. 7, 2016); The Clearing
House Association LLC, Comment Letter #35 on the
Standards for Safeguarding Customer Information
(Nov. 21, 2016).
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13177
Department of Financial Services.5 We do not
have data about the impact and efficacy of
those regulations, so whether to adopt a
version of them at the federal level and
whether that version should be a floor for or
should preempt state-level rules seem like
questions worthy of more study. Right now,
Congress and the Executive Branch,
including the leadership of the Senate
committee with jurisdiction over financial
institutions, are discussing potential privacy
and data security legislation. The NPRM
seeks comment on issues that are implicated
in this debate, as well as issues not addressed
in the New York rule, like data
minimization/elimination and requiring a
legitimate business justification for collecting
data in the first instance. These topics in
particular take us into a broader debate that
belongs—and is being had—in Congress.5 6
Third, the Safeguards Rule today is a
flexible approach, appropriate to a
company’s size and complexity. This
proposal would move us away from that
approach. There are direct costs for enhanced
precautions, but this record does not
demonstrate that those costs will
significantly reduce data security risks or
significantly increase consumer benefits. The
expansion of the Rule could create traps for
the unwary, especially small and innovative
businesses. Further, large incumbents can
often absorb regulatory compliance costs
more effectively than new entrants or smaller
players, potentially decreasing competition.
The proposed precautions, either
individually or in the aggregate, may
constitute best practices for certain firms. But
the proliferation of procedural, technical, and
governance requirements may have the
unintended consequence of diluting core
data security measures undertaken pursuant
to the existing Safeguards Rule.
Finally, the NPRM proposes that the
Commission substitute its own judgment for
a private firm’s governance decisions,
including but not limited to the appropriate
level of board engagement, hiring and
training requirements, and program
accountability structures. Data security is
important, without doubt. In our enforcement
and legislative advocacy, we focus a great
deal on it. But take, for example, board
engagement on data security. Whether and to
what extent it should command the regular
attention and personal liability of a
company’s board is precisely the kind of
question firms are in a better position to
evaluate than federal regulators. Other
matters may be more important, including to
the nation at large. A decade ago, our
economy was brought low by what many
view as improper risk assessment by
financial institutions of their assets and
liabilities. Maybe we want boards of financial
institutions to spend more time assessing
those risks. The point isn’t that the answer
is easy—the point is that we may not be the
best qualified to supply it.
This is an NPRM, and the Commission is
merely proposing new regulation and
soliciting views on its impact. But we are
also aware that the momentum behind an
NPRM regularly results in the promulgation
of new or revised rules. While the
Commission is not making a final
determination today, we are concerned that
the specific suggestions herein will frame the
debate so as to take the Commission in a
direction that may be unwarranted
(particularly given the prospect of
legislation), and which may have negative
repercussions. A review of the Safeguards
Rule, especially in light of new legal
developments, is warranted. But we should
go where the evidence today leads us. We
would strongly encourage those in industry,
academia, and civil society with expertise in
these areas to comment and provide evidence
on this proposal.
For these reasons, we dissent.
5 Cybersecurity Requirements for Financial
Services Companies, 23 NYCRR 500, et seq. (2016).
6 Press Release, S. Comm. on Banking Housing,
and Urban Affairs, Crapo, Brown Invite Feedback
on Data Privacy, Protection and Collection (Feb 13,
2019), https://www.banking.senate.gov/newsroom/
majority/crapo-brown-invite-feedback-on-dataprivacy-protection-and-collection.
7 See Brock and Evans, supra note 2.
8 Standards for Safeguarding Customer
Information (proposed Mar. 5, 2019) (16 CFR part
314.4(i)) (requiring that Chief Information Security
Officer (‘‘CISO’’) report in writing, at least annually,
to board of directors or equivalent about the overall
status and material matters related to the
information security program based on the
assumption that ‘‘such reports will not be overly
burdensome [because] . . . required information
can be gathered throughout the year as part of
managing the information security program and
satisfying the other requirements of the proposed
amendments.’’) (quoting proposed NPRM).
9 Id. at 314.4(e) (requiring the hiring of qualified
and sufficient personnel, continuous training for
key personnel, and verification of training).
10 Id. at 314.4(a)(1) (prohibiting companies from
designating more than one employee to coordinate
information security programs and instead
requiring the designation of ‘‘a single qualified
individual’’ (CISO)); Id. at 314.4(a)(2) (requiring
oversight of CISO by appropriate senior member of
personnel); Id. at 314.4(h) (requiring a written
incident response plan).
[FR Doc. 2019–04981 Filed 4–3–19; 8:45 am]
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BILLING CODE 6750–01–P
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
24 CFR Parts 5, 14, 75, 91, 92, 93, 135,
266, 570, 576, 578, 905, 964, 983, and
1000
[Docket No. FR–6085–P–01]
RIN 2501–AD87
Enhancing and Streamlining the
Implementation of ‘‘Section 3’’
Requirements for Creating Economic
Opportunities for Low- and Very LowIncome Persons and Eligible
Businesses
Office of the Assistant Deputy
Secretary for Field Policy and
Management, HUD.
ACTION: Proposed rule.
AGENCY:
Section 3 of the Housing and
Urban Development Act of 1968, as
SUMMARY:
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Federal Register / Vol. 84, No. 65 / Thursday, April 4, 2019 / Proposed Rules
amended by the Housing and
Community Development Act of 1992
(Section 3), contributes to the
establishment of stronger, more
sustainable communities by ensuring
that employment and other economic
opportunities generated by Federal
financial assistance for housing and
community development programs are,
to the greatest extent feasible, directed
toward low- and very low-income
persons, particularly those who receive
government assistance for housing. In
accordance with statutory authority,
HUD is charged with the responsibility
to implement and enforce Section 3.
HUD’s regulations implementing the
requirements of Section 3 have not been
updated since 1994 and are not as
effective as HUD believes they could be.
This proposed rule would update 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. The purpose of
these changes is to increase the impact
of the Section 3 requirements for lowand very low-income persons, increase
compliance with Section 3
requirements, and reduce regulatory
burden. HUD is also publishing
elsewhere in this issue of the Federal
Register a proposed notification for
comment that would set initial
benchmarks for measuring Section 3
compliance with the final rule.
DATES: Comment Due Date: June 3,
2019.
ADDRESSES: Interested persons are
invited to submit comments regarding
this rule. Communications must refer to
the above docket number and title.
There are two methods for submitting
public comments. All submissions must
refer to the above docket number and
title.
1. Submission of Comments by Mail.
Comments may be submitted by mail to
the Regulations Division, Office of
General Counsel, Department of
Housing and Urban Development, 451
7th Street SW, Room 10276,
Washington, DC 20410–0500.
2. Electronic Submission of
Comments. Interested persons may
submit comments electronically through
the Federal eRulemaking Portal at
www.regulations.gov. HUD strongly
encourages commenters to submit
comments electronically. Electronic
submission of comments allows the
commenter maximum time to prepare
and submit a comment, ensures timely
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receipt by HUD, and enables HUD to
make them immediately available to the
public. Comments submitted
electronically through the
www.regulations.gov website can be
viewed by other commenters and
interested members of the public.
Commenters should follow the
instructions provided on that site to
submit comments electronically.
Note: To receive consideration as public
comments, comments must be submitted
through one of the two methods specified
above. Again, all submissions must refer to
the docket number and title of the rule.
No Facsimile Comments. Facsimile
(fax) comments are not acceptable.
Public Inspection of Public
Comments. All properly submitted
comments and communications
submitted to HUD will be available for
public inspection and copying between
8 a.m. and 5 p.m., weekdays, at the
above address. Due to security measures
at the HUD Headquarters building, an
appointment to review the public
comments must be scheduled in
advance by calling the Regulations
Division at 202–708–3055 (this is not a
toll-free number). Individuals with
speech or hearing impairments may
access this number via TTY by calling
the Federal Relay Service at 800–877–
8339. Copies of all comments submitted
will be available for inspection and
downloading at www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: For
Public Housing Financial Assistance:
Merrie Nichols-Dixon, Director, Office
of Policy Program and Legislation,
Office of Public and Indian Housing,
Department of Housing and Urban
Development, 451 7th Street SW, Room
3178, Washington, DC 20410; telephone
202–402–4673 (not a toll-free number);
for Community Development Block
Grant (CDBG)/CDBG Disaster Recovery/
Section 108 Loan Guarantee Program:
Jessie Handforth Kome, Deputy Director,
Office of Block Grant Assistance, Office
of Community Planning and
Development, Department of Housing
and Urban Development, 451 7th Street
SW, Room 7286, Washington, DC 20410;
telephone 202–402–5539 (voice/TDD)
(not a toll-free numbers); for HOME or
Housing Trust Fund Section 3 projects:
Virginia Sardone, Director, Office of
Affordable Housing Program, Office of
Community Planning and Development,
Department of Housing and Urban
Development, 451 7th Street SW, Room
10168, Washington, DC 20410;
telephone 202–402–4606 (not a toll-free
number), and for Office of Housing
programs: Thomas R. Davis, Director,
Office of Recapitalization, Office of
Housing, Department of Housing and
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Urban Development, 451 7th Street SW,
Room 6230, Washington, DC 20410;
telephone 202–402–7549 (voice/TDD)
(these are not toll-free numbers).
Persons with hearing or speech
impairments may access this number
through TTY by calling the Federal
Relay Service, at toll-free, 800–877–
8339. General email inquiries regarding
Section 3 may be sent to: section3@
hud.gov.
SUPPLEMENTARY INFORMATION:
Executive Summary
Purpose of Regulatory Action
This proposed rule would update the
regulations implementing Section 3.
The purpose of Section 3 is to ensure
that employment, training, contracting,
and other economic opportunities
generated by certain HUD financial
assistance are directed to low- and very
low-income persons, particularly those
who receive government assistance for
housing, and for businesses to provide
economic opportunities to low- and
very low-income persons. As noted in
the summary of this preamble, the
regulations for Section 3 have not been
updated in over 20 years. HUD’s
experience in administering Section 3
over time has provided insight as to
how HUD could improve the
effectiveness of its Section 3 regulations.
Additionally, HUD has heard from the
public that there is a need for regulatory
changes to clarify and simplify the
existing requirements. HUD has
concluded that regulatory changes are
needed to streamline Section 3 and
more effectively benefit recipients of
HUD financial assistance to achieve the
purposes of the Section 3 statute.1
Summary of the Major Provisions of
This Regulatory Action
The following provides an overview
of the more significant provisions of this
proposed rule.
Promote Sustained Employment and
Career Development
The new rule includes multiple
elements designed to increase Section
3’s impact in directing employment
opportunities for the people served by
HUD financial assistance programs and
sustaining employment. The new rule
proposes the tracking and reporting of
1 As discussed later in this preamble, this
proposed rule would define recipients to mean any
entity that receives directly from HUD Section 3
public housing financial assistance or other
financial assistance that funds a Section 3 project,
including, but not limited to: Any State, local
government, instrumentality, Public Housing
Authority, Indian tribe, tribal organization, or other
public agency, public or private nonprofit
organizations.
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labor hours instead of new hires and
solicits public comment on whether to
retain tracking and reporting of new
hires in some contexts. The current new
hire framework, while valuable for
measuring entry into employment, does
not capture the extent to which new
hiring opportunities are created relative
to the total work performed, nor
whether those opportunities are
sustained over time. The proposed focus
on labor hours would measure total
actual employment and the proportion
of the total employment performed by
low- and very low-income workers. In
addition, the proposed focus on labor
hours emphasizes continued
employment. For example, an exclusive
focus on counting new hires regards five
new hires for one-month opportunities
as a more valued outcome than one 12month opportunity, and it does not
distinguish between full- and part-time
employment. A full-time job sustained
over a long period allows a low- or very
low-income worker to gain skills and is
a strong indicator of progress towards
self-sufficiency. A focus on labor hours
ensures that the 12-month, full time
opportunity is appropriately recognized.
To further encourage employers to
invest in and retain newly-hired lowand very low-income workers, the
proposed rule would determine whether
someone qualified as a Section 3 worker
at the time of hire and the employer
would continue to count that Section 3
hire even if in the future the Section 3
worker is no longer a low- and very lowincome worker.
HUD held a number of listening
sessions with small Public Housing
Agencies (PHAs), large PHAs, and other
entities involved with Section 3 2 and
heard from some PHAs that they would
prefer to keep reporting new hires rather
than switch to reporting labor hours.
Therefore, while HUD believes tracking
labor hours is the best option and would
simplify reporting, HUD is proposing
alternative regulatory language that
would provide for PHAs to report on
new hires. After receiving feedback on
the labor hours and new hires
framework in this proposed rule, HUD
will select either Alternative 1, labor
hours, or Alternative 2, new hires, for
PHAs to use in tracking and reporting
on Section 3.
Align Section 3 Reporting With
Standard Business Practices
As noted above, the new rule
proposes the tracking and reporting of
labor hours, rather than new hires. This
is more consistent with business
2 Links
[to the listening session notes] will be
provided at the time the proposed rule is published.
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practices for most construction
contractors working on HUD assisted or
insured projects, who already track
labor hours in their payroll systems
because they have been subject to
prevailing wage requirements 3 HUD
believes a consistent labor hour tracking
mechanism will make compliance with
Section 3 easier not only for recipients
of HUD assistance, but also for
contractors and subcontractors. The rule
also provides for employers who do not
track hours in detail through a time-andattendance system, permitting a good
faith assessment of the labor hours of a
full-time or part-time employee. The
proposed rule does not create an
obligation to establish a detailed timeand-attendance system.
Proposed Applicability and Reporting
Thresholds
This proposed rule applies to (1)
HUD’s Public Housing Program, and (2)
Other programs that provide housing
and community development
assistance. For ease in administration,
the rule would provide separate
definitions for these types of funding
and separate subparts relating to: (1)
Public housing financial assistance,
which covers (a) development
assistance provided pursuant to section
5 of the United States Housing Act of
1937 (the 1937 Act), (b) operations and
management assistance provided
pursuant to section 9(e) of the 1937 Act
(Operating Fund), and (c) development,
modernization, and management
assistance provided pursuant to section
9(d) of the 1937 Act (Capital Fund); and
(2) Section 3 projects, which means
HUD program assistance used for
housing rehabilitation, housing
construction and other public
construction projects that generally
exceed a $200,000 project threshold or
any Section 3 project funding from
HUD’s Lead Hazard Control and Healthy
Homes programs. This proposed rule
would clarify that contracts,
subcontracts, grants, or subgrants
subject to section 7(b) of the Indian SelfDetermination and Education
Assistance Act (25 U.S.C. 5307(b)) or
subject to tribal preference requirements
as authorized under 101(k) of the Native
American Housing Assistance and SelfDetermination Act (25 U.S.C. 4111(k))
must provide preferences in
employment, training, and business
opportunities to Indians and Indian
organizations.
All recipients of public housing
financial assistance and recipients that
3 See 42 U.S.C. 1437j(a), 24 CFR 905.308(b)(3)(ii),
24 CFR 965.101, 25 U.S.C. 4225(b)(1)(A), and 24
CFR 1006.345(b).
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fund a Section 3 project would be
required to report on whether they have
met benchmarks, as explained below.
PHAs with fewer than 250 units would
only be required to report on Section 3
qualitative efforts and would not be
required to report on whether they have
met the reporting benchmarks.
Reporting and Targeted Section 3
Workers
HUD’s current regulations provide for
a safe harbor where recipients may
demonstrate compliance with Section 3
by certifying compliance with the
Section 3 priorities and meeting
numerical goals for the percentage of
their new hires that qualify as Section
3 residents. Under the existing
regulations, a Section 3 resident is
either a public housing resident, or a
low- or very low-income person who
lives in the metropolitan area or
nonmetropolitan county where
assistance is expended. However, the
Section 3 statute requires recipients of
certain financial assistance to target
their efforts to direct employment and
economic opportunities to specific
groups of low- and very low-income
individuals. HUD interprets the
statutory priorities for the public
housing program to be: Residents of the
public housing projects for which the
public housing financial assistance is
expended, residents of other public
housing projects managed by the PHA
that is expending the assistance or to
residents of Section 8-assisted housing
managed by the PHA, YouthBuild
participants, and then other low- and
very low-income persons within the
metropolitan area or nonmetropolitan
county. For other HUD assistance
programs, the statutory priorities are:
Residents within the service area or the
neighborhood of the project and
YouthBuild participants. There is also a
statutory contracting priority for
businesses that provide economic
opportunities for the same priority
groups. Previously the contracting
metric was based on the cost of the
contract awarded to the Section 3
business, and now the hours worked by
the Section 3 business employees will
be counted consistent with all other
reporting.
This proposed rule anticipates that
recipients would report the labor hours
performed by ‘‘Section 3 Workers’’ as a
percentage of the total labor hours on a
project, and labor hours performed by
‘‘Targeted Section 3 Workers’’ as a
percentage of the total labor hours on a
project. The proposed rule would also
provide an alternative for public
housing financial assistance where
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reporting would be done by new hires,
but with the same three metrics.
Under this proposed rule, ‘‘Section 3
Workers’’ would generally be low- or
very low-income individuals, or those
employed by a business that generally
provides economic opportunities for
low- and very low-income individuals.
This proposed rule creates the new
concept of ‘‘Targeted Section 3
Workers’’ so that HUD can track, and
recipients can target, hiring Section 3
workers in selected categories and those
who work for Section 3 businesses. A
‘‘Targeted Section 3 Worker’’ is a subset
of all Section 3 workers (see graphic),
that HUD wishes to specifically track,
reflecting both statutory and policy
priorities. The Targeted Section 3
worker category also incorporates the
statutory requirements pertaining to
contracting opportunities for business
concerns employing low- and very lowincome persons.
Targeted Section 3 Workers for public
housing financial assistance would be:
• Residents of public housing projects
or Section 8-assisted housing; 4
• Residents of other projects of the
PHA that is expending assistance;
• Current YouthBuild participants; or
• Employees of a Section 3 business.
Targeted Section 3 Workers for other
HUD financial assistance used on a
Section 3 project would be:
• Low- or very low-income workers
residing within the service area or the
neighborhood of the project (for
purposes of this proposed rule, this
would include low- or very low-income
workers residing within a one-mile
radius of the project site; or if fewer
than 5,000 people live within one mile
of a work site, within a circle centered
on the work site that encompass a
population of 5,000 people);
• Current YouthBuild participants; or
• Employees of a Section 3 business
concern.
A long-standing criticism of local
economic development policy is that
spatially-targeted subsidies transfer jobs
away from other areas without creating
job opportunities for the neediest
individuals in the targeted area. The
proposed Section 3 regulation avoids
this pitfall by encouraging the
engagement of local firms and low-
income workers through the definition
of a targeted Section 3 worker.
current rule when they do not meet the
safe harbor, and HUD may conduct
monitoring to review the recipient’s
compliance. Elsewhere in this issue of
the Federal Register, HUD has
published a proposed notification for
comment that would set initial
benchmarks at the final rule.
4 As further explained in this proposed rule, the
term Section 8-assisted housing refers to housing
receiving project-based rental assistance or tenantbased assistance under Section 8 of the 1937 Act.
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Benchmarks
This proposed rule would establish
new benchmark measurements, which
will also serve as safe harbors. The
primary impact of the Section 3
regulation is not to create new jobs but
to redirect the job opportunities that are
generated by HUD financial assistance
to Section 3 workers and Targeted
Section 3 workers, and the proposed
benchmark would reflect and monitor
grantees’ abilities to do so. The new
benchmarks will be based on ratios of
Section 3 workers and Targeted Section
3 workers in comparison to all workers.
These benchmarks would be set by
notice and amended periodically to
provide for updating of benchmarks
where warranted. The benchmarks
would align with the reporting data
detailed above. As HUD gathers
increasing data under the new rule,
HUD can increase or decrease
benchmark figures over time, or tailor
different benchmarks for different
geographies and different funding types.
If a recipient certifies compliance with
the statutory priorities and meets the
outcome benchmarks, HUD would
presume the recipient is in compliance
with Section 3 requirements, absent
evidence to the contrary. Otherwise,
recipients will be required to submit
qualitative reports on their efforts, as
they are required to do under the
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Multiple Funding Sources
HUD is seeking to streamline the
administrative work for recipients that
receive funds through more than one
HUD program, and contractors that
receive payment from funds under those
programs. The rule provides for how to
track funding and report benchmarks
when there is a project that is funded by
public housing financial assistance and
also meets the criteria as a Section 3
project. Specifically, that the project
must follow the public housing
financial assistance requirements for the
public housing financial assistance
funds and may follow the requirements
in subpart B or subpart C for the
community development financial
assistance funds. It would also provide
for how to deal with reporting when a
Section 3 project receives housing and
community development assistance
from two different HUD programs.
Specifically, that HUD would designate
reporting to one program office.
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Integrate Section 3 Into Program
Enforcement
HUD program office staff are regularly
in touch with HUD’s funding recipients.
Under the proposed rule’s framework,
HUD’s program offices would
incorporate Section 3 compliance and
oversight into regular program oversight
and make Section 3 a more integral part
of the program’s work. As a result, this
proposed rule would eliminate the
separate extensive complaint and
compliance review procedures in the
current rule. Relatedly, it would remove
the delegation of authority in the
current regulations, as Section 3
requirements, reporting, and
compliance would be aligned with those
of the applicable HUD program offices.
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Costs and Benefits
HUD has prepared a Regulatory
Impact Assessment (RIA) that assesses
the anticipated costs and benefits of the
proposed rule. The purpose of Section
3 is to provide jobs, including
apprenticeship opportunities, to public
housing residents and other specific
low- and very low-income residents of
a local area, and contracting
opportunities for businesses that
substantially employ these persons.
However, the Section 3 requirement
itself does not create additional jobs or
contracts. Instead, Section 3 gives
priority for local jobs and contracts
created as a result of the expenditure of
HUD financial assistance to Section 3
residents and businesses residing and
operating in the area in which the HUD
financial assistance is expended. A
reasonable estimate of the impact of this
proposed rule would be a net transfer to
Section 3 workers of 3,000 to 14,000
employment opportunities, 2,000 to
4,000 of which would be to Targeted
Section 3 workers. In addition, with
respect to incomes for tenants of public
housing, the Federal rental subsidies
provided to those tenants could be
reduced as a result of the creation of job
opportunities resulting from the
expenditure of Federal financial
assistance subject to Section 3
requirements.
If implemented as proposed, this
proposed rule would result in a
reduction in reporting and
recordkeeping burden of 64,270 hours
and approximately $1.2 million
annually. This rule will not have any
impact on the level of funding for
covered HUD programs. Funding is
determined independently by
congressional appropriations,
authorizing statutes and regulatory
formulas that set the amounts of the
Federal financial assistance provided by
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HUD grants. This proposed rule is not
an economically significant rule as
defined in Executive Order 12866
(Regulatory Planning and Review).
I. Background
Section 3 of the Housing and Urban
Development Act of 1968 (Pub. L. 90–
448, approved August 1, 1968) (Section
3) was enacted for the purpose of
bringing economic opportunities,
generated by the expenditure of certain
HUD financial assistance, to the greatest
extent feasible, to low- and very lowincome persons residing in
communities where the financial
assistance is expended. Section 3
recognizes that HUD funds are often one
of the largest sources of Federal funds
expended in low- and very low-income
communities and, where such funds are
spent on activities such as construction
and rehabilitation of housing and other
public facilities, the expenditure results
in economic opportunities. By directing
HUD-funded economic opportunities to
residents and businesses in the
community where the funds are
expended, the expenditure can have the
double benefit of creating new or
rehabilitated housing and other facilities
while providing opportunities for
employment and training for the
residents of these communities. Section
3 was amended by the Housing and
Community Development Act of 1992
(Pub. L. 102–550, approved October 28,
1992), which required the Secretary of
HUD to promulgate regulations to
implement Section 3, codified at 12
U.S.C. 1701u. HUD’s Section 3
regulations were promulgated through
an interim rule published on June 30,
1994, at 59 FR 33880, and the
regulations are codified in 24 CFR part
135.
In the 24 years since HUD
promulgated the current set of Section
3 regulations, significant legislation has
been enacted that affects HUD programs
that are subject to the requirements of
Section 3 and that are not adequately
addressed in the current Section 3
regulations. This legislation includes,
but is not limited to, the following:
reforms made to HUD’s Indian housing
programs by the Native American
Housing Assistance and SelfDetermination Act of 1996 (NAHASDA)
(Pub. L. 104–330, approved October 26,
1996); public housing reforms made by
the Quality Housing and Work
Responsibility Act of 1998 (QHWRA)
(Pub. L. 105–276, approved October 21,
1998); reforms made to HUD’s
supportive housing programs by the
Section 202 Supportive Housing for the
Elderly Act of 2010 (Pub. L. 111–372,
approved January 4, 2011); and the
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Frank Melville Supportive Housing
Investment Act of 2010 (Pub. L. 111–
347, approved January 4, 2011).
In 2013, HUD’s Office of the Inspector
General conducted an audit to assess
HUD’s oversight of Section 3, in
response to concerns about economic
opportunities that were provided (or
should have been provided) by the
expenditure of HUD financial assistance
under the American Reinvestment and
Recovery Act (Recovery Act) (Pub. L.
111–5, approved February 17, 2009).
The audit found that HUD was not fully
enforcing the reporting requirements of
Section 3 for recipients of Fiscal Year
2009 Recovery Act Public Housing
Capital Funds from HUD.5 In response
to the audit and the need to update the
outdated regulations, HUD issued a
proposed rule on March 27, 2015
entitled ‘‘Creating Economic
Opportunities for Low- and Very LowIncome Persons and Eligible Businesses
Through Strengthened ‘Section 3’
Requirements’’ which sought to
strengthen HUD requirements. See 80
FR 16519. HUD received more than 300
comments on the proposed rule
(including duplicate public comments).
Comments came from a wide variety of
entities, including PHAs, other housing
providers, organizations representative
of housing providers, governmental
jurisdictions and agencies, tenant and
other housing advocacy organizations,
and individuals. All public comments
can be viewed at https://
www.regulations.gov/#!docketDetail;
D=HUD-2015-0026.
While some commenters supported
the rule, many commenters were
concerned that the proposed rule would
raise the bar for compliance and
increase administrative requirements
without increasing funding. Based on
the multitude of comments, HUD sought
additional feedback from the public by
hosting a number of Section 3 listening
sessions 6 to highlight ‘‘best practices’’
and to discuss barriers to
implementation across the country. The
sessions provided valuable information
on the challenges and barriers for
implementation that HUD hopes to
address in this new proposed rule.
II. This Proposed Rule
HUD proposes to revise its Section 3
regulations to better achieve the
statute’s goals, to make reporting more
meaningful and more aligned with
statutory requirements, and to simplify
5 See: https://www.hudoig.gov/reportspublications/audit-reports/hud-did-not-enforcereporting-requirements-of-section-3-of.
6 See Listening Session Notes at https://
www.hud.gov/program_offices/fair_housing_equal_
opp/section_3_publications_and_regulations.
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compliance for recipients. This
proposed rule does this by aligning
reporting with desired outcomes and
with data already collected by reporting
entities; clarifying the applicability and
scope of the rule; linking certain
statutory prioritization categories to a
new notice that sets forth benchmarks;
streamlining the rule’s reporting and
oversight requirements; addressing
complexities arising from the use of
multiple funding sources; simplifying
the requirements for Section 3 contract
language; and aligning Section 3
requirements more closely with specific
HUD program requirements.
This rule would remove existing
Section 3 regulations in 24 CFR part 135
and create a new part 75, which would
be organized into four subparts: Subpart
A—General Provisions; Subpart B—
Additional Provisions for Public
Housing Financial Assistance; Subpart
C—Additional Provisions for Section 3
projects; and Subpart D—Provisions for
Multiple funding sources,
recordkeeping and compliance.
Subparts A and D apply to all
recipients, subrecipients, contractors,
and subcontractors subject to Section 3
requirements. Subpart B provides
requirements specific to PHAs and other
recipients of public housing financial
assistance. Subpart C mostly mirrors
subpart B, but provides specific
requirements for recipients using funds
on a Section 3 project. Part 75 would be
codified in a section of HUD’s CFR that
establish requirements that generally
apply to HUD’s programs.
Throughout this rule, the reader will
find amendatory language titled
‘‘Alternative 1’’ and ‘‘Alternative 2.’’ As
discussed above, HUD is providing the
opportunity for PHAs and other
recipients of public housing financial
assistance to view the new rule and
provide feedback on whether HUD
should track labor hours, consistent
with what HUD is proposing for Section
3 projects, or maintain the tracking of
new hires. The language in ‘‘Alternative
1’’ is what HUD would adopt if the final
rule tracks labor hours for all public
housing financial assistance and the
language in ‘‘Alternative 2’’ is what
HUD would adopt if the final rule
provides separate tracking and reporting
of public housing financial assistance by
new hires. At the final rule stage, HUD
will decide on either ‘‘Alternative 1’’ or
‘‘Alternative 2,’’ and maintain only one
set of regulatory changes and the
definitions that apply.
HUD notes that nothing in this
proposed rule would supersede the
general requirement of 2 CFR 200.319(a)
that all procurement transactions be
conducted in a competitive manner. In
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addition, HUD notes that 2 CFR
200.319(b) permits geographical
preferences where applicable Federal
statutes expressly mandate or encourage
geographic preference, such as Section
3.
Subpart A—General Provisions
Subpart A—General Provisions
contains four sections: The general
purpose of Section 3 (§ 75.1); the
applicability of Section 3 requirements
on HUD federal assistance (§ 75.3); new
and updated definitions applicable to
this part (§ 75.5); and the Section 3
requirements applicable to HUD’s
notices of funding availability (NOFAs)
(§ 75.7).
Section 75.1 provides the framework
for the regulation and sets forth the
purpose of Section 3, which is to ensure
that economic opportunities, most
importantly employment, generated by
certain HUD financial assistance for
housing and community development
programs shall be directed to low- and
very low-income persons. Following the
Section 3 statute, this section provides
an emphasis on providing opportunities
for those who are recipients of Federal
financial assistance for housing or
residents of the community in which
the Federal financial assistance is spent.
Section 75.3 defines the application of
Section 3 consistent with the Section 3
statute. There are two categories:
(1) Public housing financial
assistance: This term covers the public
housing program assistance which
includes: (a) Development assistance
provided pursuant to section 5 of the
United States Housing Act of 1937; (b)
operations and management assistance
provided pursuant to section 9(e) of the
1937 Act (Operating Fund) and (c)
development, modernization, and
management assistance provided
pursuant to section 9(d) of the 1937 Act
(Capital Fund). While the statute also
includes a reference to modernization
assistance pursuant to section 14 of the
Act, which was repealed by the Quality
Housing and Work Responsibility Act of
1998 (QHWARA) (Pub. L. 105–276), the
former section 14 modernization
program was replaced along with the
operating, maintenance, development
and modernization programs that
became the Operating Fund and Capital
Fund programs with assistance
provided pursuant to section 9. The
Section 8 programs were never included
in the Section 3 statute and will not be
covered in this proposed rule despite
being included in the current Section 3
rule.
(2) Section 3 project: This term covers
assistance provided by other HUD
programs when used for housing
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rehabilitation, housing construction,
and other public construction projects,
as described in 12 U.S.C. 1701u(c)(2). A
Section 3 project will mean a housing
rehabilitation, housing construction,
and other public construction projects
where the HUD assistance exceeds
$200,000, and all projects that receive
funding from HUD’s Lead Hazard
Control and Healthy Homes programs.
The proposed rule’s threshold applies
on a project basis. HUD proposes using
project funding level to define
thresholds because the amount of
funding spent on the project is directly
related to the economic opportunities
generated by the project.
HUD arrived at the $200,000
threshold after analyzing data from
relevant programs, including HUD’s
Community Development Block Grant
(CDBG) and HOME Investment
Partnerships (HOME) programs. HUD
considered various thresholds in
deciding to propose the $200,000 figure.
HUD estimates that of $100,000 in
construction spending, $64,000
generally goes to labor costs, and the
median annual income for a
construction job is $44,730. Thus, a
project below $100,000 would not
generate more than one salary. On the
other hand, HUD data shows that a
higher threshold, such as $400,000,
could exempt a large portion of housing
and community development projects
from Section 3 funding. Fiscal year 2015
CDBG data shows that a $400,000
threshold would have exempted 90
percent of construction and
rehabilitation activities, and over half of
CDBG assistance. A $200,000 threshold
would still cover almost three-quarters
of CDBG funding, while exempting the
smallest three quarters of projects and
eliminating administrative burdens from
these small efforts that yield relatively
few employment opportunities. For the
HOME program, at least 90% of HOME
funding to projects greater than 1 unit
would be covered by any threshold at
$400,000 or below. It is HUD’s view that
$200,000 is a sufficiently high amount
that, when expended on constructionrelated activities, a significant amount
of those funds should be used to
generate economic opportunities for
low- and very low-income persons. An
exception applies for lead hazard
control and healthy homes mitigation
activities, which on a per unit
remediation basis would generally
involve much less than $100,000 in
HUD grant funds, and so applying a per
project threshold could effectively
exempt lead hazard control and healthy
homes grants from Section 3. As a
result, this rule proposes to apply
Section 3 requirements to all projects
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that receive funds from HUD’s Lead
Hazard Control and Healthy Homes
grant programs consistent with the
current application of Section 3 to all
grants above $100,000.
Section 75.3 provides that
requirements of this part apply to the
entire Section 3 project, regardless of
whether the project is fully or partially
funded with HUD program assistance.
This section also clarifies that Section
3 does not apply to material supply
contracts. As discussed in this
preamble, a material supply contract is
defined as a contract for the delivery of
commercially available materials and
products. The proposed rule includes a
set of examples to illustrate what is
meant by commercially available
materials for purchase, such as lumber,
drywall, wiring, concrete, pipes, toilets,
sinks, carpets, and office supplies. In
most cases a material supply contract
will include the delivery of the
materials and in those cases the delivery
is also not subject to Section 3
requirements. However, when a
recipient enters into a separate delivery
contract for an order of material
supplies, that delivery contract would
be subject to Section 3 requirements.
The proposed rule also provides that
contracts, subcontracts, grants, or
subgrants subject to section 7(b) of the
Indian Self-Determination and
Education Assistance Act (25 U.S.C.
5307(b)) or subject to tribal preference
as authorized under 101(k) of the Native
American Housing Assistance and SelfDetermination Act (25 U.S.C. 4111(k))
are not subject to the requirements in
this part because they must provide
preferences in employment, training,
and business opportunities to Indians
and Indian organizations. Lastly, § 75.3
indicates that HUD encourages
recipients of HUD assistance not
covered by Section 3 to support the
objectives of Section 3.
Section 75.5 provides the definitions
used throughout the new part. The
section proposes to use the general HUD
definitions at 24 CFR part 5 for HUD,
Public Housing, and PHAs and defines
Section 3 by reference to section 3 of the
Housing and Urban Development Act of
1968, as amended (12 U.S.C. 1701u).
The proposed rule also includes several
definitions for clarity including: ‘‘1937
Act;’’ ‘‘Public housing project;’’ ‘‘Lowincome person;’’ ‘‘Qualified Census
Tract;’’ ‘‘Section 8-assisted housing;’’
‘‘Very low-income person;’’ and
‘‘YouthBuild programs.’’
HUD proposes contract terms for
determining coverage of the rule:
Material supply contracts would be
defined as a contract that is made for the
purchase of products and materials.
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HUD provides this definition to clarify
that such contracts are not covered by
Section 3.
Professional services would be
defined as non-construction services,
including, but not limited to, contracts
for legal services, financial consulting,
accounting services, environmental
assessment, architectural services, and
civil engineering services. This
definition is informed by the current
separation of Section 3 business concern
ratios by building trade versus nonbuilding trade. Professional services
will be excluded from the benchmarking
requirements, but HUD will allow
voluntary reporting of these workers, as
discussed below.
HUD also provides definitions for
purposes of the new Section 3 reporting
requirements:
Contractor would be defined as an
entity entering into a contract with a
recipient to perform work in connection
with the expenditure of public housing
financial assistance or for work in
connection with a Section 3 project, or
a subrecipient for work in connection
with a Section 3 project.
Labor hours would be defined to
mean the number of paid hours worked
by persons on Section 3 projects or
employed with funds that include
public housing financial assistance.
This includes the labor hours of any
contractor, subcontractor, or employee
of the public housing authority that is
being paid in part by the public housing
financial assistance. For example, the
labor hours performed by an elevator
maintenance contractor under a contract
with the PHA would be included in the
total labor hours performed by the PHA
using public housing financial
assistance.
New hire would be defined as a fullor part-time employee for permanent,
temporary, or seasonal employment
opportunities that was not on the
payroll of the recipient, or of a
recipient’s contractor or subcontractor
or other entity receiving public housing
financial assistance at the beginning of
the award. The term also includes a new
hire that was hired by a contractor or
subcontractor on a per-project basis as a
result of receiving public housing
financial assistance. This definition is
part of Alternative 2 for PHAs to
consider in determining if reporting
should be completed using labor hours
or new hires. If Alternative 1, which
uses labor hours for reporting, is chosen,
this definition will not be included at
the final rule.
Public housing project is defined in
24 CFR 905.108.
Recipient would be defined to mean
any entity that receives directly from
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13183
HUD Section 3 public housing financial
assistance or other financial assistance
that funds a Section 3 project,
including, but not limited to: Any State,
local government, instrumentality, PHA,
Indian tribe, tribal organization, or other
public agency, public or private
nonprofit organization. This term
excludes the ultimate beneficiary of
Federal financial assistance under the
HUD program to which Section 3
applies (for example an individual or
family receiving a housing rehabilitation
grant financed with HOME assistance)
and does not include contractors and
subcontractors. This term establishes
the scope of entities that would be
required to report to HUD under this
proposed rule. It also defines the
entities subject to the requirement to
include contractual language requiring
the application of Section 3 (See
§§ 75.17 and 75.27.).
Small PHA would be defined to mean
a public housing authority with fewer
than 250 public housing units. This
definition allows for these smaller
entities to follow a reduced reporting
process under § 75.13. This definition is
consistent with references to small
PHAs in 24 CFR parts 902, 903, 905,
970, and 985.
Subcontractor would mean any entity
that has a contract with a contractor to
undertake a portion of the contractor’s
obligation to perform work in
connection with the expenditure of
public housing financial assistance or a
Section 3 project.
Subrecipient would be defined to
have the meaning provided in the
applicable program regulations, or in 2
CFR 200.93.
Finally, this regulation would propose
definitions for a Section 3 business
concern, Section 3 worker, and Targeted
Section 3 worker for purpose of
benchmarking:
Section 3 business concern would be
defined to mean a business that is at
least 51 percent owned by low- or very
low-income persons; over 75 percent of
the labor hours performed for the
business are performed by low- or very
low-income persons; or is at least 25
percent owned by current public
housing residents or residents who
currently live in Section 8-assisted
housing. The Section 3 statute defines a
business concern that provides
economic opportunities to mean a
business concern ‘‘that—(A) provides
economic opportunities for a class of
persons that has a majority controlling
interest in the business; (B) employs a
substantial number of such persons; or
(C) meets such other criteria as the
Secretary may establish.’’ The proposed
definition reflects the first two statutory
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requirements and provides two
additional types of business concerns
that meet the statutory intent. HUD
believes that the 75 percent figure is a
reasonable measure for determining
whether the business concern provides
economic opportunities for a substantial
number of low- and very low-income
persons. Lastly, to further encourage
businesses ownership by public housing
residents or residents who live in
Section 8-assisted housing, this
proposed rule would provide that a
Section 3 business concern could be one
that is at least 25 percent owned by
current public housing residents or
residents who currently live in Section
8-assisted housing. HUD also notes that
a prior arrest or conviction generally
does not impact an individual’s status
as an owner of a Section 3 business and
that meeting the definition of a Section
3 business does not negate the
requirement that the business meet the
specifications of the particular contract
(e.g., construction, supplies, etc.).
However, the requirements for
preventing crime in federally assisted
housing (denying admission and
terminating tenancy for criminal activity
or alcohol abuse) in subpart I of 24 CFR
part 5 continue to apply to Section 3.
Accordingly, subpart I will apply to
applicants or tenants who would be
under consideration as an owner of a
Section 3 business.
Section 3 worker would be defined to
mean a worker whose income, before
being hired to work on the project, is
below the income limit established by
HUD; a worker who lives in a qualified
census tract; or a worker who is
employed by a Section 3 business
concern. The program statutes and
regulations provide the basis for the
income limit for determining eligibility
for assisted housing programs, including
the Public Housing, Section 8 projectbased, Section 8 Housing Choice
Voucher, Section 202 Housing for the
Elderly, and Section 811 Housing for
Persons with Disabilities programs.
HUD annually establishes income limits
based on Median Family Income
estimates and Fair Market Rent area
definitions for each metropolitan area,
parts of some metropolitan areas, and
each non-metropolitan county. The
income limits are available at: https://
www.huduser.gov/portal/datasets/
il.html.
HUD would define qualified census
tract as any census tract (or equivalent
geographic area defined by the Bureau
of the Census) in which at least 50
percent of households have an income
of less than 60 percent of Area Median
Gross Income (AMGI); or where the
poverty rate is at least 25 percent and
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where the census tract is designated as
a qualified census tract by HUD.
Qualified census tract data can be found
here: https://www.huduser.gov/portal/
datasets/qct.html. The definition of
Section 3 worker would provide that an
individual’s prior arrest or conviction
shall not negatively impact that
individual’s status as a Section 3 worker
and that meeting the definition of a
Section 3 worker does not negate the
requirement that the individual be
qualified for the job. However, the
requirements for preventing crime in
federally assisted housing (denying
admission and terminating tenancy for
criminal activity or alcohol abuse) in
subpart I of 24 CFR part 5 continue to
apply to individuals identified as
Section 3 workers or as owners of a
Section 3 business.
Targeted Section 3 worker would be
defined as provided in § 75.11 for the
public housing financial assistance and
as provided in § 75.19 for a Section 3
project. For certain projects receiving
funding from multiple sources, the
definition is provided in § 75.29.
Section 75.7 would establish
requirements applicable to HUD’s
NOFAs for public housing financial
assistance and Section 3 projects. HUD
would require that all NOFAs that
award funds covered by Section 3 will
include notice that the assistance is
subject to part 75. This section would
also provide that HUD may include,
where appropriate, points or bonus
points for exceeding Section 3
requirements. This proposed rule would
remove the requirements in the
currently codified part 135 that require
NOFA applicants to submit
certifications that the applicant will
comply with the Section 3
requirements, require a statement of
activities intended by recipients of
assistance covered by Section 3, and
require that the NOFA give preference
for Section 3 requirements. HUD’s
removal of these requirements is
consistent with how HUD implements
other applicable program requirements.
Further, these additional burdens are
unnecessary as recipients already agree
to comply with all applicable program
requirements, including Section 3
requirements, when they submit a
NOFA.
Subpart B—Additional Provisions for
Public Housing Financial Assistance
Subpart B—Additional Provisions for
Public Housing Financial Assistance
contains five sections, which set out the
requirements for PHAs and other
recipients of public housing financial
assistance, as defined in § 75.3. The
subpart includes the following:
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Requirements (§ 75.9); Targeted Section
3 worker definition for public housing
financial assistance (§ 75.11); Section 3
safe harbor (§ 75.13); Reporting
(§ 75.15); and Contract Provisions
(§ 75.17).
Section 75.9 would incorporate the
statutory Section 3 requirements for
prioritizing categories of Section 3
workers and businesses when using
public housing financial assistance
defined in § 75.3(a)(1). The statutory
prioritization requires that a PHA or
other recipient of public housing
financial assistance must make its best
efforts, consistent with existing Federal,
state, and local laws and regulations, to
provide employment and training
opportunities generated by the public
housing financial assistance to Section 3
workers in the following priority order:
(1) To residents of the public housing
projects for which the public housing
financial assistance is expended;
(2) To residents of other public
housing projects managed by the PHA
that is expending assistance or to
residents of other Section 8-assisted
housing managed by the PHA;
(3) To participants in YouthBuild
programs; and
(4) To low- and very low-income
persons residing within the
metropolitan area (or nonmetropolitan
county) in which the assistance is
expended.
The Section 3 statute also requires
that a PHA or other recipient of public
housing financial assistance must make
its best efforts to award contracts and
subcontracts to business concerns that
provide economic opportunities to
Section 3 workers in the following
priority order:
(1) To Section 3 business concerns
that provide economic opportunities for
residents of the public housing projects
for which the assistance is provided;
(2) To Section 3 business concerns
that provide economic opportunities for
residents of other public housing
projects managed by the PHA that is
providing the assistance or for residents
of Section 8-assisted housing managed
by the PHA;
(3) To YouthBuild programs; and
(4) To Section 3 business concerns
that provide economic opportunities for
Section 3 workers residing within the
metropolitan area (or nonmetropolitan
county) in which the assistance is
provided.
Section 75.11 would establish the
definition of a ‘‘Targeted Section 3
worker’’ for PHAs and other recipients
of public housing financial assistance.
This definition is used for reporting and
tracking by HUD and to ensure that
PHAs and other recipients use their best
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efforts to provide employment
opportunities to the categories of
workers in certain priority categories
established by the Section 3 statute, as
well as to all residents of public housing
projects or Section 8-assisted housing,
and to workers employed by Section 3
business concerns. The definition of a
‘‘Targeted Section 3 worker’’ for subpart
B has an Alternative 1 definition and
Alternative 2 definition to reflect the
option of reporting labor hour or new
hires.
Alternative 1: Would provide that a
Targeted Section 3 worker for subpart B
is a worker employed by a Section 3
business concern, or a worker who
currently is or who was when hired by
the worker’s current employer a resident
in a public housing project or Section 8assisted housing; a resident of other
projects managed by the PHA that is
expending assistance; or a current
YouthBuild participant.
Alternative 2: Would provide that a
Targeted Section 3 worker for subpart B
is a new hire employed by a Section 3
business concern, or a new hire
employed by the worker’s current
employer who is also a resident in a
public housing project or Section 8assisted housing; a resident of other
projects managed by the PHA that is
expending assistance; or a current
YouthBuild participant.
In both alternatives, the definition
focuses on certain targeted categories for
public housing financial assistance.
Additionally, the definition includes all
employees of a Section 3 business
concern to recognize the statutory
requirement for recipients to make best
efforts to award contracts to Section 3
business concerns. The definition also
includes all residents of public housing
projects, as well as residents receiving
project-based or tenant-based Section 8
assistance, and YouthBuild participants
combining these categories allows for a
single, streamlined outcome metric
(labor hours) that reflects both the
employment and contracting
components of the Section 3 statute, as
well as HUD’s desire to incentivize the
employment of all residents who live in
public housing or receive Section 8
assistance, and also in the YouthBuild
program.
The Targeted Section 3 worker
concept is consistent with the goals of
expanding employment opportunities
for particular individuals that receive
federal assistance for housing and of
expanding subcontracting opportunities
for businesses that are owned by or
substantially employ such persons.
The first alternative focuses on labor
hours and includes current employees
and those recently hired by the
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employer. HUD believes that counting
labor hours for employees who are
already employed and qualify as a
Targeted Section 3 worker ensures that
such workers have continued long-term
employment. HUD has also heard from
stakeholders that some employers may
fire and re-hire people, hire people for
very short-term jobs, and engage in
other maneuvering to meet the Section
3 requirements. HUD believes counting
labor hours is consistent with the statute
and mitigates contractors’ ability to
manipulate their Section 3 outcomes.
Section 75.13 would provide PHAs
and other recipients a safe harbor
provided they certify to following the
prioritization in § 75.9 and meet or
exceed the Section 3 benchmarks that
HUD will prescribe through notice. The
safe harbor proposed by this rule, like
the safe harbor provided by the
currently codified rule, would allow for
recipients that meet this standard to be
free from additional Section 3 reporting.
However, this proposed rule also
provides that the safe harbor exists only
to the extent that no evidence to the
contrary is presented to HUD, and that
meeting the safe harbor does not exempt
PHAs and other recipients of public
housing financial assistance from
maintaining records of compliance for
general program review. See §§ 75.31
and 75.33.
This section would also set forth the
process of establishing benchmarks.
HUD proposes to establish Section 3
benchmarks for Section 3 workers,
Targeted Section 3 workers, or both
through a document published in the
Federal Register. The rule would
provide that HUD may establish a single
nationwide benchmark or may establish
multiple benchmarks based on
geography, the type of public housing
financial assistance, or other variables.
When establishing the Section 3
benchmarks, HUD would consider the
industry averages worked by specific
categories of workers or in different
localities or regions; data reported by
PHAs or other recipients of public
housing financial assistance pursuant to
this section; and any other factors HUD
deems important. In establishing the
Section 3 benchmarks, HUD would
exclude professional service contracts
from the benchmark ratios. HUD plans
to update the benchmarks through a
document published in the Federal
Register, subject to public comment, not
less frequently than once every three
years. Providing the benchmark through
Federal Register notice would allow
HUD to revise the benchmarks where
warranted in response to the data HUD
gathers and based on feedback HUD
receives from recipients. Over time, the
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benchmarks can become more tailored
and a more reliable indicator for when
enforcement efforts should be
undertaken, giving the safe harbors
more value and creating a greater
incentive for recipients, contractors, and
subcontractors to exceed the safe
harbors. Section 3 benchmarks will
consist of the following ratios:
Alternative 1: (1) The number of labor
hours worked by Section 3 workers
divided by the total number of labor
hours worked by all workers employed
with public housing financial assistance
in the PHA’s fiscal year; (2) the number
of labor hours worked by Targeted
Section 3 workers, as defined in
§ 75.11(a) 7 divided by the total number
of labor hours worked by all workers
employed with public housing financial
assistance in the PHA’s fiscal year; or (3)
ratios for both (1) and (2).
Alternative 2: (1) The number of new
hires that are Section 3 workers divided
by the total number of new hires
employed with public housing financial
assistance in the PHA’s fiscal year; or (2)
the number of new hires that are
Targeted Section 3 workers, as defined
in § 75.11(a),8 divided by the total
number of new hires employed with
public housing financial assistance in
the PHA’s fiscal year; or (3) ratios for
both (1) and (2).
Section 75.15 proposes the process for
PHAs and other recipients of public
housing financial assistance to report to
HUD on the data for the benchmarks.
Specifically, it requires that the
following be reported:
Alternative 1: The total number of
total labor hours worked with the public
housing financial assistance, labor hours
worked by Section 3 workers, and labor
hours worked by Targeted Section 3
workers. However, the rule would
provide a limited exception where
PHAs and other recipients of public
housing financial assistance could use
the reporting of a good faith assessment
of the labor hours of a full-time or parttime employee from contractors and
subcontractors that have not been
subject to requirements specifying time
and attendance reporting, and do not
have systems already in place to track
labor hours. This small carve-out
provides a limited exception for
recipients to report on the labor hours
from contractors and subcontractors that
do not already track labor hours without
necessitating any change in time and
attendance or payroll systems for the
reporting contractors and
subcontractors. However, it is not a
permanent exemption and if in the
7 This
8 This
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future the contractor or subcontractor is
required to track labor hours pursuant to
some other authority, or begins to
voluntarily track labor hours, the
exception would no longer apply.
Alternative 2: The total number of
new hires with public housing financial
assistance, total number of new hires
that are Section 3 workers, and total
number of new hires that are Targeted
Section 3 workers.
Both Alternative 1 and Alternative 2
would provide that reporting may, but
is not required to, include professional
service jobs. Given the challenges HUD
has heard in hiring Section 3 workers
and Targeted Section 3 workers in
professional service jobs, HUD has
decided not to include those jobs in its
benchmark ratio and instead proposes to
make the reporting of professional
services jobs voluntary. Therefore, if a
PHA, other recipient of public housing
financial assistance, contractor, or
subcontractor has professional service
employees that are Section 3 workers
and Targeted Section 3 workers, the
PHA or other recipient of public
housing financial assistance may report
on those jobs and count them to
increase their total numbers. By
including labor hours for professional
services work in the numerators of these
calculations (i.e., labor hours for the
Section 3 workers and Targeted Section
3 workers), but not in the denominators
(i.e., all labor hours worked), HUD is
also recognizing the value of this more
challenging effort to create
opportunities in the professional
services context.
Section 75.15 would provide that
small PHAs will not be required to
report the number of labor hours or new
hires. Small PHAs would instead be
required to report their qualitative
efforts. PHAs and other recipients of
public housing financial assistance that
do not meet the Section 3 benchmarks
described in § 75.11 would also have to
provide reports on their qualitative
efforts. HUD is considering some of the
following to signify qualitative efforts:
Outreach efforts to generate job
applicants who are Targeted Section 3
workers; direct on-the-job training
(including apprenticeships); indirect
training such as arranging for,
contracting for, or paying tuition for, offsite training technical assistance to help
Section 3 workers; and outreach efforts
to identify and secure bids from Section
3 business concerns. HUD plans to
create a form for tracking and reporting
qualitative efforts, to ease burden on
recipients.
All reporting either under the general
reporting framework or the qualitative
reporting requirement would be on an
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annual basis and reported to HUD in a
manner consistent with reporting
requirements for the applicable HUD
program. HUD believes that requiring
reporting annually, but consistent with
timeframes that PHAs and other
recipients of public housing financial
assistance are already using to submit
documents to HUD, will relieve existing
burden. For example, when an annual
plan is completed for a PHA the Section
3 reporting would be done at that time
or when a recipient of public housing
financial assistance must submit an
annual report. HUD is also looking to
include reporting into existing systems
rather than requiring PHAs and other
recipients to log into and report under
a separate system, such as HUD’s
existing Section 3 Performance
Evaluation and Registration System
(SPEARS).
Section 75.17 would establish
requirements for PHAs and other
recipients of public housing financial
assistance to include language
referencing Section 3 in contracts that
are subject to Section 3. The proposed
rule would provide that PHAs and other
recipients of public housing financial
assistance include contractual language
applying Section 3 to any contractor.
PHAs and other recipients of public
housing financial assistance would also
require that contractors include
contractual language applying Section 3
to any subcontract. Lastly, the section
would provide that regardless of
whether Section 3 language exists in a
contract, PHAs and other recipients of
public housing financial assistance must
ensure the contractors and
subcontractors are in compliance with
§ 75.9. As distinguished from currently
codified § 135.38, this proposed rule
would not codify the exact contractual
language that PHAs and other recipients
of public housing financial assistance
must include and would no longer
require the use of this contract provision
below the initial subcontract level. HUD
believes this will reduce regulatory
burdens. This change does not,
however, limit the requirement that
public housing financial assistance is
used consistent with the statutory
requirements in § 75.9.
Subpart C—Additional Provisions for
Section 3 Projects
Subpart C—Additional Provisions for
Section 3 Projects sets out the
requirements for recipients working on
a Section 3 project, as defined in § 75.3.
The sections include: Requirements
(§ 75.19); Targeted Section 3 worker
definition for Section 3 projects
(§ 75.21); Section 3 safe harbor (§ 75.23);
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Reporting (§ 75.25); and Contract
Provisions (§ 75.27).
Section 75.19 would incorporate the
statutory Section 3 requirements for
prioritizing categories of Section 3
workers and businesses under other
HUD funds that are used for Section 3
projects, as defined in § 75.3(a)(2). The
statutory prioritization ensures that
employment and training opportunities
arising in connection with Section 3
projects are provided, consistent with
existing Federal, state and local laws
and regulations, to Section 3 workers
within the metropolitan area (or
nonmetropolitan county) in which the
project is located to the greatest extent
feasible to these following groups:
(1) Section 3 workers residing within
the service area or the neighborhood of
the project; and
(2) To participants in YouthBuild
programs.
The Section 3 statute also requires
that to the greatest extent feasible
contracts and subcontracts awarded in
connection with Section 3 projects are
provided to Section 3 business concerns
that provide economic opportunities to
Section 3 workers residing within the
metropolitan area (or nonmetropolitan
county) in which the project is located.
Those efforts should be directed as
follows:
(1) Section 3 Business concerns that
provide economic opportunities for
Section 3 workers residing within the
service area or the neighborhood of the
project; and
(2) YouthBuild programs.
For the purposes of Section 3 only,
HUD would define ‘‘Service area or the
neighborhood of the project’’ to mean an
area within 1 mile of the Section 3
project or, if fewer than 5,000 people
live within one mile of a Section 3
project, within a circle centered on the
Section 3 project that is sufficient to
encompass a population of 5,000 people
according to the most recent U.S.
Census. HUD notes above that
consistent with existing Federal
regulations, Federal procurement
requirements at 2 CFR 200.319(a) must
continue to be followed, as discussed
above.
Section 75.21 would define a
‘‘Targeted Section 3 worker’’ for Section
3 projects. This definition would be
used for reporting and tracking by HUD
so that recipients will focus on reaching
the priority workers in the statute and
workers employed by Section 3 business
concerns. HUD would define a
‘‘Targeted Section 3 worker’’ for subpart
C as a worker employed by a Section 3
business concern, or a worker who is or
was when hired by the worker’s current
employer: (1) A Section 3 worker living
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within the service area or the
neighborhood of the project, as this term
is described in § 75.5; or (2) a current
YouthBuild participant. As with the
definition of ‘‘Targeted Section 3
worker’’ for PHAs and other recipients
of public housing financial assistance,
this definition would include current
YouthBuild participants. Additionally,
all employees of Section 3 business
concerns would be considered Targeted
Section 3 workers to recognize the
statutory requirements to award
contracts to Section 3 business
concerns, to the greatest extent feasible,
while providing for a single,
streamlined outcome metric (labor
hours) that reflects both the
employment and contracting
components of the Section 3 statute.
HUD believes counting individuals
who live within one mile of the
worksite or within a circle centered
around the worksite that encompasses
5,000 people provides a definitive
means of determining who counts as a
Targeted Section 3 worker within the
service area or the neighborhood of the
project. HUD proposes to use this 5,000person figure because HUD examined
current CPD projects and determined
that most (77%) had a population of
5,000 people within one mile of the
project site, and the median project had
4,627 potential Targeted Section 3
workers. Further, an individual could
live across the street from a project and
be differently affected by development
activities, and still not be considered to
be living in the same ‘‘neighborhood’’ as
a project because of how the
jurisdiction’s neighborhood boundaries
are drawn. HUD plans to create and
provide at the issuance of a final rule a
web tool for recipients, subrecipients,
contractors, and subcontractors that will
help in determining the geographic area
that encompasses Targeted Section 3
workers under this definition. The
discussion in subpart B of this preamble
pertaining to the YouthBuild program
and participants applies for subpart C as
well.
Section 75.23 would provide a
recipient undertaking a Section 3
project a safe harbor provided the
recipient certifies to following the
prioritization in § 75.19 and meets or
exceeds the Section 3 benchmarks that
HUD will prescribe through notice. The
safe harbor proposed by this rule, like
the safe harbor provided by the
currently codified rule, would allow for
recipients that meet this standard to be
free from additional Section 3 reporting.
However, this proposed rule provides
that the safe harbor exists only to the
extent that no evidence to the contrary
is presented to HUD, and that meeting
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the safe harbor does not exempt
recipients from maintaining records of
compliance for general program review.
See §§ 75.31 and 75.33.
This section would also establish the
process of establishing benchmarks,
consistent with subpart B. Similar to the
process for establishing the benchmarks
for public housing financial assistance
under subpart B, HUD proposes to
establish Section 3 benchmarks for
Section 3 workers, Targeted Section 3
workers, or both through a document
published in the Federal Register.
Section 75.25 would provide the
reporting requirements for Section 3
projects by recipients to HUD for the
benchmarks. Specifically, § 75.25 would
require that the total number of total
labor hours, labor hours worked by
Section 3 workers, and labor hours
worked by Targeted Section 3 workers
on a Section 3 project be reported to
HUD. However, the rule would provide
a limited exception for recipients, and
for subrecipients, contractors, and
subcontractors that report up to
recipients, that are not subject to
requirements specifying time and
attendance reporting. The rule does not
require any change in the time and
attendance, or payroll systems used by
recipients, subrecipients, contractors, or
subcontractors. Where labor hours of a
full-time or part-time employee are not
already tracked, this proposed rule
would allow the recipient to report
labor hours of those employees based on
a good faith assessment. This small
carve-out would apply in a limited
situation and was created not to
increase burden on recipients,
subrecipients, contractors, and
subcontractors that are not tracking
labor hours. However, if in the future
the recipient, subrecipient, contractor,
or subcontractor is required to track
labor hours, or does so voluntarily, the
exception would no longer apply. This
section also, consistent with § 75.15 in
subpart B, would provide that Section 3
project recipients may, but are not
required to, report professional service
jobs. Therefore, if a Section 3 project has
labor hours for professional service
employees that are Section 3 workers
and Targeted Section 3 workers, the
recipient may, but is not required to,
report on those jobs and count them to
increase their total numbers. By
including labor hours for professional
services work in the numerators of these
calculations (i.e., labor hours for the
Section 3 workers and Targeted Section
3 workers), but not in the denominators
(i.e., all labor hours worked), HUD is
also recognizing the value of this more
challenging effort to create
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opportunities in the professional
services context.
Section 75.25 would also provide that
a recipient that does not meet the
Section 3 benchmarks described in
§ 75.21 would be required to report on
its qualitative efforts. HUD is
considering some of the following to
signify qualitative efforts: Outreach
efforts to generate job applicants who
are Targeted Section 3 workers; direct
on-the job training (including
apprenticeships); indirect training such
as arranging for, contracting for, or
paying tuition for, off-site training
technical assistance to help Section 3
workers; and outreach efforts to identify
and secure bids from Section 3 business
concerns. HUD plans to provide a form
for ease in reporting qualitative
reporting. All reporting either under the
general reporting framework or the
qualitative reporting requirement must
be submitted annually to HUD in a
manner consistent with reporting
requirements for the applicable HUD
program. As discussed in this preamble,
HUD believes that requiring reporting
consistent with existing reports will
decrease administrative burden on
recipients, and HUD will continue to
look for ways to streamline reporting in
other ways, such as using existing
program-specific reporting systems. The
proposed rule further allows projects to
be reported on a project-by-project basis,
with each annual report reflecting
projects completed within the reporting
year.
Section 75.27 would establish
contract requirements for Section 3
project recipients. Specifically, the
proposed rule would require that a
recipient of a Section 3 project include
language applying Section 3 to any
subrecipient agreement, program
regulatory agreement, or contract for a
Section 3 project. The proposed rule
would also require that recipients of
Section 3 projects ensure that
subrecipients, contractors, and
subcontractors meet the requirements in
§ 75.19. As noted in this preamble, HUD
is not codifying the language that
recipients and contractors working on
Section 3 projects are required to
include in subrecipient agreements and
subcontracts and is limiting the
requirement to include language only to
the contract level. HUD believes these
changes will reduce the burden on the
regulated entity, but HUD notes that it
does not change the requirement that
Section 3 project hiring must be
consistent with the statutory
requirements in § 75.19.
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Subpart D—Provisions for Multiple
Funding Sources, Recordkeeping, and
Compliance
Subpart D sets out the requirements
for recipients of multiple types of HUD
financial assistance subject to Section 3.
The sections include compliance
requirement for recipients when in
receipt of multiple funding sources
(§ 75.29); recordkeeping requirements
(§ 75.31); and compliance requirements
(§ 75.33).
Section 75.29 would provide
requirements for recipients to follow
when in receipt of multiple funding
sources. Section 75.29(a) would provide
that if a housing rehabilitation, housing
construction, or other public
construction project is subject to Section
3 requirements pursuant to both § 75.3,
paragraphs (a)(1) and (2), the recipient
must follow subpart B of this proposed
rule for the public housing financial
assistance funds and may follow either
subpart B or subpart C for the housing
and community development financial
assistance funds. For example, when a
PHA receives public housing financial
assistance and a community
development block grant for a project to
build a playground, the PHA can follow
either option in paragraph (a) for the
community development block grant
funds to comply with Section 3
requirements. For the funding under
§ 75.3(a)(2), a Targeted Section 3 worker
is any worker who meets the definition
of a Targeted Section 3 worker in either
subpart B or subpart C of this part. As
with other sections in the rule, § 75.29
provides two different alternatives
depending on whether PHAs will be
required in a final rule to report using
labor hours or new hires. If the final rule
provides for the use of new hires for
public housing financial assistance,
when multiple funding sources are used
PHAs would be required to report both
labor hours and new hires.
The section also proposes in
paragraph (b) that if a housing
rehabilitation, housing construction, or
other public construction project is
subject to Section 3 pursuant to
multiple housing and community
development financial assistance
programs, the recipient or recipients
must follow subpart C of this part and
report to one HUD program office, as
prescribed by HUD. This section will
make the application of Section 3
requirements easier for recipients that
work with multiple funding sources and
ease reporting burden. For example,
when CDBG funds and a Lead Hazard
Control grant are combined, the
recipients would follow the paragraph
(b) requirements to comply with Section
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3 requirements. In this case, HUD would
designate reporting to only one program
office.
Section 75.31 would require that HUD
be provided access to records, reports,
and other documents or items that are
maintained to demonstrate compliance
with the requirements of this part, or
that are maintained in accordance with
the regulations governing the specific
HUD program. This section also
provides directions on what
documentation must be maintained for
Section 3 workers and Targeted Section
3 workers. For a Section 3 worker, the
recipient would be required to maintain
certification, or ensure that a
subrecipient, contractor, or
subcontractor that employs the worker
maintains certification that the worker
either meets the income limit
established by HUD, the worker
participates in a means-tested program
such as public housing or Section-8
assisted housing, that the worker’s
residency is in a qualified census tract
or that the worker is employed by a
Section 3 business.
For a Targeted Section 3 worker, the
recipient subject to subpart B must
maintain certification, or ensure that a
contractor or subcontractor that employs
the worker maintains certification that
the worker resides in public housing or
Section-8 assisted housing or the worker
is employed by a Section 3 business. A
third option under Alternative 1 and 2
is a certification that the employee is a
YouthBuild participant.
For a Targeted Section 3 worker, the
recipient subject to subpart C would be
required to maintain a certification, or
ensure that a subrecipient, contractor, or
subcontractor that employs the worker
maintains certification that the worker’s
residence is within 1 mile of the work
site or, if fewer than 5,000 people live
within 1 mile of a work site, within a
circle centered on the work site that is
sufficient to encompass a population of
5,000 people according to the most
recent U.S. Census; that the worker is
employed by a Section 3 business; or
that the worker is a YouthBuild
participant. This section also requires
that documentation is maintained for
the time period required for record
retentions in accordance with
applicable program regulations, or in
the absence of applicable program
regulations, 2 CFR part 200.
Section 75.33 proposes the
compliance requirements for recipients.
It would require that records
demonstrating compliance be
maintained and provides that HUD
would conduct compliance and
enforcement actions in conjunction with
normal program oversight. It also notes
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that complaints alleging failure of
compliance with part 75 may be
reported to the HUD program office
responsible for the public housing
financial assistance or Section 3 project.
HUD believes that the Section 3
requirements should be handled
consistent with other program
requirements that a recipient is subject
to when accepting HUD funds. As
result, this proposed rule provides that
while HUD would monitor compliance
with the requirements, the applicable
HUD program office would determine
appropriate methods by which to
oversee Section 3 compliance. HUD
would be able to impose appropriate
remedies and sanctions in accordance
with the laws and regulations for the
program under which the violation was
found. HUD would continue to compile
the information in a report on all
expenditures subject to Section 3 for
release to the public, and HUD believes
providing for a program-specific
implementation, while maintaining
consistent review processes across
programs, will ease burden on the
entities subject to the Section 3
requirements.
III. Specific Questions for Comment
While HUD welcomes comments on
all aspects of this proposed rule, HUD
specifically requests comments on the
following:
1. HUD seeks comments on the use of
the statutory terms ‘‘best efforts’’ and
‘‘greatest extent feasible’’ in this
proposed rule. Specifically, HUD seeks
comments on whether this proposed
rule should define these terms, whether
the two terms should be considered
interchangeable, whether only one term
should be used, how the proposed rule
should apply these terms relative to
HUD’s efforts to increase employment
and training opportunities for low- and
very low-income persons, and how
recipients can most effectively/
efficiently demonstrate they have
satisfied these definitions in reporting to
HUD. In accordance with the Section 3
statute, both HUD’s existing Section 3
rule and this proposed rule do not
provide an absolute mandate that
employers hire Section 3 workers or that
HUD funding recipients provide
contracting opportunities to Section 3
businesses. Such a mandate would be
infeasible, as there could be situations
where no Section 3 workers or
businesses are available or are qualified.
However, HUD emphasizes its intention
that the terms ‘‘best efforts’’ and
‘‘greatest extent feasible’’ should be read
as very narrow qualifiers and seeks
comment on how to best convey that.
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As background, HUD’s existing
Section 3 rule provides that
employment and other economic
opportunities generated by certain HUD
financial assistance must be directed to
low and very low-income persons to the
greatest extent feasible. The term ‘‘best
efforts’’ is not used in the existing rule.
This proposed rule contains
requirements that more closely track the
language of the Section 3 statute. Under
this proposed rule, PHAs and other
recipients receiving public housing
financial assistance and their
contractors and subcontractors must
make their ‘‘best efforts’’ to provide
employment and training opportunities
generated by the public housing
financial assistance to Section 3 workers
in the statutorily-mandated order of
priority, and must make their ‘‘best
efforts’’ to award contracts and
subcontracts to business concerns that
provide economic opportunities to
Section 3 workers in the statutorilymandated order of priority. Also,
following the Section 3 statute, this
proposed rule would provide that: To
the ‘‘greatest extent feasible,’’ recipients
of funds in other HUD programs that
provide housing and community
development assistance must ensure
that employment and training
opportunities arising in connection with
Section 3 projects are provided to
Section 3 workers within the
metropolitan area (or nonmetropolitan
county) in which the project is located,
and where feasible, priority should be
given to specific categories of Section 3
workers; and contracts for work
awarded in connection with Section 3
projects should be provided to Section
3 business concerns that provide
economic opportunities to Section 3
workers residing within the
metropolitan area (or nonmetropolitan
county) in which the project is located,
to the ‘‘greatest extent feasible.’’
2. HUD specifically requests
comments on the proposal to move to
labor hours or retain new hires for
public housing financial assistance
reporting and tracking. As discussed
above, HUD believes that tracking labor
hours consistent with existing tracking
for prevailing wage requirements would
reduce burden on recipients. HUD also
believes that tracking labor hours will
better allow HUD to determine if longterm employment opportunities are
being generated. Unlike a labor hours
measure, the new hire measure does not
consider the share of actual work done
by low- and very low-income workers,
and new Section 3 hires may not be
given the opportunity to work a
substantial number of hours. By using a
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new hire measure, the Section 3
obligation is fulfilled by hiring Section
3 workers for jobs of any duration,
rather than prioritizing opportunities for
sustained employment. Additionally,
using a new hire measure explicitly
values entry rather than retention of
workers, and thus provides an incentive
for high turnover. While HUD believes
that using labor hours for all financial
assistance subject to Section 3
requirements will reduce burden, HUD
has heard from some PHAs that they
may prefer to maintain the use of new
hires. HUD requests those PHAs provide
feedback on why maintaining the new
hire framework is a benefit. HUD seeks
comments from PHAs on alternative 2
regulatory language that would retain
the new hire framework for tracking
public housing financial assistance, but
with the same benchmarking
requirements that are in this proposed
rule. HUD also seeks comments on how
retaining new hires for public housing
financial assistance while using labor
hours for Section 3 projects will work
for recipients, contractors, and
subcontractors, especially for those who
work with multiple funding sources.
3. As discussed in this preamble, this
proposed rule would set the threshold
for applicability of Section 3
requirements for Section 3 projects to
when the amount of the assistance to
the project exceeds $200,000. HUD also
provides that all projects that receive
funding from HUD’s Lead Hazard
Control and Healthy Homes programs
are covered, and notes that Section 8
programs were not included in the
Section 3 statute and are not covered in
this rule. HUD seeks comment on
whether an alternate threshold would be
more appropriate or equally effective to
the proposed $200,000 per project
threshold. HUD also seeks comment on
the inclusion of all projects under the
HUD’s Lead Hazard Control and Healthy
Homes programs and exclusion of
Section 8 programs.
In addition to seeking comments on
an appropriate per project threshold,
HUD seeks comments on whether the
threshold for Section 3 projects should
be established by project, total funding
received by the recipient, or whether the
threshold should be based on total
funds expended by a recipient.
Establishing a project threshold has
advantages in that it ties Section 3
obligations to the specific projects that
are generating economic opportunities.
However, HUD understands that there
may be disadvantages to using a
threshold based on project size. The
term ‘‘project’’ is defined differently by
different HUD programs, which could
make a uniform application of this rule
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13189
difficult. Also, recipients might be able
to change the scope of what would be
considered a ‘‘project’’ to avoid
compliance with Section 3.
If HUD were to use a threshold based
on total funding a recipient receives,
rather than a per-project threshold, HUD
seeks comment on whether the $200,000
threshold included in this proposed rule
should be maintained, or whether the
rule should adopt a different threshold.
Using the $200,000 threshold as
proposed in this rule, HUD estimates
that less than 4 percent of grantees
receiving funds from HUD’s Office of
Community Planning and Development
Program will be exempt from Section 3,
and less than 0.1 percent of total awards
will be exempt. Applying a larger
recipient threshold, such as $400,000,
would increase the number of recipients
exempted from Section 3 requirements
to 20 percent and only increase the
amount of funding exempt from Section
3 coverage to 1.5 percent. This would
significantly reduce compliance burden
from the current rule for smaller
grantees without significantly reducing
the funds subject to Section 3.
4. HUD seeks comment on HUD’s
proposal to include hours worked by
Section 3 business employees in the
Targeted Section 3 Worker definitions
as a way to report all Section 3 activities
in a single metric rather than reporting
on Section 3 business concern
participation separately through the
existing aggregate dollars spent
calculation. HUD also seeks comment
on whether the changes to the Section
3 business concern definition are
appropriate to the proposed new
framework, especially the change that to
qualify as a Section 3 business over 75
percent of the labor hours performed for
the business must be performed by lowor very low-income persons versus the
current requirement that 30 percent of
permanent, full-time employee, include
persons who are currently Section 3
residents, or within 3 years of the date
of first employment with the business
concern were Section 3 residents.
5. As explained by this preamble, this
proposed rule would provide that small
PHAs would not be required to report
labor hour or new hire figures to HUD.
HUD seeks comment on whether small
PHAs should be required to report as
other PHAs are if they put out a bid for
a single procurement that exceeds the
project threshold discussed in the above
paragraph.
6. HUD seeks comments on whether
Section 3 requirements, as it applies to
Section 3 projects, should apply to all
subcontractors, and whether at a certain
level HUD should consider reducing the
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reporting or compliance burden for
subcontractors.
7. HUD requests comment on whether
its initial and future benchmarks should
include benchmarks for both the
number of labor hours worked by
Section 3 workers divided by the total
number of labor hours for all workers
and the number of labor hours worked
by Targeted Section 3 workers divided
by the total number of labor hours for
all workers. Alternatively, HUD seeks
comment on limiting the benchmark to
include Targeted Section 3 workers
only.
8. For Section 3 projects, the statute
requires that ‘‘where feasible, priority
should be given to low- and very lowincome persons residing within the
service area of the project or the
neighborhood in which the project is
located.’’ The statute does not define
‘‘neighborhood’’ or ‘‘service area’’ for
purposes of how recipients determine
where they should focus their
prioritization. The lack of definitions
complicates compliance for contractors,
subcontractors, and grantees receiving
multiple types of HUD financial
assistance. HUD proposes to provide a
definition for recipients to use when
prioritizing and reporting workers for
Section 3 projects. The definition differs
from existing regulatory definitions and
local or state definitions, and HUD
specifically requests comment on
whether the definition works for
recipients or if a different definition for
‘‘neighborhood’’ or ‘‘service area’’ is
needed for purposes of Section 3. HUD
also asks whether the 1 mile and 5,000
population radius is an appropriate
geographic size of a ‘neighborhood’ or
‘service area’.
9. HUD provides that a Targeted
Section 3 worker includes current
YouthBuild participants and asks
whether that definition should be
expanded to include previous
YouthBuild workers that are under 24
years of age or those who are still
eligible to participate in YouthBuild,
but may have graduated out of the
program.
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IV. Findings and Certifications
Regulatory Review—Executive Orders
12866 and 13563
Under Executive Order 12866
(Regulatory Planning and Review), a
determination must be made whether a
regulatory action is significant and,
therefore, subject to review by the Office
of Management and Budget (OMB) in
accordance with the requirements of the
order. Executive Order 13563
(Improving Regulations and Regulatory
Review) directs executive agencies to
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analyze regulations that are ‘‘outmoded,
ineffective, insufficient, or excessively
burdensome, and to modify, streamline,
expand, or repeal them in accordance
with what has been learned.’’ Executive
Order 13563 also directs that, where
relevant, feasible, and consistent with
regulatory objectives, and to the extent
permitted by law, agencies are to
identify and consider regulatory
approaches that reduce burdens and
maintain flexibility and freedom of
choice for the public.
This rule was determined to be a
‘‘significant regulatory action’’ as
defined in Section 3(f) of the order
(although not an economically
significant regulatory action under the
order). Consistent with Executive Order
13563, this rule creates new part 75
regulations that would replace the part
135 regulations, with the intention to
make compliance with Section 3 more
effective and less burdensome, and
therefore, help to contribute to job
creation for low- and very low-income
persons. As noted earlier in this
preamble, HUD has prepared an initial
Regulatory Impact Analysis (RIA) that
addresses the costs and benefits of the
proposed rule. HUD’s RIA is part of the
docket file for this rule.
The docket file is available for public
inspection in the Regulations Division,
Office of the General Counsel, Room
10276, 451 7th Street SW, Washington,
DC 20410–0500. Due to security
measures at the HUD Headquarters
building, please schedule an
appointment to review the docket file by
calling the Regulations Division at 202–
402–3055 (this is not a toll-free
number). Individuals with speech or
hearing impairments may access this
number via TTY by calling the Federal
Relay Service at toll-free 800–877–8339.
Environmental Impact
The proposed rule does not direct,
provide for assistance or loan and
mortgage insurance for, or otherwise
govern or regulate, real property
acquisition, disposition, leasing,
rehabilitation, alteration, demolition, or
new construction, or establish, revise, or
provide for standards for construction or
construction materials, manufactured
housing, or occupancy. Accordingly,
under 24 CFR 50.19(c)(1), this proposed
rule is categorically excluded from
environmental review under the
National Environmental Policy Act of
1969 (42 U.S.C. 4321).
Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act
of 1995 (2 U.S.C. 1531–1538) (UMRA)
establishes requirements for Federal
agencies to assess the effects of their
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regulatory actions on State, local, and
tribal governments and on the private
sector. This proposed rule does not
impose a Federal mandate on any state,
local, or tribal government, or on the
private sector, within the meaning of
UMRA.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) generally requires an
agency to conduct a regulatory
flexibility analysis of any rule subject to
notice and comment rulemaking
requirements, unless the agency certifies
that the rule will not have a significant
economic impact on a substantial
number of small entities. As has been
discussed in this preamble, this rule
proposes to update HUD’s Section 3
regulations and replace them with a
new 24 CFR part 75, for which the
objective is to increase employment
opportunities for low- and very lowincome persons and businesses that are
owned by or employ such persons.
These entities generally are small and
therefore strengthening the
requirements of Section 3 should benefit
small businesses that are Section 3
businesses. This rule also considers the
burden on small PHAs, defined in this
proposed rule as a public housing
authority that manages or operates fewer
than 250 public housing units, and
reduces the burden on them through a
new streamlined reporting process that
would not require them to report labor
hours or new hires. There are
approximately 2,950 PHAs, of which
approximately 2,250 are small.
As more fully discussed in the
accompanying RIA, the number of
economic opportunities generated for
Section 3 residents and businesses will
not increase to the degree that this rule
would have a significant economic
impact on a substantial number of small
entities. In addition, for those small
entities that must comply with this
proposed rule, the changes made by this
proposed rule are designed to reduce
burden on them, as well as all
recipients. The current recordkeeping
and reporting requirements for Section
3 is 90,180 hours with a cost of
$1,817,000. HUD estimated that this
new rule will reduce the number of
hours by 68 percent to 25,910 hours.
The biggest reduction will be for small
PHAs that will no longer need to do
quantitative analysis with a total
estimated time saving of 12,375 hours
with a cost of $281,036, or
approximately $125 for small PHAs.
HUD also anticipates an across the
board savings in recordkeeping given
the time savings resulting from less time
reporting new hires as a separate metric.
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For these reasons, HUD has determined
that this rule would not have a
significant economic impact on a
substantial number of small entities.
Notwithstanding HUD’s determination
that this rule will not have a significant
effect on a substantial number of small
entities, HUD specifically invites
comments regarding any less
burdensome alternatives to this rule that
will meet HUD’s objectives as described
in this preamble.
Executive Order 13132, Federalism
Executive Order 13132 (entitled
‘‘Federalism’’) prohibits an agency from
publishing any rule that has federalism
implications if the rule either: (1)
Imposes substantial direct compliance
costs on State and local governments
and is not required by statute, or (2)
preempts State law, unless the agency
meets the consultation and funding
requirements of Section 6 of the
Executive Order. This proposed rule
does not have federalism implications
and does not impose substantial direct
compliance costs on State and local
governments nor preempt state law
within the meaning of the Executive
Order.
Paperwork Reduction Act
Currently, 24 CFR part 135 requires
that all recipients track and report
Section 3 information to HUD, includes
prescriptive contractual language,
requires compliance by contractors of
the Section 3 requirements, contains
reporting and recordkeeping
requirements, and provides for the filing
of Section 3 complaints. Section 3
Performance Evaluation and
Registration System (SPEARS) is the
main site in which HUD captures the
number of Section 3 residents hired and
the amount of contracts awarded to
Section 3 businesses. The existing
information collection requirement for
these requirements has been approved
by the Office of Management and
Number of
respondents
Information collection
jbell on DSK30RV082PROD with PROPOSALS
Budget (OMB) under the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501–
3520) and assigned OMB control
number 2529–0043.
The proposed rule would change the
existing reporting requirement to
decrease qualitatively those who need to
report, excluding small PHAs and
recipients of Section 3 projects under
the $200,000 threshold, and require
reporting only once a year by recipients
of completed projects. HUD provides in
§§ 75.15 and 75.25 that recipients would
be required to submit reports to HUD
annually either in a qualitative form or
quantitative form. HUD includes all the
large PHAs in the § 75.15(a) reporting
number for reporting on the Section 3
benchmarks and estimates 2 hours to
track and report annually given the
amount of funds handled by these
PHAs. HUD also estimates that a PHA
will employ approximately seven
contractors or subcontractors each fiscal
year that would need to track and report
up to the PHA, each at one-half an hour
for reporting time. Lastly, HUD
estimates that 5 percent of the 700 large
PHAs may fail the Section 3
benchmarks and would need to report
on their qualitative efforts along with
the 2,250 small PHAs and estimates that
such reporting would take one-half an
hour.
As for § 75.25(a), HUD estimates that
66 percent of most program recipients
would complete projects in a fiscal year
that need to be reported except that for
the HOME program, HUD estimates that
90 percent of HOME recipients would
complete projects in a fiscal year, at an
estimate of 3,600 recipients. Given these
projects are more diverse in size, HUD
estimates that the average time to report
on the Section 3 benchmarks for
recipients would be 1 hour. HUD also
estimates that a Section 3 project will
engage approximately five contractors or
subcontractors each fiscal year that
would also need to track and report up
to the Section 3 project recipient, each
§ 75.15(a) Labor Hour or New Hire Reporting for PHA .....................................
§ 75.15(a) Labor Hour or New Hire Reporting for Contractors or Subcontractors of PHAs .........................................
§ 75.15(b)–(d) Qualitative Reporting for
PHAs ....................................................
§ 75.25(a) Labor Hour Reporting for Section 3 Projects ......................................
§ 75.25(a) Labor Hour Reporting for Contractors and Subcontractors on Section
3 Projects .............................................
§ 75.25(b) Qualitative Reporting for Section 3 Projects ......................................
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PO 00000
Frequency
of response
per annum
Burden
hour per
response
13191
at one-half an hour for reporting time.
Lastly, HUD estimates that 5 percent of
the 3,600 recipients may fail the Section
3 benchmarks and would need to report
on their qualitative efforts and estimates
that such reporting would take one-half
an hour.
HUD also notes that the rule no longer
requires the inclusion of prescriptive
contractual language. See §§ 75.17 and
75.27. HUD believes that this change
will result in a de minimis upfront
burden related to updating contracts, if
recipients, subrecipients and contractors
chose to do so, but that removing the
requirement will actually reduce burden
on recipients, subrecipients, and
contractors on a sustained basis by
giving them flexibility to use alternative
or existing contractual language. HUD
also provides for recordkeeping
requirements at § 75.31 and believes
that the maintaining of records by
recipients will take a recipient
approximately 2 hours. However, HUD
notes that some programs, such as
HOME, already have recordkeeping
requirements that are part of existing
approved Information Collection
Requests and, thus, excludes those
programs from the burden matrix.
Lastly, HUD maintains the option for
individuals to file complaints and
retains the frequency number that was
in the existing Section 3 reporting
burden.
In accordance with the Paperwork
Reduction Act, an agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information, unless the collection
displays a currently valid OMB control
number. The current recordkeeping
requirements for Section 3 is 90,180
hours with a cost of $1,817,000. HUD
estimates that this new rule will reduce
the number of hours by 68 percent to
25,910 hours for a total cost savings of
approximately $1.2 million. The overall
reporting and recordkeeping burden is
estimated as follows:
Annual burden
hours
Hourly cost
per response
Annual cost
700
1
2
1,400
$22.71
$31,794.00
4,900
1
0.5
2,450
22.71
55,639.50
2,300
1
0.5
1,150
22.71
26,116.50
3,600
1
1
3,600
22.71
81,756.00
10,800
1
0.5
5,400
22.71
122,634.00
180
1
0.5
90
22.71
2,043.90
Frm 00049
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jbell on DSK30RV082PROD with PROPOSALS
Frequency
of response
per annum
Number of
respondents
Information collection
Burden
hour per
response
Annual burden
hours
Hourly cost
per response
Annual cost
§ 75.31 Recordkeeping ............................
§ 75.33 Complaints ..................................
5,900
20
1
1
2
1
11,800
20
22.71
10.00
267,978.00
200.00
Total ..................................................
........................
........................
........................
25,910.00
........................
588,161.90
In accordance with 5 CFR
1320.8(d)(1), HUD is soliciting
comments from members of the public
and affected agencies concerning the
information collection requirements in
the proposed rule regarding:
(1) Whether the proposed collection
of information is necessary for the
proper performance of the functions of
the agency, including whether the
information will have practical utility;
(2) The accuracy of the agency’s
estimate of the burden of the proposed
collection of information;
(3) Whether the proposed collection
of information enhances the quality,
utility, and clarity of the information to
be collected; and
(4) Whether the proposed information
collection minimizes the burden of the
collection of information on those who
are to respond; including through the
use of appropriate automated collection
techniques or other forms of information
technology (e.g., permitting electronic
submission of responses).
Interested persons are invited to
submit comments regarding the
information collection requirements in
this rule. The proposed information
collection requirements in this rule have
been submitted to OMB for review
under section 3507(d) of the Paperwork
Reduction Act. Under the provisions of
5 CFR part 1320, OMB is required to
make a decision concerning this
collection of information between 30
and 60 days after the publication date.
Therefore, a comment on the
information collection requirements is
best assured of having its full effect if
OMB receives the comment within 30
days of the publication. This time frame
does not affect the deadline for
comments to the agency on the
proposed rule, however. Comments
must refer to the proposed rule by name
and docket number (FR–6085) and must
be sent to:
HUD Desk Officer, Office of
Management and Budget, New
Executive Office Building,
Washington, DC 20503, Fax number:
202- 395–6947, and
Colette Pollard, HUD Reports Liaison
Officer, Department of Housing and
Urban Development, 451 7th Street
SW, Room 2204, Washington, DC
20410
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Interested persons may submit
comments regarding the information
collection requirements electronically
through the Federal eRulemaking Portal
at https://www.regulations.gov. HUD
strongly encourages commenters to
submit comments electronically.
Electronic submission of comments
allows the commenter maximum time to
prepare and submit a comment, ensures
timely receipt by HUD, and enables
HUD to make them immediately
available to the public. Comments
submitted electronically through the
https://www.regulations.gov website can
be viewed by other commenters and
interested members of the public.
Commenters should follow the
instructions provided on that site to
submit comments electronically.
List of Subjects
24 CFR Part 5
Administrative practice and
procedure, Aged, Claims, Crime,
Government contracts, Grant programshousing and community development,
Individuals with disabilities,
Intergovernmental relations, Loan
programs-housing and community
development, Low- and moderateincome housing, Mortgage insurance,
Penalties, Pets, Public housing, Rent
subsidies, Reporting and recordkeeping
requirements, Social security,
Unemployment compensation, Wages.
24 CFR Part 14
Claims, Equal access to justice,
Lawyers, Reporting and recordkeeping
requirements.
24 CFR Part 75
Administrative practice and
procedure, Community development,
Government contracts, Grant
programs—housing and community
development, Housing, Loan
programs—housing and community
development, Reporting and
recordkeeping requirements, Small
businesses.
24 CFR Part 91
Aged, Grant programs-housing and
community development, Homeless,
Individuals with disabilities, Low- and
moderate-income housing, Reporting
and recordkeeping requirements.
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24 CFR Part 92
Administrative practice and
procedure, Low- and moderate-income
housing, Manufactured homes, Rent
subsidies, Reporting and recordkeeping
requirements.
24 CFR Part 93
Administrative practice and
procedure, Grant programs-housing and
community development, Low- and
moderate-income housing,
Manufactured homes, Rent subsidies,
Reporting and recordkeeping
requirements.
24 CFR Part 135
Administrative practice and
procedure, Community development,
Equal employment opportunity,
Government contracts, Grant
programs—housing and community
development, Housing, Loan
programs—housing and community
development, Reporting and
recordkeeping requirements, Small
businesses.
24 CFR Part 266
Intergovernmental relations, Low- and
moderate-income housing, Mortgage
insurance, Reporting and recordkeeping
requirements.
24 CFR Part 570
Administrative practice and
procedure, American Samoa,
Community development block grants,
Grant programs—education, Grant
programs-housing and community
development, Guam, Indians, Loan
programs—housing and community
development, Low- and moderateincome housing, Northern Mariana
Islands, Pacific Islands Trust Territory,
Puerto Rico, Reporting and
recordkeeping requirements, Student
aid, Virgin Islands.
24 CFR Part 576
Community facilities, Grant
programs—housing and community
development, Grant programs—social
programs, Homeless, Reporting and
recordkeeping requirements.
24 CFR Part 578
Community development,
Community facilities, Grant programs—
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housing and community development,
Grant programs—social programs,
Homeless, Reporting and recordkeeping
requirements.
24 CFR Part 905
Grant programs—housing and
community development, Public
housing, Reporting and recordkeeping
requirements.
24 CFR Part 964
Grant programs—housing and
community development, Public
housing, Reporting and recordkeeping
requirements.
24 CFR Part 983
Grant programs—housing and
community development, Low- and
moderate-income housing, Rent
subsidies, Reporting and recordkeeping
requirements.
24 CFR Part 1000
Aged, Community development block
grants, Grant programs—housing and
community development, Grant
programs—Indians, Indians, Individuals
with disabilities, Public housing,
Reporting and recordkeeping
requirements.
Accordingly, for the reasons described
in the preamble, HUD proposes to
amend 24 CFR parts 5, 14, 75, 91, 92,
93, 135, 266, 570, 576, 578, 905, 964,
983, and 1000 as follows:
PART 5—GENERAL HUD PROGRAM
REQUIREMENTS; WAIVERS
[Amended]
2. Amend § 5.105(a) by removing ‘‘;
section 3 of the Housing and Urban
Development Act of 1968 (12 U.S.C.
1701u) and implementing regulations at
24 CFR part 135.’’
■
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PART 14—IMPLEMENTATION OF THE
EQUAL ACCESS TO JUSTICE ACT IN
ADMINISTRATIVE PROCEEDINGS
3. The authority for part 14 continues
to read as follows:
Authority: 5 U.S.C. 504(c)(1); 42 U.S.C.
3535(d).
§ 14.115
[Amended]
4. Amend § 14.115 by removing and
reserving paragraph (a)(5).
■
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PART 75—ECONOMIC
OPPORTUNITIES FOR LOW- AND
VERY LOW–INCOME PERSONS
Sec.
Subpart A—General Provisions
75.1 Purpose.
75.3 Applicability.
75.5 Definitions.
75.7 Requirements applicable to HUD
NOFAs for Section 3 covered programs.
Subpart B—Additional Provisions for Public
Housing Financial Assistance
75.9 Requirements.
75.11 Targeted Section 3 worker for public
housing financial assistance.
75.13 Section 3 safe harbor.
75.15 Reporting.
75.17 Contract provisions.
Subpart C—Additional Provisions for
Housing and Community Development
Financial Assistance
75.19 Requirements.
75.21 Targeted Section 3 worker for
housing and community development
financial assistance.
75.23 Section 3 safe harbor.
75.25 Reporting.
75.27 Contract provisions.
Subpart D—Provisions for Multiple Funding
Sources, Recordkeeping, and Compliance
75.29 Multiple funding sources.
75.31 Recordkeeping.
75.33 Compliance.
Authority: 12 U.S.C. 1701u; 42 U.S.C.
3535(d).
§ 75.1
Authority: 12 U.S.C. 1701u and 1701x; 42
U.S.C. 1437a, 1437c, 1437d, 1437f, 1437n,
3535(d); Sec. 327, Pub. L. 109–115, 119 Stat.
2936; Sec. 607, Pub. L. 109–115, 119 Stat.
3051 (42 U.S.C. 14043e et seq.); E.O. 13279,
67 FR 77141, 3 CFR, 2002 Comp., p. 258; and
E.O. 13559, 75 FR 71319, 3 CFR 2010 Comp.,
p. 273.
■
5. Add part 75 to read as follows:
Subpart A—General Provisions
1. The authority for part 5 is revised
to read as follows:
■
§ 5.105
■
Purpose.
This part establishes the requirements
to be followed to ensure the objectives
of Section 3 of the Housing and Urban
Development Act of 1968 (12 U.S.C.
1701u) (Section 3) are met. The purpose
of Section 3 is to ensure that economic
opportunities, most importantly
employment, generated by certain HUD
financial assistance shall be directed to
low- and very low-income persons,
particularly those who are recipients of
government assistance for housing or
residents of the community in which
the Federal assistance is spent.
§ 75.3
Applicability of Section 3.
(a) General applicability. Section 3
applies to public housing financial
assistance and Section 3 projects, as
follows:
(1) Public housing financial
assistance. Public housing financial
assistance means:
(i) Development assistance provided
pursuant to section 5 of the United
States Housing Act of 1937 (the 1937
Act);
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(ii) Operations and management
assistance provided pursuant to section
9(e) of the 1937 Act; and
(iii) Development, modernization, and
management assistance provided
pursuant to section 9(d) of the 1937 Act.
(2) Section 3 projects. (i) Section 3
projects means housing rehabilitation,
housing construction, and other public
construction projects assisted under
HUD programs that provide housing and
community development financial
assistance when the amount of
assistance to the project exceeds a
threshold of $200,000. This threshold
does not apply where the assistance is
from the Lead Hazard Control and
Healthy Homes programs, as authorized
by section 501 of the Housing and
Urban Development Act of 1970 (12
U.S.C. 1701z–1), the Lead-Based Paint
Poisoning Prevention Act (42 U.S.C
4801 et seq.); and the Residential LeadBased Paint Hazard Reduction Act of
1992 (42 U.S.C. 4851 et seq.) The project
is the site or sites together with any
building(s) and improvements located
on the site(s) that are under common
ownership, management, and financing.
(ii) HUD may adjust the threshold
provided in paragraph (a)(2)(i) of this
section not less than every 5 years based
on a national construction cost inflation
factor, and new thresholds will be
published in the Federal Register,
subject to public comment.
(iii) The requirements in this part
apply to an entire Section 3 project,
regardless of whether the project is fully
or partially assisted under HUD
programs that provide housing and
community development financial
assistance.
(b) Contracts for materials. Section 3
requirements do not apply to material
supply contracts.
(c) Indian and Tribal preferences.
Contracts, subcontracts, grants, or
subgrants subject to section 7(b) of the
Indian Self-Determination and
Education Assistance Act (25 U.S.C.
5307(b)) or subject to tribal preference
requirements as authorized under 101(k)
of the Native American Housing
Assistance and Self-Determination Act
(25 U.S.C. 4111(k)) must provide
preferences in employment, training,
and business opportunities to Indians
and Indian organizations, and are
therefore not subject to the requirements
of this part.
(d) Other HUD assistance and other
Federal assistance. Recipients that are
not subject to Section 3 are encouraged
to consider ways to support the purpose
of Section 3.
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Definitions.
The terms HUD, Public housing, and
Public Housing Agency (PHA) are
defined in 24 CFR part 5. The following
definitions also apply to this part:
1937 Act means the United States
Housing Act of 1937, 42 U.S.C. 1437 et
seq.
Contractor means any entity entering
into a contract with:
(1) A recipient to perform work in
connection with the expenditure of
public housing financial assistance or
for work in connection with a Section
3 project; or
(2) A subrecipient for work in
connection with a Section 3 project.
Labor hours means the number of
paid hours worked by persons on a
Section 3 project or employed with
funds that include public housing
financial assistance.
Low-income person means a person as
defined in section 3(b)(2) of the 1937
Act.
Material supply contracts means
contracts for the purchase of products
and materials, including, but not limited
to, lumber, drywall, wiring, concrete,
pipes, toilets, sinks, carpets, and office
supplies.
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Alternative 2—Definition of New Hire
New hire means a full- or part-time
employee for permanent, temporary, or
seasonal employment opportunities
who:
(1) Was not on the payroll of the PHA,
or the PHA’s contractor or
subcontractor, or other recipient
receiving public housing financial
assistance funds at the beginning of the
award of public housing financial
assistance; or
(2) Was hired by contractors or
subcontractors on a per-project basis as
a result of receiving public housing
financial assistance.
Professional services means nonconstruction services, including, but not
limited to, contracts for legal services,
financial consulting, accounting
services, environmental assessment,
architectural services, and civil
engineering services.
Public housing financial assistance
means assistance as defined in
§ 75.3(a)(1).
Public housing project is defined in
24 CFR 905.108.
Qualified census tract means any
census tract (or equivalent geographic
area defined by the Bureau of the
Census) in which at least 50 percent of
households have an income of less than
60 percent of Area Median Gross
Income (AMGI); or where the poverty
rate is at least 25 percent and where the
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census tract is designated as a qualified
census tract by HUD.
Recipient means any entity that
receives directly from HUD public
housing financial assistance or housing
and community development assistance
that funds Section 3 projects, including,
but not limited to, any State, local
government, instrumentality, PHA,
Indian tribe, tribal organization, or other
public agency, public or private
nonprofit organization.
Section 3 means section 3 of the
Housing and Urban Development Act of
1968, as amended (12 U.S.C. 1701u).
Section 3 business concern means:
(1) A business concern that meets one
of the following criteria:
(i) It is at least 51 percent owned by
low- or very low-income persons;
(ii) Over 75 percent of the labor hours
performed for the business are
performed by low- or very low-income
persons; or
(iii) It is a business at least 25 percent
owned by current public housing
residents or residents who currently live
in Section 8-assisted housing.
(2) The status of a Section 3 business
concern shall not be negatively affected
by a prior arrest or conviction of its
owner(s) or employees.
(3) Nothing in this part shall be
construed to require the contracting or
subcontracting of a Section 3 business
concern. Section 3 business concerns
are not exempt from meeting the
specifications of the contract.
Section 3 project means a project
defined in § 75.3(a)(2).
Section 3 worker means:
(1) Any worker who fits one of the
following categories:
(i) The worker’s income is below the
income limit established by HUD.
(ii) The worker lives in a qualified
census tract.
(iii) The worker is employed by a
Section 3 business concern.
(2) The status of a Section 3 worker
shall not be negatively affected by a
prior arrest or conviction.
(3) Nothing in this part shall be
construed to require the employment of
someone who meets this definition of a
Section 3 worker. Section 3 workers are
not exempt from meeting the
qualifications of the position to be
filled.
Section 8-assisted housing refers to
housing receiving project-based rental
assistance or tenant-based assistance
under section 8 of the 1937 Act.
Service area or the neighborhood of
the project means an area within one
mile of the Section 3 project or, if fewer
than 5,000 people live within one mile
of a Section 3 project, within a circle
centered on the Section 3 project that is
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sufficient to encompass a population of
5,000 people according to the most
recent U.S. Census.
Small PHA means a public housing
authority that manages or operates fewer
than 250 public housing units.
Subcontractor means any entity that
has a contract with a contractor to
undertake a portion of the contractor’s
obligation to perform work in
connection with the expenditure of
public housing financial assistance or
for a Section 3 project.
Subrecipient has the meaning
provided in the applicable program
regulations, or in 2 CFR 200.93.
Targeted Section 3 worker has the
meanings provided in § 75.11, § 75.21,
or § 75.29, and does not exclude an
individual that has a prior arrest or
conviction.
Very low-income person means the
definition for this term set forth in
Section 3(b)(2) of the 1937 Act.
YouthBuild programs refers to
YouthBuild programs receiving
assistance under the Workforce
Innovation and Opportunity Act (29
U.S.C. 3226).
§ 75.7 Requirements applicable to HUD
NOFAs for Section 3 covered programs.
All notices of funding availability
(NOFAs) issued by HUD that announce
the availability of funding covered by
§ 75.3 will include notice that this part
is applicable to the funding and may
include, as appropriate for the specific
NOFA, points or bonus points for
Section 3 plans.
Subpart B—Additional Provisions for
Public Housing Financial Assistance
§ 75.9
Requirements.
(a) Employment and training. (1)
Consistent with existing Federal, state,
and local laws and regulations, PHAs or
other recipients receiving public
housing financial assistance, and their
contractors and subcontractors, must
make their best efforts to provide
employment and training opportunities
generated by the public housing
financial assistance to Section 3
workers.
(2) PHAs or other recipients, and their
contractors and subcontractors, must
make their best efforts described in
paragraph (a)(1) of this section to
Section 3 workers in the following order
of priority:
(i) To residents of the public housing
projects for which the public housing
financial assistance is expended;
(ii) To residents of other public
housing projects managed by the PHA
that is expending the assistance or to
residents of Section 8-assisted housing
managed by the PHA;
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(iii) To participants in YouthBuild
programs; and
(iv) To low- and very low-income
persons residing within the
metropolitan area (or nonmetropolitan
county) in which the assistance is
expended.
(b) Contracting. (1) Consistent with
existing Federal, state, and local laws
and regulations, PHAs and other
recipients of public housing financial
assistance, and their contractors and
subcontractors, must make their best
efforts to award contracts and
subcontracts to business concerns that
provide economic opportunities to
Section 3 workers.
(2) PHAs and other recipients, and
their contractors and subcontractors,
must direct the efforts described in
paragraph (b)(1) of this section in the
following order of priority:
(i) To Section 3 business concerns
that provide economic opportunities for
residents of the public housing projects
for which the assistance is provided;
(ii) To Section 3 business concerns
that provide economic opportunities for
residents of other public housing
projects managed by the PHA that is
providing the assistance or for residents
of Section 8-assisted housing managed
by the PHA;
(iii) To YouthBuild programs; and
(iv) To Section 3 business concerns
that provide economic opportunities to
Section 3 workers residing within the
metropolitan area (or nonmetropolitan
county) in which the assistance is
provided.
§ 75.11 Targeted Section 3 worker for
public housing financial assistance.
Alternative 1—Paragraph (a)
(a) Targeted Section 3 worker. A
Targeted Section 3 worker for public
housing financial assistance means:
(1) A worker employed by a Section
3 business concern; or
(2) A worker who currently is or who
was when hired by the worker’s current
employer:
(i) A resident in a public housing
project or Section 8-assisted housing;
(ii) A resident of other projects
managed by the PHA that is expending
assistance; or
(iii) A current YouthBuild participant.
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Alternative 2—Paragraph (a)
(a) Targeted Section 3 worker. A
Targeted Section 3 worker for public
housing financial assistance means:
(1) A new hire employed by a Section
3 business concern; or
(2) A new hire employed by the
worker’s current employer, who is also
one of the following:
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(i) A resident in a public housing
project or Section 8-assisted housing;
(ii) A resident of other projects
managed by the PHA that is expending
assistance; or
(iii) A current YouthBuild.
(b) [Reserved]
§ 75.13
Section 3 safe harbor.
(a) General. PHAs and other
recipients will be considered to have
complied with requirements in this part,
in the absence of evidence to the
contrary if they:
(1) Certify that they have followed the
prioritization of effort in § 75.9; and
(2) Meet or exceed the applicable
Section 3 benchmarks as described in
paragraph (b) of this section.
(b) Establishing benchmarks. (1) HUD
will establish Section 3 benchmarks for
Section 3 workers or Targeted Section 3
workers or both through a document
published in the Federal Register. HUD
may establish a single nationwide
benchmark for Section 3 workers and a
single nationwide benchmark for
Targeted Section 3 workers, or may
establish multiple benchmarks based on
geography, the type of public housing
financial assistance, or other variables.
HUD will update the benchmarks
through a document published in the
Federal Register, subject to public
comment, not less frequently than once
every 3 years.
(2) In establishing the Section 3
benchmarks, HUD may consider the
industry averages worked by specific
categories of workers or in different
localities or regions; prior reports
pursuant to this section; and any other
factors HUD deems important. In
establishing the Section 3 benchmarks,
HUD will exclude professional services.
Alternative 1—Paragraph (b)(3)
(3) Section 3 benchmarks will consist
of the following two ratios:
(i) The number of labor hours worked
by Section 3 workers divided by the
total number of labor hours worked by
all workers funded by public housing
financial assistance in the PHA’s or
other recipient’s fiscal year.
(ii) The number of labor hours worked
by Targeted Section 3 workers, as
defined in § 75.11(a), divided by the
total number of labor hours worked by
all workers funded by public housing
financial assistance in the PHA’s or
other recipient’s fiscal year.
Alternative 2—Paragraph (b)(3)
(3) Section 3 benchmarks will consist
of the following two ratios:
(i) The number of new hires that are
Section 3 workers divided by the total
number of new hires funded by public
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housing financial assistance in the
PHA’s or other recipient’s fiscal year.
(ii) The number of new hires that are
Targeted Section 3 workers, as defined
in § 75.11(a), divided by the total
number of new hires funded by public
housing financial assistance in the
PHA’s or other recipient’s fiscal year.
§ 75.15
Reporting.
Alternative 1—Paragraph (a)
(a) Reporting of labor hours. (1) For
public housing financial assistance,
PHAs and other recipients must report
in a manner prescribed by HUD:
(i) The total number of labor hours
worked;
(ii) The total number of labor hours
worked by Section 3 workers; and
(iii) The total number of labor hours
worked by Targeted Section 3 workers.
(2) The labor hours reported under
paragraph (a)(1) of this section must
include the total number of labor hours
worked with public housing financial
assistance for the PHA’s or other
recipient’s fiscal year, including labor
hours worked by any contractors and
subcontractors that the PHA or other
recipient is required, or elects pursuant
to paragraph (a)(3) of this section, to
report.
(3) PHAs and other recipients
reporting under this section, as well as
contractors and subcontractors who
report to PHAs and recipients, may
report labor hours by Section 3 workers,
under paragraph (a)(1)(ii) of this section,
and labor hours by Targeted Section 3
workers, under paragraph (a)(1)(iii) of
this section, from professional services
without including labor hours from
professional services in the total number
of labor hours worked under paragraph
(a)(1)(i) of this section. If a contract
covers both professional services and
other work and the PHA, other
recipient, contractor, or subcontractor
chooses not to report labor hours from
professional services, the labor hours
under the contract that are not from
professional services must still be
reported.
(4) PHAs and other recipients may
report on the labor hours of a contractor
or subcontractor based on the contractor
or subcontractor’s good faith assessment
of the labor hours of a full-time or parttime employee if the contractor or
subcontractor is not subject to other
requirements specifying time and
attendance reporting, or does not
otherwise track labor hours.
Alternative 2—Paragraph (a)
(a) Reporting of new hires. (1) For
public housing financial assistance,
PHAs and other recipients must report
in a form prescribed by HUD:
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(i) The total number of new hires;
(ii) The total number of new hires that
are Section 3 workers; and
(iii) The total number of new hires
that are Targeted Section 3 workers.
(2) The new hires reported, under
paragraph (a)(1)(i) of this section, must
include the total number of new hires
funded by public housing financial
assistance for the PHA’s or other
recipient’s fiscal year, including new
hires funded by any contractors and
subcontractors that the PHA or other
recipient is required, or elects pursuant
to paragraph (a)(3) of this section, to
report.
(3) PHAs and other recipients
reporting under this section, as well as
contractors and subcontractors who
report to PHAs and recipients, may
report new hires of Section 3 workers,
under paragraph (a)(1)(ii) of this section,
and new hires of Targeted Section 3
workers, under paragraph (a)(1)(iii) of
this section, performing professional
services without including hires in
professional services in the total number
of new hires under paragraph (a)(1)(i) of
this section. If a contract covers both
professional services and other work
and the PHA, recipient, contractor, or
subcontractor chooses not to report new
hires performing professional services,
the new hires under the contract that are
not performing professional services
must still be reported.
(b) Additional reporting if Section 3
benchmarks are not met. If the PHA’s or
other recipient’s reporting under
paragraph (a) of this section indicates
that the PHA or other recipient has not
met the Section 3 benchmarks described
in § 75.11, the PHA or other recipient
will be required to report in a form
prescribed by HUD on the qualitative
nature of its activities or those of its
contractors and subcontractors.
(c) Reporting frequency. Unless
otherwise provided, PHAs or other
recipients will report annually to HUD
under paragraph (a) of this section, and
where required under paragraph (b) of
this section, in a manner consistent with
reporting requirements for the
applicable HUD program.
(d) Reporting by Small PHAs. Small
PHAs will not be required to report
under paragraph (a) of this section.
Small PHAs are required to report on
their qualitative efforts, as described in
paragraph (b) of this section, in a
manner consistent with reporting
requirements for the applicable HUD
program.
§ 75.17
Contract provisions.
(a) PHAs or other recipients must
include language in any agreement or
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contract to apply Section 3 to
contractors.
(b) PHAs or other recipients must
require contractors to include language
in any contract or agreement to apply
Section 3 to subcontractors.
(c) PHAs or other recipients must
require all contractors and
subcontractors to meet the requirements
of § 75.9, regardless of whether Section
3 language is included in contracts.
Subpart C—Additional Provisions for
Housing and Community Development
Financial Assistance
§ 75.19
Requirements.
(a) Employment and training. (1) To
the greatest extent feasible, and
consistent with existing Federal, state,
and local laws and regulations,
recipients covered by this subpart shall
ensure that employment and training
opportunities arising in connection with
Section 3 projects are provided to
Section 3 workers within the
metropolitan area (or nonmetropolitan
county) in which the project is located.
(2) Where feasible, recipients should
provide opportunities and training
described in paragraph (a)(1) of this
section to:
(i) Section 3 workers residing within
the service area or the neighborhood of
the project; and
(ii) Participants in YouthBuild
programs.
(b) Contracting. (1) To the greatest
extent feasible, and consistent with
existing Federal, state, and local laws
and regulations recipients covered by
this subpart shall ensure contracts for
work awarded in connection with
Section 3 projects are provided to
Section 3 businesses concerns that
provide economic opportunities to
Section 3 workers residing within the
metropolitan area (or nonmetropolitan
county) in which the project is located.
(2) Where feasible, recipients should
direct the efforts described in paragraph
(b)(1) of this section to:
(i) Section 3 business concerns that
provide economic opportunities to
Section 3 workers residing within the
service area or the neighborhood of the
project; and
(ii) YouthBuild programs.
§ 75.21 Targeted Section 3 worker for
housing and community development
financial assistance.
(a) For purposes of this subpart, a
Targeted Section 3 worker is:
(1) A worker employed by a Section
3 business concern; or
(2) A worker who is or was when
hired by the worker’s current employer:
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(i) Living within the service area or
the neighborhood of the project, as
defined in § 75.5; or
(ii) A current YouthBuild participant.
(b) [Reserved]
§ 75.23
Section 3 safe harbor.
(a) General. Recipients will be
considered to have complied with
requirements in this part, in the absence
of evidence to the contrary if they:
(1) Certify that they have followed the
prioritization of effort in § 75.19; and
(2) Meet or exceed the applicable
Section 3 benchmark as described in
paragraph (b) of this section.
(b) Establishing benchmarks. (1) HUD
will establish Section 3 benchmarks for
Section 3 workers or Targeted Section 3
workers or both through a document
published in the Federal Register. HUD
may establish a single nationwide
benchmark for Section 3 workers and a
single nationwide benchmark for
Targeted Section 3 workers, or may
establish multiple benchmarks based on
geography, the nature of the Section 3
project, or other variables. HUD will
update the benchmarks through a
document published in the Federal
Register, subject to public comment, not
less frequently than once every 3years.
(2) In establishing the Section 3
benchmarks, HUD may consider the
industry averages for labor hours
worked by specific categories of workers
or in different localities or regions;
averages for labor hours worked by
Section 3 workers and Targeted Section
3 workers as reported by recipients
pursuant to this section; and any other
factors HUD deems important. In
establishing the Section 3 benchmarks,
HUD will exclude labor hours
associated with professional services
from the total labor hours, the labor
hours worked by Section 3 workers, and
the labor hours worked by Targeted
Section 3 workers.
(3) Section 3 benchmarks will consist
of the following two ratios:
(i) The number of labor hours worked
by Section 3 workers divided by the
total number of labor hours worked by
all workers on a Section 3 project.
(ii) The number of labor hours worked
by Targeted Section 3 workers divided
by the total number of labor hours
worked by all workers on a Section 3
project.
§ 75.25
Reporting.
(a) Reporting of labor hours. (1) For
Section 3 projects, recipients must
report in a manner prescribed by HUD:
(i) The total number of labor hours
worked;
(ii) The total number of labor hours
worked by Section 3 workers; and
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(iii) The total number of labor hours
worked by Targeted Section 3 workers.
(2) The labor hours reported under
paragraph (a)(1) of this section must
include the total number of labor hours
worked on a Section 3 project, including
labor hours worked under any
subrecipients, contractors, and
subcontractors that the recipient is
required, or elects pursuant to
paragraph (a)(3) of this section, to
report.
(3) Recipients reporting under this
section, as well as contractors and
subcontractors who report to PHAs and
recipients, may report labor hours by
Section 3 workers, under paragraph
(a)(1)(ii) of this section, and labor hours
by Targeted Section 3 workers, under
paragraph (a)(1)(iii) of this section, from
professional services without including
labor hours from professional services
in the total number of labor hours
worked under paragraph (a)(1)(i) of this
section. If a contract covers both
professional services and other work
and the recipient or contractor or
subcontractor chooses not to report
labor hours from professional services,
the labor hours under the contract that
are not from professional services must
still be reported.
(4) Recipients may report on the labor
hours of a contractor or subcontractor
based on the contractor or
subcontractor’s good faith assessment of
the labor hours of a full-time or parttime employee if the contractor or
subcontractor is not subject to other
requirements specifying time and
attendance reporting, or does not
otherwise track labor hours.
(b) Additional reporting if Section 3
benchmarks are not met. If the
recipient’s reporting under paragraph (a)
of this section indicates that the
recipient has not met the Section 3
benchmarks described in § 75.23, the
recipient must report in a form
prescribed by HUD on the qualitative
nature of the activities the recipient or
its contractors and subcontractors
pursued in order to comply with this
part.
(c) Reporting frequency. Unless
otherwise provided, recipients must
report annually to HUD under
paragraph (a) of this section, and, where
required, under paragraph (b) of this
section, on all projects completed
within the reporting year in a manner
consistent with reporting requirements
for the applicable HUD program.
§ 75.27
Contract provisions.
(a) Recipients must include language
applying Section 3 requirements in any
subrecipient agreement or contract for a
Section 3 project.
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(b) Recipients of Section 3 projects
must require subrecipients, contractors,
and subcontractors to meet the
requirements of § 75.19, regardless of
whether Section 3 language is included
in recipient or subrecipient agreements,
program regulatory agreements, or
contracts.
Subpart D—Provisions for Multiple
Funding Sources, Recordkeeping, and
Compliance
§ 75.29
Multiple funding sources.
(a) If a housing rehabilitation, housing
construction or other public
construction project is subject to Section
3 pursuant to § 75.3(a)(1) and (2), the
recipient must follow subpart B of this
part for the public housing financial
assistance and may follow either
subpart B or C of this part for the
housing and community development
financial assistance. For this project, the
following applies:
(1) For housing and community
development financial assistance, a
Targeted Section 3 worker is any worker
who meets the definition of a Targeted
Section 3 worker in either subpart B or
C of this part; and
Alternative 1—Paragraph (a)(2)
(2) The recipients of both sources of
funding shall report on the housing
rehabilitation, housing construction, or
other public construction project as a
whole and shall identify the multiple
associated recipients. PHAs and other
recipients must report the following
information:
(i) The total number of labor hours
worked on the project;
(ii) The total number of labor hours
worked by Section 3 workers on the
project; and
(iii) The total number of labor hours
worked by Targeted Section 3 workers
on the project.
Alternative 2—Paragraph (a)(2)
(2) The recipients of both sources of
funding shall report on the housing
rehabilitation, housing construction, or
other public construction project as a
whole and shall identify the multiple
associated recipients.
(i) PHAs and other recipients must
report the following information:
(A) The total number of labor hours
worked on the project;
(B) The total number of labor hours
worked by Section 3 workers on the
project; and
(C) The total number of labor hours
worked by Targeted Section 3 workers,
as defined in either subpart B or C of
this part, on the project.
(ii) The PHA must also report the
following information:
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(A) The total number of new hires on
the project;
(B) The total number of Section 3
workers that are new hires on the
project; and
(C) The total number of Targeted
Section 3 workers, as defined in either
subpart B or C of this part, that are new
hires on the project.
(b) If a housing rehabilitation, housing
construction, or other public
construction project is subject to Section
3 because the project is assisted with
funding from multiple programs that
exceed the threshold in § 75.3(a)(2), the
recipient or recipients must follow
subpart C of this part, and must report
to the applicable HUD program office, as
prescribed by HUD.
§ 75.31
Recordkeeping.
(a) HUD shall have access to all
records, reports, and other documents or
items of the recipient that are
maintained to demonstrate compliance
with the requirements of this part, or
that are maintained in accordance with
the regulations governing the specific
HUD program by which the Section 3
project is governed, or the public
housing financial assistance is provided
or otherwise made available to the
recipient, contractor, or subcontractor.
(b) Recipients must maintain
documentation, or ensure that a
subrecipient, contractor, or
subcontractor that employs the worker
maintains certification, to ensure that
workers meet the definition of a Section
3 worker or Targeted Section 3 worker,
as follows:
(1) For a worker to qualify as a
Section 3 worker, one of the following
must be maintained:
(i) A worker’s self-certification that
their income is below the income limit
from the prior calendar year;
(ii) A worker’s self-certification of
participation in a means-tested program
such as public housing or Section 8assisted housing;
(iii) Certification from a PHA, or the
owner or property manager of projectbased Section 8-assisted housing, or the
administrator of tenant-based Section 8assisted housing that the worker is a
participant in one of their programs;
(iv) An employer’s certification that
the worker’s income from that employer
is below the income limit when based
on an employer’s calculation of what
the worker’s wage rate would translate
to if annualized on a full-time basis;
(v) An employer’s confirmation that a
worker’s residency is in a qualified
census tract; or
(vi) An employer’s certification that
the worker is employed by a Section 3
business.
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Federal Register / Vol. 84, No. 65 / Thursday, April 4, 2019 / Proposed Rules
(2) For a worker to qualify as a
Targeted Section 3 worker, one of the
following must be maintained:
(i) For a worker to qualify as a
Targeted Section 3 worker under
subpart B of this part:
(A) A worker’s self-certification of
participation in public housing or
Section 8-assisted housing programs;
(B) Certification from a PHA, or the
owner or property manager of projectbased Section 8-assisted housing, or the
administrator of tenant-based Section 8assisted housing that the worker is a
participant in one of their programs;
(C) An employer’s certification that
the worker is employed by a Section 3
business concern; or
jbell on DSK30RV082PROD with PROPOSALS
§ 91.215
[Amended]
7. Amend § 91.215(j) by removing ‘‘24
CFR part 135’’ and adding in its place
‘‘24 CFR part 75’’.
■
§ 91.325
(D) An employer’s certification that
the worker is a YouthBuild participant.
(ii) For a worker to qualify as a
Targeted Section 3 worker under
subpart C of this part:
(A) An employer’s confirmation that a
worker’s residence is within 1 mile of
the work site or, if fewer than 5,000
people live within 1 mile of a work site,
within a circle centered on the work site
that is sufficient to encompass a
population of 5,000 people according to
the most recent U.S. Census;
(B) An employer’s certification that
the worker is employed by a Section 3
business concern; or
(C) A worker’s self-certification that
the worker is a YouthBuild participant.
(c) The documentation described in
paragraph (b) of this section must be
maintained for the time period required
for record retentions in accordance with
applicable program regulations or, in
the absence of applicable program
regulations, 2 CFR part 200.
Compliance.
(a) Records of compliance. Each
recipient shall maintain adequate
records demonstrating compliance with
this part.
(b) Complaints. Complaints alleging
failure of compliance with this part may
be reported to the HUD program office
responsible for the public housing
financial assistance or the Section 3
project.
(c) Monitoring. HUD will monitor
compliance with the requirements of
this part. The applicable HUD program
office will determine appropriate
methods by which to oversee Section 3
compliance. HUD may impose
appropriate remedies and sanctions in
accordance with the laws and
Jkt 247001
Authority: 42 U.S.C. 3535(d), 3601–3619,
5301–5315, 11331–11388, 12701–12711,
12741–12756, and 12901–12912.
[Amended]
8. Amend § 91.225(a)(7) by removing
‘‘24 CFR part 135’’ and adding in its
place ‘‘24 CFR part 75’’.
Alternative 2—Paragraph (b)(2)(i)(D)
16:38 Apr 03, 2019
6. The authority citation for part 91
continues to read as follows:
■
■
(D) A worker’s certification that the
worker is a YouthBuild participant.
VerDate Sep<11>2014
PART 91—CONSOLIDATED
SUBMISSIONS FOR COMMUNITY
PLANNING AND DEVELOPMENT
PROGRAMS
§ 91.225
Alternative 1—Paragraph (b)(2)(i)(D)
§ 75.33
regulations for the program under which
the violation was found.
[Amended]
9. Amend § 91.325(a)(7) by removing
‘‘24 CFR part 135’’ and adding in its
place ‘‘24 CFR part 75’’.
■
§ 91.425
b. Remove paragraph (a)(5)(i)(B);
c. Redesignate paragraph (a)(5)(i)(A)
as paragraph (a)(5)(ii);
■ d. In newly redesignated paragraph
(a)(5)(iv), remove ‘‘24 part 35’’ and add
in its place ‘‘24 CFR part 35’’; and
■ e. Add paragraph (a)(5)(xi).
The addition reads as follows:
■
■
§ 93.407
Recordkeeping.
*
*
*
*
*
(a) * * *
(5) * * *
(xi) Documentation of actions
undertaken to meet the requirements of
24 CFR part 75, which implements
section 3 of the Housing and Urban
Development Act of 1968, as amended
(12 U.S.C. 1701u).
*
*
*
*
*
CHAPTER I—OFFICE OF ASSISTANT
SECRETARY FOR EQUAL OPPORTUNITY,
DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT [AMENDED]
15. Under the authority of 42 U.S.C.
3535(d), in chapter I, remove the
headings for subchapters A and B.
■
PART 135 [REMOVED]
[Amended]
10. Amend § 91.425(a)(1)(vii) by
removing ‘‘24 CFR part 135’’ and adding
in its place ‘‘24 CFR part 75’’.
■
■
PART 92—HOME INVESTMENT
PARTNERSHIPS PROGRAM
PART 266—HOUSING FINANCE
AGENCY RISK–SHARING PROGRAM
FOR INSURED AFFORDABLE
MULTIFAMILY PROJECT LOANS
16. Remove part 135.
■
11. The authority citation for part 92
continues to read as follows:
■
Authority: 42 U.S.C. 3535(d), 12 U.S.C.
1701x and 4568.
Authority: 12 U.S.C. 1707; 42 U.S.C.
3535(d).
12. Amend § 92.508 as follows:
a. Remove paragraph (a)(7)(i)(B);
b. Redesignate paragraph (a)(7)(i)(C) as
paragraph (a)(7)(i)(B); and
■ c. Add paragraph (a)(7)(xi).
The addition reads as follows:
■
■
■
§ 92.508
§ 266.220
[Amended]
18. Amend § 266.220(c) by removing
‘‘; section 3 of the Housing and Urban
Development Act of 1968 (12 U.S.C.
1701u), as implemented by 24 CFR part
135’’.
■
Recordkeeping.
*
*
*
*
*
(a) * * *
(7) * * *
(xi) Documentation of actions
undertaken to meet the requirements of
24 CFR part 75 which implements
section 3 of the Housing Development
Act of 1968, as amended (12 U.S.C.
1701u).
*
*
*
*
*
PART 93—HOUSING TRUST FUND
13. The authority citation for part 93
continues to read as follows:
■
Authority: 42 U.S.C. 3535(d), 12 U.S.C.
4568.
14. Amend § 93.407 as follows:
a. Redesignate paragraphs (a)(5)(ii)
through (ix) as paragraphs (a)(5)(iii)
through (x);
■
■
PO 00000
17. The authority citation for part 266
continues to read as follows:
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Sfmt 4702
PART 570—COMMUNITY
DEVELOPMENT BLOCK GRANTS
19. The authority citation for part 570
continues to read as follows:
■
Authority: 12 U.S.C. 1701x, 1701 x–1; 42
U.S.C. 3535(d) and 5301–5320.
§ 570.487
[Amended]
20. Amend § 570.487(d) by removing
‘‘24 CFR part 135’’ and adding in its
place ‘‘24 CFR part 75’’.
■
§ 570.607
[Amended]
21. Amend § 570.607(b) by removing
‘‘24 CFR part 135’’ and adding in its
place ‘‘24 CFR part 75’’.
■
PART 576—EMERGENCY SOLUTIONS
GRANTS PROGRAM
22. The authority citation for part 576
continues to read as follows:
■
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04APP1
Federal Register / Vol. 84, No. 65 / Thursday, April 4, 2019 / Proposed Rules
Authority: 12 U.S.C. 1701x, 1701 x–1; 42
U.S.C. 11371 et seq., 42 U.S.C. 3535(d).
PART 1000—NATIVE AMERICAN
HOUSING ACTIVITIES
§ 576.407
■
[Amended]
23. Amend § 576.407(a) by removing
‘‘24 CFR part 135’’ and adding in its
place ‘‘24 CFR part 75’’.
■
33. Revise § 1000.42 to read as
follows:
24. The authority citation for part 578
continues to read as follows:
■
Authority: 12 U.S.C. 1701x, 1701 x–1; 42
U.S.C. 11381 et seq., 42 U.S.C. 3535(d).
[Amended]
25. Amend § 578.99 by removing
‘‘federal’’ in the section heading and
adding in its place ‘‘Federal’’ and
removing ‘‘24 CFR part 135’’ in
paragraph (i) and adding in its place ‘‘24
CFR part 75’’.
■
PART 905—THE PUBLIC HOUSING
CAPITAL FUND PROGRAM
26. The authority citation for part 905
continues to read as follows:
■
Authority: 42 U.S.C. 1437g, 42 U.S.C.
1437z–2, 42 U.S.C. 1437z–7, and 3535(d).
§ 905.308
§ 1000.42 Are the requirements of Section
3 of the Housing and Urban Development
Act of 1968 applicable?
No. Recipients shall comply with
Indian preference requirements of
section 7(b) of the Indian SelfDetermination and Education
Assistance Act (25 U.S.C. 5307(b)), or
employment and contract preference
laws adopted by the recipient’s tribe in
accordance with section 101(k) of
NAHASDA.
Dated: March 29, 2019.
Matthew F. Hunter,
Assistant Deputy Secretary for Field Policy
and Management.
[FR Doc. 2019–06495 Filed 4–3–19; 8:45 am]
BILLING CODE 4210–67–P
[Amended]
24 CFR Part 75
PART 964—TENANT PARTICIPATION
AND TENANT OPPORTUNITIES IN
PUBLIC HOUSING
Section 3 Benchmarks for Creating
Economic Opportunities for Low- and
Very Low-Income Persons and Eligible
Businesses
28. The authority citation for part 964
continues to read as follows:
AGENCY:
■
Authority: 42 U.S.C. 1437d, 1437g, 1437r,
3535(d).
[Amended]
29. Amend § 964.320 by removing ‘‘24
CFR part 135’’ and adding in its place
‘‘24 CFR part 75’’and removing ‘‘24 CFR
135.7’’ and adding in its place ‘‘24 CFR
75.3’’.
■
PART 983—PROJECT-BASED
VOUCHER (PBV) PROGRAM
30. The authority citation for part 983
continues to read as follows:
■
Authority: 42 U.S.C. 1437f and 3535(d).
§ 983.4
[Amended]
31. Amend § 983.4 by removing the
definition of ‘‘Section 3—Training,
employment and contracting
opportunities in development’’.
■
§ 983.154
[Amended]
32. Amend § 983.154 by removing and
reserving paragraph (c).
■
VerDate Sep<11>2014
16:38 Apr 03, 2019
Jkt 247001
DATES:
Comment Due Date. June 3,
Interested persons are
invited to submit comments regarding
this document to the Regulations
Division, Office of General Counsel, 451
7th Street SW, Room 10276, Department
of Housing and Urban Development,
Washington, DC 20410–0500.
Communications must refer to the above
docket number and title. There are two
methods for submitting public
comments. All submissions must refer
to the above docket number and title.
1. Submission of Comments by Mail.
Comments may be submitted by mail to
the Regulations Division, Office of
General Counsel, Department of
Housing and Urban Development, 451
7th Street SW, Room 10276,
Washington, DC 20410–0500.
2. Electronic Submission of
Comments. Interested persons may
submit comments electronically through
the Federal eRulemaking Portal at
www.regulations.gov. HUD strongly
encourages commenters to submit
comments electronically. Electronic
submission of comments allows the
commenter maximum time to prepare
and submit comments, ensures timely
receipt by HUD, and enables HUD to
make them immediately available to the
public. Comments submitted
electronically through the
www.regulations.gov website can be
viewed by other commenters and
interested members of the public.
Commenters should follow the
instructions provided on that site to
submit comments electronically.
ADDRESSES:
27. Amend § 905.308(b)(10) by
removing ‘‘24 CFR part 135’’ and adding
in its place ‘‘24 CFR part 75’’.
§ 964.320
increase the impact of the Section 3
requirements, and streamline and
update HUD’s reporting and tracking
requirements. The proposed rule
includes a requirement that HUD set
Section 3 benchmarks by publishing a
notification, subject to public comment,
in the Federal Register. The proposed
rule provides that HUD will set
benchmarks based on the number of
Section 3 workers and a subset of
Section 3 workers, defined as Targeted
Section 3 workers. If a recipient
complies with the statutory priorities
regarding effort and meets the outcome
benchmarks, HUD would presume the
recipient is following Section 3
requirements, absent evidence to the
contrary. These proposed outcome
benchmarks are being published
concurrently with the proposed rule so
the public can comment on the
proposed benchmarks and methodology
for setting the benchmarks prior to
adoption of the final rule and
benchmarks.
2019.
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
■
jbell on DSK30RV082PROD with PROPOSALS
Authority: 25 U.S.C. 4101 et seq.; 42
U.S.C. 3535(d).
■
PART 578—CONTINUUM OF CARE
PROGRAM
§ 578.99
32. The authority citation for part
1000 continues to read as follows:
[Docket No. FR–6085–N–02]
Office of the Assistant Deputy
Secretary for Field Policy and
Management, HUD.
ACTION: Notification of proposed
benchmarks.
Section 3 of the Housing and
Urban Development Act of 1968, as
amended by the Housing and
Community Development Act of 1992
(Section 3), contributes to the
establishment of stronger, more
sustainable communities by ensuring
that employment and other economic
opportunities generated by Federal
financial assistance for housing and
community development programs are,
to the greatest extent feasible, directed
toward low- and very low-income
persons, particularly those who are
recipients of government assistance for
housing. HUD is statutorily charged
with the authority and responsibility to
implement and enforce Section 3.
Elsewhere in this issue of the Federal
Register, HUD published a proposed
rule that would amend the Section 3
regulations to, among other things,
SUMMARY:
PO 00000
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E:\FR\FM\04APP1.SGM
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Agencies
[Federal Register Volume 84, Number 65 (Thursday, April 4, 2019)]
[Proposed Rules]
[Pages 13177-13199]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-06495]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 5, 14, 75, 91, 92, 93, 135, 266, 570, 576, 578, 905,
964, 983, and 1000
[Docket No. FR-6085-P-01]
RIN 2501-AD87
Enhancing and Streamlining the Implementation of ``Section 3''
Requirements for Creating Economic Opportunities for Low- and Very Low-
Income Persons and Eligible Businesses
AGENCY: Office of the Assistant Deputy Secretary for Field Policy and
Management, HUD.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: Section 3 of the Housing and Urban Development Act of 1968, as
[[Page 13178]]
amended by the Housing and Community Development Act of 1992 (Section
3), contributes to the establishment of stronger, more sustainable
communities by ensuring that employment and other economic
opportunities generated by Federal financial assistance for housing and
community development programs are, to the greatest extent feasible,
directed toward low- and very low-income persons, particularly those
who receive government assistance for housing. In accordance with
statutory authority, HUD is charged with the responsibility to
implement and enforce Section 3. HUD's regulations implementing the
requirements of Section 3 have not been updated since 1994 and are not
as effective as HUD believes they could be. This proposed rule would
update 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. The
purpose of these changes is to increase the impact of the Section 3
requirements for low- and very low-income persons, increase compliance
with Section 3 requirements, and reduce regulatory burden. HUD is also
publishing elsewhere in this issue of the Federal Register a proposed
notification for comment that would set initial benchmarks for
measuring Section 3 compliance with the final rule.
DATES: Comment Due Date: June 3, 2019.
ADDRESSES: Interested persons are invited to submit comments regarding
this rule. Communications must refer to the above docket number and
title. There are two methods for submitting public comments. All
submissions must refer to the above docket number and title.
1. Submission of Comments by Mail. Comments may be submitted by
mail to the Regulations Division, Office of General Counsel, Department
of Housing and Urban Development, 451 7th Street SW, Room 10276,
Washington, DC 20410-0500.
2. Electronic Submission of Comments. Interested persons may submit
comments electronically through the Federal eRulemaking Portal at
www.regulations.gov. HUD strongly encourages commenters to submit
comments electronically. Electronic submission of comments allows the
commenter maximum time to prepare and submit a comment, ensures timely
receipt by HUD, and enables HUD to make them immediately available to
the public. Comments submitted electronically through the
www.regulations.gov website can be viewed by other commenters and
interested members of the public. Commenters should follow the
instructions provided on that site to submit comments electronically.
Note: To receive consideration as public comments, comments must
be submitted through one of the two methods specified above. Again,
all submissions must refer to the docket number and title of the
rule.
No Facsimile Comments. Facsimile (fax) comments are not acceptable.
Public Inspection of Public Comments. All properly submitted
comments and communications submitted to HUD will be available for
public inspection and copying between 8 a.m. and 5 p.m., weekdays, at
the above address. Due to security measures at the HUD Headquarters
building, an appointment to review the public comments must be
scheduled in advance by calling the Regulations Division at 202-708-
3055 (this is not a toll-free number). Individuals with speech or
hearing impairments may access this number via TTY by calling the
Federal Relay Service at 800-877-8339. Copies of all comments submitted
will be available for inspection and downloading at
www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: For Public Housing Financial
Assistance: Merrie Nichols-Dixon, Director, Office of Policy Program
and Legislation, Office of Public and Indian Housing, Department of
Housing and Urban Development, 451 7th Street SW, Room 3178,
Washington, DC 20410; telephone 202-402-4673 (not a toll-free number);
for Community Development Block Grant (CDBG)/CDBG Disaster Recovery/
Section 108 Loan Guarantee Program: Jessie Handforth Kome, Deputy
Director, Office of Block Grant Assistance, Office of Community
Planning and Development, Department of Housing and Urban Development,
451 7th Street SW, Room 7286, Washington, DC 20410; telephone 202-402-
5539 (voice/TDD) (not a toll-free numbers); for HOME or Housing Trust
Fund Section 3 projects: Virginia Sardone, Director, Office of
Affordable Housing Program, Office of Community Planning and
Development, Department of Housing and Urban Development, 451 7th
Street SW, Room 10168, Washington, DC 20410; telephone 202-402-4606
(not a toll-free number), and for Office of Housing programs: Thomas R.
Davis, Director, Office of Recapitalization, Office of Housing,
Department of Housing and Urban Development, 451 7th Street SW, Room
6230, Washington, DC 20410; telephone 202-402-7549 (voice/TDD) (these
are not toll-free numbers). Persons with hearing or speech impairments
may access this number through TTY by calling the Federal Relay
Service, at toll-free, 800-877-8339. General email inquiries regarding
Section 3 may be sent to: [email protected].
SUPPLEMENTARY INFORMATION:
Executive Summary
Purpose of Regulatory Action
This proposed rule would update the regulations implementing
Section 3. The purpose of Section 3 is to ensure that employment,
training, contracting, and other economic opportunities generated by
certain HUD financial assistance are directed to low- and very low-
income persons, particularly those who receive government assistance
for housing, and for businesses to provide economic opportunities to
low- and very low-income persons. As noted in the summary of this
preamble, the regulations for Section 3 have not been updated in over
20 years. HUD's experience in administering Section 3 over time has
provided insight as to how HUD could improve the effectiveness of its
Section 3 regulations. Additionally, HUD has heard from the public that
there is a need for regulatory changes to clarify and simplify the
existing requirements. HUD has concluded that regulatory changes are
needed to streamline Section 3 and more effectively benefit recipients
of HUD financial assistance to achieve the purposes of the Section 3
statute.\1\
---------------------------------------------------------------------------
\1\ As discussed later in this preamble, this proposed rule
would define recipients to mean any entity that receives directly
from HUD Section 3 public housing financial assistance or other
financial assistance that funds a Section 3 project, including, but
not limited to: Any State, local government, instrumentality, Public
Housing Authority, Indian tribe, tribal organization, or other
public agency, public or private nonprofit organizations.
---------------------------------------------------------------------------
Summary of the Major Provisions of This Regulatory Action
The following provides an overview of the more significant
provisions of this proposed rule.
Promote Sustained Employment and Career Development
The new rule includes multiple elements designed to increase
Section 3's impact in directing employment opportunities for the people
served by HUD financial assistance programs and sustaining employment.
The new rule proposes the tracking and reporting of
[[Page 13179]]
labor hours instead of new hires and solicits public comment on whether
to retain tracking and reporting of new hires in some contexts. The
current new hire framework, while valuable for measuring entry into
employment, does not capture the extent to which new hiring
opportunities are created relative to the total work performed, nor
whether those opportunities are sustained over time. The proposed focus
on labor hours would measure total actual employment and the proportion
of the total employment performed by low- and very low-income workers.
In addition, the proposed focus on labor hours emphasizes continued
employment. For example, an exclusive focus on counting new hires
regards five new hires for one-month opportunities as a more valued
outcome than one 12-month opportunity, and it does not distinguish
between full- and part-time employment. A full-time job sustained over
a long period allows a low- or very low-income worker to gain skills
and is a strong indicator of progress towards self-sufficiency. A focus
on labor hours ensures that the 12-month, full time opportunity is
appropriately recognized. To further encourage employers to invest in
and retain newly-hired low- and very low-income workers, the proposed
rule would determine whether someone qualified as a Section 3 worker at
the time of hire and the employer would continue to count that Section
3 hire even if in the future the Section 3 worker is no longer a low-
and very low-income worker.
HUD held a number of listening sessions with small Public Housing
Agencies (PHAs), large PHAs, and other entities involved with Section 3
\2\ and heard from some PHAs that they would prefer to keep reporting
new hires rather than switch to reporting labor hours. Therefore, while
HUD believes tracking labor hours is the best option and would simplify
reporting, HUD is proposing alternative regulatory language that would
provide for PHAs to report on new hires. After receiving feedback on
the labor hours and new hires framework in this proposed rule, HUD will
select either Alternative 1, labor hours, or Alternative 2, new hires,
for PHAs to use in tracking and reporting on Section 3.
---------------------------------------------------------------------------
\2\ Links [to the listening session notes] will be provided at
the time the proposed rule is published.
---------------------------------------------------------------------------
Align Section 3 Reporting With Standard Business Practices
As noted above, the new rule proposes the tracking and reporting of
labor hours, rather than new hires. This is more consistent with
business practices for most construction contractors working on HUD
assisted or insured projects, who already track labor hours in their
payroll systems because they have been subject to prevailing wage
requirements \3\ HUD believes a consistent labor hour tracking
mechanism will make compliance with Section 3 easier not only for
recipients of HUD assistance, but also for contractors and
subcontractors. The rule also provides for employers who do not track
hours in detail through a time-and-attendance system, permitting a good
faith assessment of the labor hours of a full-time or part-time
employee. The proposed rule does not create an obligation to establish
a detailed time-and-attendance system.
---------------------------------------------------------------------------
\3\ See 42 U.S.C. 1437j(a), 24 CFR 905.308(b)(3)(ii), 24 CFR
965.101, 25 U.S.C. 4225(b)(1)(A), and 24 CFR 1006.345(b).
---------------------------------------------------------------------------
Proposed Applicability and Reporting Thresholds
This proposed rule applies to (1) HUD's Public Housing Program, and
(2) Other programs that provide housing and community development
assistance. For ease in administration, the rule would provide separate
definitions for these types of funding and separate subparts relating
to: (1) Public housing financial assistance, which covers (a)
development assistance provided pursuant to section 5 of the United
States Housing Act of 1937 (the 1937 Act), (b) operations and
management assistance provided pursuant to section 9(e) of the 1937 Act
(Operating Fund), and (c) development, modernization, and management
assistance provided pursuant to section 9(d) of the 1937 Act (Capital
Fund); and (2) Section 3 projects, which means HUD program assistance
used for housing rehabilitation, housing construction and other public
construction projects that generally exceed a $200,000 project
threshold or any Section 3 project funding from HUD's Lead Hazard
Control and Healthy Homes programs. This proposed rule would clarify
that contracts, subcontracts, grants, or subgrants subject to section
7(b) of the Indian Self-Determination and Education Assistance Act (25
U.S.C. 5307(b)) or subject to tribal preference requirements as
authorized under 101(k) of the Native American Housing Assistance and
Self-Determination Act (25 U.S.C. 4111(k)) must provide preferences in
employment, training, and business opportunities to Indians and Indian
organizations.
All recipients of public housing financial assistance and
recipients that fund a Section 3 project would be required to report on
whether they have met benchmarks, as explained below. PHAs with fewer
than 250 units would only be required to report on Section 3
qualitative efforts and would not be required to report on whether they
have met the reporting benchmarks.
Reporting and Targeted Section 3 Workers
HUD's current regulations provide for a safe harbor where
recipients may demonstrate compliance with Section 3 by certifying
compliance with the Section 3 priorities and meeting numerical goals
for the percentage of their new hires that qualify as Section 3
residents. Under the existing regulations, a Section 3 resident is
either a public housing resident, or a low- or very low-income person
who lives in the metropolitan area or nonmetropolitan county where
assistance is expended. However, the Section 3 statute requires
recipients of certain financial assistance to target their efforts to
direct employment and economic opportunities to specific groups of low-
and very low-income individuals. HUD interprets the statutory
priorities for the public housing program to be: Residents of the
public housing projects for which the public housing financial
assistance is expended, residents of other public housing projects
managed by the PHA that is expending the assistance or to residents of
Section 8-assisted housing managed by the PHA, YouthBuild participants,
and then other low- and very low-income persons within the metropolitan
area or nonmetropolitan county. For other HUD assistance programs, the
statutory priorities are: Residents within the service area or the
neighborhood of the project and YouthBuild participants. There is also
a statutory contracting priority for businesses that provide economic
opportunities for the same priority groups. Previously the contracting
metric was based on the cost of the contract awarded to the Section 3
business, and now the hours worked by the Section 3 business employees
will be counted consistent with all other reporting.
This proposed rule anticipates that recipients would report the
labor hours performed by ``Section 3 Workers'' as a percentage of the
total labor hours on a project, and labor hours performed by ``Targeted
Section 3 Workers'' as a percentage of the total labor hours on a
project. The proposed rule would also provide an alternative for public
housing financial assistance where
[[Page 13180]]
reporting would be done by new hires, but with the same three metrics.
Under this proposed rule, ``Section 3 Workers'' would generally be
low- or very low-income individuals, or those employed by a business
that generally provides economic opportunities for low- and very low-
income individuals. This proposed rule creates the new concept of
``Targeted Section 3 Workers'' so that HUD can track, and recipients
can target, hiring Section 3 workers in selected categories and those
who work for Section 3 businesses. A ``Targeted Section 3 Worker'' is a
subset of all Section 3 workers (see graphic), that HUD wishes to
specifically track, reflecting both statutory and policy priorities.
The Targeted Section 3 worker category also incorporates the statutory
requirements pertaining to contracting opportunities for business
concerns employing low- and very low-income persons.
[GRAPHIC] [TIFF OMITTED] TP04AP19.017
Targeted Section 3 Workers for public housing financial assistance
would be:
Residents of public housing projects or Section 8-assisted
housing; \4\
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\4\ As further explained in this proposed rule, the term Section
8-assisted housing refers to housing receiving project-based rental
assistance or tenant-based assistance under Section 8 of the 1937
Act.
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Residents of other projects of the PHA that is expending
assistance;
Current YouthBuild participants; or
Employees of a Section 3 business.
Targeted Section 3 Workers for other HUD financial assistance used
on a Section 3 project would be:
Low- or very low-income workers residing within the
service area or the neighborhood of the project (for purposes of this
proposed rule, this would include low- or very low-income workers
residing within a one-mile radius of the project site; or if fewer than
5,000 people live within one mile of a work site, within a circle
centered on the work site that encompass a population of 5,000 people);
Current YouthBuild participants; or
Employees of a Section 3 business concern.
A long-standing criticism of local economic development policy is
that spatially-targeted subsidies transfer jobs away from other areas
without creating job opportunities for the neediest individuals in the
targeted area. The proposed Section 3 regulation avoids this pitfall by
encouraging the engagement of local firms and low-income workers
through the definition of a targeted Section 3 worker.
Benchmarks
This proposed rule would establish new benchmark measurements,
which will also serve as safe harbors. The primary impact of the
Section 3 regulation is not to create new jobs but to redirect the job
opportunities that are generated by HUD financial assistance to Section
3 workers and Targeted Section 3 workers, and the proposed benchmark
would reflect and monitor grantees' abilities to do so. The new
benchmarks will be based on ratios of Section 3 workers and Targeted
Section 3 workers in comparison to all workers. These benchmarks would
be set by notice and amended periodically to provide for updating of
benchmarks where warranted. The benchmarks would align with the
reporting data detailed above. As HUD gathers increasing data under the
new rule, HUD can increase or decrease benchmark figures over time, or
tailor different benchmarks for different geographies and different
funding types. If a recipient certifies compliance with the statutory
priorities and meets the outcome benchmarks, HUD would presume the
recipient is in compliance with Section 3 requirements, absent evidence
to the contrary. Otherwise, recipients will be required to submit
qualitative reports on their efforts, as they are required to do under
the current rule when they do not meet the safe harbor, and HUD may
conduct monitoring to review the recipient's compliance. Elsewhere in
this issue of the Federal Register, HUD has published a proposed
notification for comment that would set initial benchmarks at the final
rule.
Multiple Funding Sources
HUD is seeking to streamline the administrative work for recipients
that receive funds through more than one HUD program, and contractors
that receive payment from funds under those programs. The rule provides
for how to track funding and report benchmarks when there is a project
that is funded by public housing financial assistance and also meets
the criteria as a Section 3 project. Specifically, that the project
must follow the public housing financial assistance requirements for
the public housing financial assistance funds and may follow the
requirements in subpart B or subpart C for the community development
financial assistance funds. It would also provide for how to deal with
reporting when a Section 3 project receives housing and community
development assistance from two different HUD programs. Specifically,
that HUD would designate reporting to one program office.
[[Page 13181]]
Integrate Section 3 Into Program Enforcement
HUD program office staff are regularly in touch with HUD's funding
recipients. Under the proposed rule's framework, HUD's program offices
would incorporate Section 3 compliance and oversight into regular
program oversight and make Section 3 a more integral part of the
program's work. As a result, this proposed rule would eliminate the
separate extensive complaint and compliance review procedures in the
current rule. Relatedly, it would remove the delegation of authority in
the current regulations, as Section 3 requirements, reporting, and
compliance would be aligned with those of the applicable HUD program
offices.
Costs and Benefits
HUD has prepared a Regulatory Impact Assessment (RIA) that assesses
the anticipated costs and benefits of the proposed rule. The purpose of
Section 3 is to provide jobs, including apprenticeship opportunities,
to public housing residents and other specific low- and very low-income
residents of a local area, and contracting opportunities for businesses
that substantially employ these persons. However, the Section 3
requirement itself does not create additional jobs or contracts.
Instead, Section 3 gives priority for local jobs and contracts created
as a result of the expenditure of HUD financial assistance to Section 3
residents and businesses residing and operating in the area in which
the HUD financial assistance is expended. A reasonable estimate of the
impact of this proposed rule would be a net transfer to Section 3
workers of 3,000 to 14,000 employment opportunities, 2,000 to 4,000 of
which would be to Targeted Section 3 workers. In addition, with respect
to incomes for tenants of public housing, the Federal rental subsidies
provided to those tenants could be reduced as a result of the creation
of job opportunities resulting from the expenditure of Federal
financial assistance subject to Section 3 requirements.
If implemented as proposed, this proposed rule would result in a
reduction in reporting and recordkeeping burden of 64,270 hours and
approximately $1.2 million annually. This rule will not have any impact
on the level of funding for covered HUD programs. Funding is determined
independently by congressional appropriations, authorizing statutes and
regulatory formulas that set the amounts of the Federal financial
assistance provided by HUD grants. This proposed rule is not an
economically significant rule as defined in Executive Order 12866
(Regulatory Planning and Review).
I. Background
Section 3 of the Housing and Urban Development Act of 1968 (Pub. L.
90-448, approved August 1, 1968) (Section 3) was enacted for the
purpose of bringing economic opportunities, generated by the
expenditure of certain HUD financial assistance, to the greatest extent
feasible, to low- and very low-income persons residing in communities
where the financial assistance is expended. Section 3 recognizes that
HUD funds are often one of the largest sources of Federal funds
expended in low- and very low-income communities and, where such funds
are spent on activities such as construction and rehabilitation of
housing and other public facilities, the expenditure results in
economic opportunities. By directing HUD-funded economic opportunities
to residents and businesses in the community where the funds are
expended, the expenditure can have the double benefit of creating new
or rehabilitated housing and other facilities while providing
opportunities for employment and training for the residents of these
communities. Section 3 was amended by the Housing and Community
Development Act of 1992 (Pub. L. 102-550, approved October 28, 1992),
which required the Secretary of HUD to promulgate regulations to
implement Section 3, codified at 12 U.S.C. 1701u. HUD's Section 3
regulations were promulgated through an interim rule published on June
30, 1994, at 59 FR 33880, and the regulations are codified in 24 CFR
part 135.
In the 24 years since HUD promulgated the current set of Section 3
regulations, significant legislation has been enacted that affects HUD
programs that are subject to the requirements of Section 3 and that are
not adequately addressed in the current Section 3 regulations. This
legislation includes, but is not limited to, the following: reforms
made to HUD's Indian housing programs by the Native American Housing
Assistance and Self-Determination Act of 1996 (NAHASDA) (Pub. L. 104-
330, approved October 26, 1996); public housing reforms made by the
Quality Housing and Work Responsibility Act of 1998 (QHWRA) (Pub. L.
105-276, approved October 21, 1998); reforms made to HUD's supportive
housing programs by the Section 202 Supportive Housing for the Elderly
Act of 2010 (Pub. L. 111-372, approved January 4, 2011); and the Frank
Melville Supportive Housing Investment Act of 2010 (Pub. L. 111-347,
approved January 4, 2011).
In 2013, HUD's Office of the Inspector General conducted an audit
to assess HUD's oversight of Section 3, in response to concerns about
economic opportunities that were provided (or should have been
provided) by the expenditure of HUD financial assistance under the
American Reinvestment and Recovery Act (Recovery Act) (Pub. L. 111-5,
approved February 17, 2009). The audit found that HUD was not fully
enforcing the reporting requirements of Section 3 for recipients of
Fiscal Year 2009 Recovery Act Public Housing Capital Funds from HUD.\5\
In response to the audit and the need to update the outdated
regulations, HUD issued a proposed rule on March 27, 2015 entitled
``Creating Economic Opportunities for Low- and Very Low-Income Persons
and Eligible Businesses Through Strengthened `Section 3' Requirements''
which sought to strengthen HUD requirements. See 80 FR 16519. HUD
received more than 300 comments on the proposed rule (including
duplicate public comments). Comments came from a wide variety of
entities, including PHAs, other housing providers, organizations
representative of housing providers, governmental jurisdictions and
agencies, tenant and other housing advocacy organizations, and
individuals. All public comments can be viewed at https://www.regulations.gov/#!docketDetail;D=HUD-2015-0026.
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\5\ See: https://www.hudoig.gov/reports-publications/audit-reports/hud-did-not-enforce-reporting-requirements-of-section-3-of.
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While some commenters supported the rule, many commenters were
concerned that the proposed rule would raise the bar for compliance and
increase administrative requirements without increasing funding. Based
on the multitude of comments, HUD sought additional feedback from the
public by hosting a number of Section 3 listening sessions \6\ to
highlight ``best practices'' and to discuss barriers to implementation
across the country. The sessions provided valuable information on the
challenges and barriers for implementation that HUD hopes to address in
this new proposed rule.
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\6\ See Listening Session Notes at https://www.hud.gov/program_offices/fair_housing_equal_opp/section_3_publications_and_regulations.
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II. This Proposed Rule
HUD proposes to revise its Section 3 regulations to better achieve
the statute's goals, to make reporting more meaningful and more aligned
with statutory requirements, and to simplify
[[Page 13182]]
compliance for recipients. This proposed rule does this by aligning
reporting with desired outcomes and with data already collected by
reporting entities; clarifying the applicability and scope of the rule;
linking certain statutory prioritization categories to a new notice
that sets forth benchmarks; streamlining the rule's reporting and
oversight requirements; addressing complexities arising from the use of
multiple funding sources; simplifying the requirements for Section 3
contract language; and aligning Section 3 requirements more closely
with specific HUD program requirements.
This rule would remove existing Section 3 regulations in 24 CFR
part 135 and create a new part 75, which would be organized into four
subparts: Subpart A--General Provisions; Subpart B--Additional
Provisions for Public Housing Financial Assistance; Subpart C--
Additional Provisions for Section 3 projects; and Subpart D--Provisions
for Multiple funding sources, recordkeeping and compliance. Subparts A
and D apply to all recipients, subrecipients, contractors, and
subcontractors subject to Section 3 requirements. Subpart B provides
requirements specific to PHAs and other recipients of public housing
financial assistance. Subpart C mostly mirrors subpart B, but provides
specific requirements for recipients using funds on a Section 3
project. Part 75 would be codified in a section of HUD's CFR that
establish requirements that generally apply to HUD's programs.
Throughout this rule, the reader will find amendatory language
titled ``Alternative 1'' and ``Alternative 2.'' As discussed above, HUD
is providing the opportunity for PHAs and other recipients of public
housing financial assistance to view the new rule and provide feedback
on whether HUD should track labor hours, consistent with what HUD is
proposing for Section 3 projects, or maintain the tracking of new
hires. The language in ``Alternative 1'' is what HUD would adopt if the
final rule tracks labor hours for all public housing financial
assistance and the language in ``Alternative 2'' is what HUD would
adopt if the final rule provides separate tracking and reporting of
public housing financial assistance by new hires. At the final rule
stage, HUD will decide on either ``Alternative 1'' or ``Alternative
2,'' and maintain only one set of regulatory changes and the
definitions that apply.
HUD notes that nothing in this proposed rule would supersede the
general requirement of 2 CFR 200.319(a) that all procurement
transactions be conducted in a competitive manner. In addition, HUD
notes that 2 CFR 200.319(b) permits geographical preferences where
applicable Federal statutes expressly mandate or encourage geographic
preference, such as Section 3.
Subpart A--General Provisions
Subpart A--General Provisions contains four sections: The general
purpose of Section 3 (Sec. 75.1); the applicability of Section 3
requirements on HUD federal assistance (Sec. 75.3); new and updated
definitions applicable to this part (Sec. 75.5); and the Section 3
requirements applicable to HUD's notices of funding availability
(NOFAs) (Sec. 75.7).
Section 75.1 provides the framework for the regulation and sets
forth the purpose of Section 3, which is to ensure that economic
opportunities, most importantly employment, generated by certain HUD
financial assistance for housing and community development programs
shall be directed to low- and very low-income persons. Following the
Section 3 statute, this section provides an emphasis on providing
opportunities for those who are recipients of Federal financial
assistance for housing or residents of the community in which the
Federal financial assistance is spent.
Section 75.3 defines the application of Section 3 consistent with
the Section 3 statute. There are two categories:
(1) Public housing financial assistance: This term covers the
public housing program assistance which includes: (a) Development
assistance provided pursuant to section 5 of the United States Housing
Act of 1937; (b) operations and management assistance provided pursuant
to section 9(e) of the 1937 Act (Operating Fund) and (c) development,
modernization, and management assistance provided pursuant to section
9(d) of the 1937 Act (Capital Fund). While the statute also includes a
reference to modernization assistance pursuant to section 14 of the
Act, which was repealed by the Quality Housing and Work Responsibility
Act of 1998 (QHWARA) (Pub. L. 105-276), the former section 14
modernization program was replaced along with the operating,
maintenance, development and modernization programs that became the
Operating Fund and Capital Fund programs with assistance provided
pursuant to section 9. The Section 8 programs were never included in
the Section 3 statute and will not be covered in this proposed rule
despite being included in the current Section 3 rule.
(2) Section 3 project: This term covers assistance provided by
other HUD programs when used for housing rehabilitation, housing
construction, and other public construction projects, as described in
12 U.S.C. 1701u(c)(2). A Section 3 project will mean a housing
rehabilitation, housing construction, and other public construction
projects where the HUD assistance exceeds $200,000, and all projects
that receive funding from HUD's Lead Hazard Control and Healthy Homes
programs.
The proposed rule's threshold applies on a project basis. HUD
proposes using project funding level to define thresholds because the
amount of funding spent on the project is directly related to the
economic opportunities generated by the project.
HUD arrived at the $200,000 threshold after analyzing data from
relevant programs, including HUD's Community Development Block Grant
(CDBG) and HOME Investment Partnerships (HOME) programs. HUD considered
various thresholds in deciding to propose the $200,000 figure. HUD
estimates that of $100,000 in construction spending, $64,000 generally
goes to labor costs, and the median annual income for a construction
job is $44,730. Thus, a project below $100,000 would not generate more
than one salary. On the other hand, HUD data shows that a higher
threshold, such as $400,000, could exempt a large portion of housing
and community development projects from Section 3 funding. Fiscal year
2015 CDBG data shows that a $400,000 threshold would have exempted 90
percent of construction and rehabilitation activities, and over half of
CDBG assistance. A $200,000 threshold would still cover almost three-
quarters of CDBG funding, while exempting the smallest three quarters
of projects and eliminating administrative burdens from these small
efforts that yield relatively few employment opportunities. For the
HOME program, at least 90% of HOME funding to projects greater than 1
unit would be covered by any threshold at $400,000 or below. It is
HUD's view that $200,000 is a sufficiently high amount that, when
expended on construction-related activities, a significant amount of
those funds should be used to generate economic opportunities for low-
and very low-income persons. An exception applies for lead hazard
control and healthy homes mitigation activities, which on a per unit
remediation basis would generally involve much less than $100,000 in
HUD grant funds, and so applying a per project threshold could
effectively exempt lead hazard control and healthy homes grants from
Section 3. As a result, this rule proposes to apply Section 3
requirements to all projects
[[Page 13183]]
that receive funds from HUD's Lead Hazard Control and Healthy Homes
grant programs consistent with the current application of Section 3 to
all grants above $100,000.
Section 75.3 provides that requirements of this part apply to the
entire Section 3 project, regardless of whether the project is fully or
partially funded with HUD program assistance.
This section also clarifies that Section 3 does not apply to
material supply contracts. As discussed in this preamble, a material
supply contract is defined as a contract for the delivery of
commercially available materials and products. The proposed rule
includes a set of examples to illustrate what is meant by commercially
available materials for purchase, such as lumber, drywall, wiring,
concrete, pipes, toilets, sinks, carpets, and office supplies. In most
cases a material supply contract will include the delivery of the
materials and in those cases the delivery is also not subject to
Section 3 requirements. However, when a recipient enters into a
separate delivery contract for an order of material supplies, that
delivery contract would be subject to Section 3 requirements.
The proposed rule also provides that contracts, subcontracts,
grants, or subgrants subject to section 7(b) of the Indian Self-
Determination and Education Assistance Act (25 U.S.C. 5307(b)) or
subject to tribal preference as authorized under 101(k) of the Native
American Housing Assistance and Self-Determination Act (25 U.S.C.
4111(k)) are not subject to the requirements in this part because they
must provide preferences in employment, training, and business
opportunities to Indians and Indian organizations. Lastly, Sec. 75.3
indicates that HUD encourages recipients of HUD assistance not covered
by Section 3 to support the objectives of Section 3.
Section 75.5 provides the definitions used throughout the new part.
The section proposes to use the general HUD definitions at 24 CFR part
5 for HUD, Public Housing, and PHAs and defines Section 3 by reference
to section 3 of the Housing and Urban Development Act of 1968, as
amended (12 U.S.C. 1701u). The proposed rule also includes several
definitions for clarity including: ``1937 Act;'' ``Public housing
project;'' ``Low-income person;'' ``Qualified Census Tract;'' ``Section
8-assisted housing;'' ``Very low-income person;'' and ``YouthBuild
programs.''
HUD proposes contract terms for determining coverage of the rule:
Material supply contracts would be defined as a contract that is
made for the purchase of products and materials. HUD provides this
definition to clarify that such contracts are not covered by Section 3.
Professional services would be defined as non-construction
services, including, but not limited to, contracts for legal services,
financial consulting, accounting services, environmental assessment,
architectural services, and civil engineering services. This definition
is informed by the current separation of Section 3 business concern
ratios by building trade versus non-building trade. Professional
services will be excluded from the benchmarking requirements, but HUD
will allow voluntary reporting of these workers, as discussed below.
HUD also provides definitions for purposes of the new Section 3
reporting requirements:
Contractor would be defined as an entity entering into a contract
with a recipient to perform work in connection with the expenditure of
public housing financial assistance or for work in connection with a
Section 3 project, or a subrecipient for work in connection with a
Section 3 project.
Labor hours would be defined to mean the number of paid hours
worked by persons on Section 3 projects or employed with funds that
include public housing financial assistance. This includes the labor
hours of any contractor, subcontractor, or employee of the public
housing authority that is being paid in part by the public housing
financial assistance. For example, the labor hours performed by an
elevator maintenance contractor under a contract with the PHA would be
included in the total labor hours performed by the PHA using public
housing financial assistance.
New hire would be defined as a full- or part-time employee for
permanent, temporary, or seasonal employment opportunities that was not
on the payroll of the recipient, or of a recipient's contractor or
subcontractor or other entity receiving public housing financial
assistance at the beginning of the award. The term also includes a new
hire that was hired by a contractor or subcontractor on a per-project
basis as a result of receiving public housing financial assistance.
This definition is part of Alternative 2 for PHAs to consider in
determining if reporting should be completed using labor hours or new
hires. If Alternative 1, which uses labor hours for reporting, is
chosen, this definition will not be included at the final rule.
Public housing project is defined in 24 CFR 905.108.
Recipient would be defined to mean any entity that receives
directly from HUD Section 3 public housing financial assistance or
other financial assistance that funds a Section 3 project, including,
but not limited to: Any State, local government, instrumentality, PHA,
Indian tribe, tribal organization, or other public agency, public or
private nonprofit organization. This term excludes the ultimate
beneficiary of Federal financial assistance under the HUD program to
which Section 3 applies (for example an individual or family receiving
a housing rehabilitation grant financed with HOME assistance) and does
not include contractors and subcontractors. This term establishes the
scope of entities that would be required to report to HUD under this
proposed rule. It also defines the entities subject to the requirement
to include contractual language requiring the application of Section 3
(See Sec. Sec. 75.17 and 75.27.).
Small PHA would be defined to mean a public housing authority with
fewer than 250 public housing units. This definition allows for these
smaller entities to follow a reduced reporting process under Sec.
75.13. This definition is consistent with references to small PHAs in
24 CFR parts 902, 903, 905, 970, and 985.
Subcontractor would mean any entity that has a contract with a
contractor to undertake a portion of the contractor's obligation to
perform work in connection with the expenditure of public housing
financial assistance or a Section 3 project.
Subrecipient would be defined to have the meaning provided in the
applicable program regulations, or in 2 CFR 200.93.
Finally, this regulation would propose definitions for a Section 3
business concern, Section 3 worker, and Targeted Section 3 worker for
purpose of benchmarking:
Section 3 business concern would be defined to mean a business that
is at least 51 percent owned by low- or very low-income persons; over
75 percent of the labor hours performed for the business are performed
by low- or very low-income persons; or is at least 25 percent owned by
current public housing residents or residents who currently live in
Section 8-assisted housing. The Section 3 statute defines a business
concern that provides economic opportunities to mean a business concern
``that--(A) provides economic opportunities for a class of persons that
has a majority controlling interest in the business; (B) employs a
substantial number of such persons; or (C) meets such other criteria as
the Secretary may establish.'' The proposed definition reflects the
first two statutory
[[Page 13184]]
requirements and provides two additional types of business concerns
that meet the statutory intent. HUD believes that the 75 percent figure
is a reasonable measure for determining whether the business concern
provides economic opportunities for a substantial number of low- and
very low-income persons. Lastly, to further encourage businesses
ownership by public housing residents or residents who live in Section
8-assisted housing, this proposed rule would provide that a Section 3
business concern could be one that is at least 25 percent owned by
current public housing residents or residents who currently live in
Section 8-assisted housing. HUD also notes that a prior arrest or
conviction generally does not impact an individual's status as an owner
of a Section 3 business and that meeting the definition of a Section 3
business does not negate the requirement that the business meet the
specifications of the particular contract (e.g., construction,
supplies, etc.). However, the requirements for preventing crime in
federally assisted housing (denying admission and terminating tenancy
for criminal activity or alcohol abuse) in subpart I of 24 CFR part 5
continue to apply to Section 3. Accordingly, subpart I will apply to
applicants or tenants who would be under consideration as an owner of a
Section 3 business.
Section 3 worker would be defined to mean a worker whose income,
before being hired to work on the project, is below the income limit
established by HUD; a worker who lives in a qualified census tract; or
a worker who is employed by a Section 3 business concern. The program
statutes and regulations provide the basis for the income limit for
determining eligibility for assisted housing programs, including the
Public Housing, Section 8 project-based, Section 8 Housing Choice
Voucher, Section 202 Housing for the Elderly, and Section 811 Housing
for Persons with Disabilities programs. HUD annually establishes income
limits based on Median Family Income estimates and Fair Market Rent
area definitions for each metropolitan area, parts of some metropolitan
areas, and each non-metropolitan county. The income limits are
available at: https://www.huduser.gov/portal/datasets/il.html.
HUD would define qualified census tract as any census tract (or
equivalent geographic area defined by the Bureau of the Census) in
which at least 50 percent of households have an income of less than 60
percent of Area Median Gross Income (AMGI); or where the poverty rate
is at least 25 percent and where the census tract is designated as a
qualified census tract by HUD. Qualified census tract data can be found
here: https://www.huduser.gov/portal/datasets/qct.html. The definition
of Section 3 worker would provide that an individual's prior arrest or
conviction shall not negatively impact that individual's status as a
Section 3 worker and that meeting the definition of a Section 3 worker
does not negate the requirement that the individual be qualified for
the job. However, the requirements for preventing crime in federally
assisted housing (denying admission and terminating tenancy for
criminal activity or alcohol abuse) in subpart I of 24 CFR part 5
continue to apply to individuals identified as Section 3 workers or as
owners of a Section 3 business.
Targeted Section 3 worker would be defined as provided in Sec.
75.11 for the public housing financial assistance and as provided in
Sec. 75.19 for a Section 3 project. For certain projects receiving
funding from multiple sources, the definition is provided in Sec.
75.29.
Section 75.7 would establish requirements applicable to HUD's NOFAs
for public housing financial assistance and Section 3 projects. HUD
would require that all NOFAs that award funds covered by Section 3 will
include notice that the assistance is subject to part 75. This section
would also provide that HUD may include, where appropriate, points or
bonus points for exceeding Section 3 requirements. This proposed rule
would remove the requirements in the currently codified part 135 that
require NOFA applicants to submit certifications that the applicant
will comply with the Section 3 requirements, require a statement of
activities intended by recipients of assistance covered by Section 3,
and require that the NOFA give preference for Section 3 requirements.
HUD's removal of these requirements is consistent with how HUD
implements other applicable program requirements. Further, these
additional burdens are unnecessary as recipients already agree to
comply with all applicable program requirements, including Section 3
requirements, when they submit a NOFA.
Subpart B--Additional Provisions for Public Housing Financial
Assistance
Subpart B--Additional Provisions for Public Housing Financial
Assistance contains five sections, which set out the requirements for
PHAs and other recipients of public housing financial assistance, as
defined in Sec. 75.3. The subpart includes the following: Requirements
(Sec. 75.9); Targeted Section 3 worker definition for public housing
financial assistance (Sec. 75.11); Section 3 safe harbor (Sec.
75.13); Reporting (Sec. 75.15); and Contract Provisions (Sec. 75.17).
Section 75.9 would incorporate the statutory Section 3 requirements
for prioritizing categories of Section 3 workers and businesses when
using public housing financial assistance defined in Sec. 75.3(a)(1).
The statutory prioritization requires that a PHA or other recipient of
public housing financial assistance must make its best efforts,
consistent with existing Federal, state, and local laws and
regulations, to provide employment and training opportunities generated
by the public housing financial assistance to Section 3 workers in the
following priority order:
(1) To residents of the public housing projects for which the
public housing financial assistance is expended;
(2) To residents of other public housing projects managed by the
PHA that is expending assistance or to residents of other Section 8-
assisted housing managed by the PHA;
(3) To participants in YouthBuild programs; and
(4) To low- and very low-income persons residing within the
metropolitan area (or nonmetropolitan county) in which the assistance
is expended.
The Section 3 statute also requires that a PHA or other recipient
of public housing financial assistance must make its best efforts to
award contracts and subcontracts to business concerns that provide
economic opportunities to Section 3 workers in the following priority
order:
(1) To Section 3 business concerns that provide economic
opportunities for residents of the public housing projects for which
the assistance is provided;
(2) To Section 3 business concerns that provide economic
opportunities for residents of other public housing projects managed by
the PHA that is providing the assistance or for residents of Section 8-
assisted housing managed by the PHA;
(3) To YouthBuild programs; and
(4) To Section 3 business concerns that provide economic
opportunities for Section 3 workers residing within the metropolitan
area (or nonmetropolitan county) in which the assistance is provided.
Section 75.11 would establish the definition of a ``Targeted
Section 3 worker'' for PHAs and other recipients of public housing
financial assistance. This definition is used for reporting and
tracking by HUD and to ensure that PHAs and other recipients use their
best
[[Page 13185]]
efforts to provide employment opportunities to the categories of
workers in certain priority categories established by the Section 3
statute, as well as to all residents of public housing projects or
Section 8-assisted housing, and to workers employed by Section 3
business concerns. The definition of a ``Targeted Section 3 worker''
for subpart B has an Alternative 1 definition and Alternative 2
definition to reflect the option of reporting labor hour or new hires.
Alternative 1: Would provide that a Targeted Section 3 worker for
subpart B is a worker employed by a Section 3 business concern, or a
worker who currently is or who was when hired by the worker's current
employer a resident in a public housing project or Section 8-assisted
housing; a resident of other projects managed by the PHA that is
expending assistance; or a current YouthBuild participant.
Alternative 2: Would provide that a Targeted Section 3 worker for
subpart B is a new hire employed by a Section 3 business concern, or a
new hire employed by the worker's current employer who is also a
resident in a public housing project or Section 8-assisted housing; a
resident of other projects managed by the PHA that is expending
assistance; or a current YouthBuild participant.
In both alternatives, the definition focuses on certain targeted
categories for public housing financial assistance. Additionally, the
definition includes all employees of a Section 3 business concern to
recognize the statutory requirement for recipients to make best efforts
to award contracts to Section 3 business concerns. The definition also
includes all residents of public housing projects, as well as residents
receiving project-based or tenant-based Section 8 assistance, and
YouthBuild participants combining these categories allows for a single,
streamlined outcome metric (labor hours) that reflects both the
employment and contracting components of the Section 3 statute, as well
as HUD's desire to incentivize the employment of all residents who live
in public housing or receive Section 8 assistance, and also in the
YouthBuild program.
The Targeted Section 3 worker concept is consistent with the goals
of expanding employment opportunities for particular individuals that
receive federal assistance for housing and of expanding subcontracting
opportunities for businesses that are owned by or substantially employ
such persons.
The first alternative focuses on labor hours and includes current
employees and those recently hired by the employer. HUD believes that
counting labor hours for employees who are already employed and qualify
as a Targeted Section 3 worker ensures that such workers have continued
long-term employment. HUD has also heard from stakeholders that some
employers may fire and re-hire people, hire people for very short-term
jobs, and engage in other maneuvering to meet the Section 3
requirements. HUD believes counting labor hours is consistent with the
statute and mitigates contractors' ability to manipulate their Section
3 outcomes.
Section 75.13 would provide PHAs and other recipients a safe harbor
provided they certify to following the prioritization in Sec. 75.9 and
meet or exceed the Section 3 benchmarks that HUD will prescribe through
notice. The safe harbor proposed by this rule, like the safe harbor
provided by the currently codified rule, would allow for recipients
that meet this standard to be free from additional Section 3 reporting.
However, this proposed rule also provides that the safe harbor exists
only to the extent that no evidence to the contrary is presented to
HUD, and that meeting the safe harbor does not exempt PHAs and other
recipients of public housing financial assistance from maintaining
records of compliance for general program review. See Sec. Sec. 75.31
and 75.33.
This section would also set forth the process of establishing
benchmarks. HUD proposes to establish Section 3 benchmarks for Section
3 workers, Targeted Section 3 workers, or both through a document
published in the Federal Register. The rule would provide that HUD may
establish a single nationwide benchmark or may establish multiple
benchmarks based on geography, the type of public housing financial
assistance, or other variables. When establishing the Section 3
benchmarks, HUD would consider the industry averages worked by specific
categories of workers or in different localities or regions; data
reported by PHAs or other recipients of public housing financial
assistance pursuant to this section; and any other factors HUD deems
important. In establishing the Section 3 benchmarks, HUD would exclude
professional service contracts from the benchmark ratios. HUD plans to
update the benchmarks through a document published in the Federal
Register, subject to public comment, not less frequently than once
every three years. Providing the benchmark through Federal Register
notice would allow HUD to revise the benchmarks where warranted in
response to the data HUD gathers and based on feedback HUD receives
from recipients. Over time, the benchmarks can become more tailored and
a more reliable indicator for when enforcement efforts should be
undertaken, giving the safe harbors more value and creating a greater
incentive for recipients, contractors, and subcontractors to exceed the
safe harbors. Section 3 benchmarks will consist of the following
ratios:
Alternative 1: (1) The number of labor hours worked by Section 3
workers divided by the total number of labor hours worked by all
workers employed with public housing financial assistance in the PHA's
fiscal year; (2) the number of labor hours worked by Targeted Section 3
workers, as defined in Sec. 75.11(a) \7\ divided by the total number
of labor hours worked by all workers employed with public housing
financial assistance in the PHA's fiscal year; or (3) ratios for both
(1) and (2).
---------------------------------------------------------------------------
\7\ This refers to Sec. 75.11(a) Alternative 1.
---------------------------------------------------------------------------
Alternative 2: (1) The number of new hires that are Section 3
workers divided by the total number of new hires employed with public
housing financial assistance in the PHA's fiscal year; or (2) the
number of new hires that are Targeted Section 3 workers, as defined in
Sec. 75.11(a),\8\ divided by the total number of new hires employed
with public housing financial assistance in the PHA's fiscal year; or
(3) ratios for both (1) and (2).
---------------------------------------------------------------------------
\8\ This refers to Sec. 75.11(a) Alternative 2.
---------------------------------------------------------------------------
Section 75.15 proposes the process for PHAs and other recipients of
public housing financial assistance to report to HUD on the data for
the benchmarks. Specifically, it requires that the following be
reported:
Alternative 1: The total number of total labor hours worked with
the public housing financial assistance, labor hours worked by Section
3 workers, and labor hours worked by Targeted Section 3 workers.
However, the rule would provide a limited exception where PHAs and
other recipients of public housing financial assistance could use the
reporting of a good faith assessment of the labor hours of a full-time
or part-time employee from contractors and subcontractors that have not
been subject to requirements specifying time and attendance reporting,
and do not have systems already in place to track labor hours. This
small carve-out provides a limited exception for recipients to report
on the labor hours from contractors and subcontractors that do not
already track labor hours without necessitating any change in time and
attendance or payroll systems for the reporting contractors and
subcontractors. However, it is not a permanent exemption and if in the
[[Page 13186]]
future the contractor or subcontractor is required to track labor hours
pursuant to some other authority, or begins to voluntarily track labor
hours, the exception would no longer apply.
Alternative 2: The total number of new hires with public housing
financial assistance, total number of new hires that are Section 3
workers, and total number of new hires that are Targeted Section 3
workers.
Both Alternative 1 and Alternative 2 would provide that reporting
may, but is not required to, include professional service jobs. Given
the challenges HUD has heard in hiring Section 3 workers and Targeted
Section 3 workers in professional service jobs, HUD has decided not to
include those jobs in its benchmark ratio and instead proposes to make
the reporting of professional services jobs voluntary. Therefore, if a
PHA, other recipient of public housing financial assistance,
contractor, or subcontractor has professional service employees that
are Section 3 workers and Targeted Section 3 workers, the PHA or other
recipient of public housing financial assistance may report on those
jobs and count them to increase their total numbers. By including labor
hours for professional services work in the numerators of these
calculations (i.e., labor hours for the Section 3 workers and Targeted
Section 3 workers), but not in the denominators (i.e., all labor hours
worked), HUD is also recognizing the value of this more challenging
effort to create opportunities in the professional services context.
Section 75.15 would provide that small PHAs will not be required to
report the number of labor hours or new hires. Small PHAs would instead
be required to report their qualitative efforts. PHAs and other
recipients of public housing financial assistance that do not meet the
Section 3 benchmarks described in Sec. 75.11 would also have to
provide reports on their qualitative efforts. HUD is considering some
of the following to signify qualitative efforts: Outreach efforts to
generate job applicants who are Targeted Section 3 workers; direct on-
the-job training (including apprenticeships); indirect training such as
arranging for, contracting for, or paying tuition for, off-site
training technical assistance to help Section 3 workers; and outreach
efforts to identify and secure bids from Section 3 business concerns.
HUD plans to create a form for tracking and reporting qualitative
efforts, to ease burden on recipients.
All reporting either under the general reporting framework or the
qualitative reporting requirement would be on an annual basis and
reported to HUD in a manner consistent with reporting requirements for
the applicable HUD program. HUD believes that requiring reporting
annually, but consistent with timeframes that PHAs and other recipients
of public housing financial assistance are already using to submit
documents to HUD, will relieve existing burden. For example, when an
annual plan is completed for a PHA the Section 3 reporting would be
done at that time or when a recipient of public housing financial
assistance must submit an annual report. HUD is also looking to include
reporting into existing systems rather than requiring PHAs and other
recipients to log into and report under a separate system, such as
HUD's existing Section 3 Performance Evaluation and Registration System
(SPEARS).
Section 75.17 would establish requirements for PHAs and other
recipients of public housing financial assistance to include language
referencing Section 3 in contracts that are subject to Section 3. The
proposed rule would provide that PHAs and other recipients of public
housing financial assistance include contractual language applying
Section 3 to any contractor. PHAs and other recipients of public
housing financial assistance would also require that contractors
include contractual language applying Section 3 to any subcontract.
Lastly, the section would provide that regardless of whether Section 3
language exists in a contract, PHAs and other recipients of public
housing financial assistance must ensure the contractors and
subcontractors are in compliance with Sec. 75.9. As distinguished from
currently codified Sec. 135.38, this proposed rule would not codify
the exact contractual language that PHAs and other recipients of public
housing financial assistance must include and would no longer require
the use of this contract provision below the initial subcontract level.
HUD believes this will reduce regulatory burdens. This change does not,
however, limit the requirement that public housing financial assistance
is used consistent with the statutory requirements in Sec. 75.9.
Subpart C--Additional Provisions for Section 3 Projects
Subpart C--Additional Provisions for Section 3 Projects sets out
the requirements for recipients working on a Section 3 project, as
defined in Sec. 75.3. The sections include: Requirements (Sec.
75.19); Targeted Section 3 worker definition for Section 3 projects
(Sec. 75.21); Section 3 safe harbor (Sec. 75.23); Reporting (Sec.
75.25); and Contract Provisions (Sec. 75.27).
Section 75.19 would incorporate the statutory Section 3
requirements for prioritizing categories of Section 3 workers and
businesses under other HUD funds that are used for Section 3 projects,
as defined in Sec. 75.3(a)(2). The statutory prioritization ensures
that employment and training opportunities arising in connection with
Section 3 projects are provided, consistent with existing Federal,
state and local laws and regulations, to Section 3 workers within the
metropolitan area (or nonmetropolitan county) in which the project is
located to the greatest extent feasible to these following groups:
(1) Section 3 workers residing within the service area or the
neighborhood of the project; and
(2) To participants in YouthBuild programs.
The Section 3 statute also requires that to the greatest extent
feasible contracts and subcontracts awarded in connection with Section
3 projects are provided to Section 3 business concerns that provide
economic opportunities to Section 3 workers residing within the
metropolitan area (or nonmetropolitan county) in which the project is
located. Those efforts should be directed as follows:
(1) Section 3 Business concerns that provide economic opportunities
for Section 3 workers residing within the service area or the
neighborhood of the project; and
(2) YouthBuild programs.
For the purposes of Section 3 only, HUD would define ``Service area
or the neighborhood of the project'' to mean an area within 1 mile of
the Section 3 project or, if fewer than 5,000 people live within one
mile of a Section 3 project, within a circle centered on the Section 3
project that is sufficient to encompass a population of 5,000 people
according to the most recent U.S. Census. HUD notes above that
consistent with existing Federal regulations, Federal procurement
requirements at 2 CFR 200.319(a) must continue to be followed, as
discussed above.
Section 75.21 would define a ``Targeted Section 3 worker'' for
Section 3 projects. This definition would be used for reporting and
tracking by HUD so that recipients will focus on reaching the priority
workers in the statute and workers employed by Section 3 business
concerns. HUD would define a ``Targeted Section 3 worker'' for subpart
C as a worker employed by a Section 3 business concern, or a worker who
is or was when hired by the worker's current employer: (1) A Section 3
worker living
[[Page 13187]]
within the service area or the neighborhood of the project, as this
term is described in Sec. 75.5; or (2) a current YouthBuild
participant. As with the definition of ``Targeted Section 3 worker''
for PHAs and other recipients of public housing financial assistance,
this definition would include current YouthBuild participants.
Additionally, all employees of Section 3 business concerns would be
considered Targeted Section 3 workers to recognize the statutory
requirements to award contracts to Section 3 business concerns, to the
greatest extent feasible, while providing for a single, streamlined
outcome metric (labor hours) that reflects both the employment and
contracting components of the Section 3 statute.
HUD believes counting individuals who live within one mile of the
worksite or within a circle centered around the worksite that
encompasses 5,000 people provides a definitive means of determining who
counts as a Targeted Section 3 worker within the service area or the
neighborhood of the project. HUD proposes to use this 5,000-person
figure because HUD examined current CPD projects and determined that
most (77%) had a population of 5,000 people within one mile of the
project site, and the median project had 4,627 potential Targeted
Section 3 workers. Further, an individual could live across the street
from a project and be differently affected by development activities,
and still not be considered to be living in the same ``neighborhood''
as a project because of how the jurisdiction's neighborhood boundaries
are drawn. HUD plans to create and provide at the issuance of a final
rule a web tool for recipients, subrecipients, contractors, and
subcontractors that will help in determining the geographic area that
encompasses Targeted Section 3 workers under this definition. The
discussion in subpart B of this preamble pertaining to the YouthBuild
program and participants applies for subpart C as well.
Section 75.23 would provide a recipient undertaking a Section 3
project a safe harbor provided the recipient certifies to following the
prioritization in Sec. 75.19 and meets or exceeds the Section 3
benchmarks that HUD will prescribe through notice. The safe harbor
proposed by this rule, like the safe harbor provided by the currently
codified rule, would allow for recipients that meet this standard to be
free from additional Section 3 reporting. However, this proposed rule
provides that the safe harbor exists only to the extent that no
evidence to the contrary is presented to HUD, and that meeting the safe
harbor does not exempt recipients from maintaining records of
compliance for general program review. See Sec. Sec. 75.31 and 75.33.
This section would also establish the process of establishing
benchmarks, consistent with subpart B. Similar to the process for
establishing the benchmarks for public housing financial assistance
under subpart B, HUD proposes to establish Section 3 benchmarks for
Section 3 workers, Targeted Section 3 workers, or both through a
document published in the Federal Register.
Section 75.25 would provide the reporting requirements for Section
3 projects by recipients to HUD for the benchmarks. Specifically, Sec.
75.25 would require that the total number of total labor hours, labor
hours worked by Section 3 workers, and labor hours worked by Targeted
Section 3 workers on a Section 3 project be reported to HUD. However,
the rule would provide a limited exception for recipients, and for
subrecipients, contractors, and subcontractors that report up to
recipients, that are not subject to requirements specifying time and
attendance reporting. The rule does not require any change in the time
and attendance, or payroll systems used by recipients, subrecipients,
contractors, or subcontractors. Where labor hours of a full-time or
part-time employee are not already tracked, this proposed rule would
allow the recipient to report labor hours of those employees based on a
good faith assessment. This small carve-out would apply in a limited
situation and was created not to increase burden on recipients,
subrecipients, contractors, and subcontractors that are not tracking
labor hours. However, if in the future the recipient, subrecipient,
contractor, or subcontractor is required to track labor hours, or does
so voluntarily, the exception would no longer apply. This section also,
consistent with Sec. 75.15 in subpart B, would provide that Section 3
project recipients may, but are not required to, report professional
service jobs. Therefore, if a Section 3 project has labor hours for
professional service employees that are Section 3 workers and Targeted
Section 3 workers, the recipient may, but is not required to, report on
those jobs and count them to increase their total numbers. By including
labor hours for professional services work in the numerators of these
calculations (i.e., labor hours for the Section 3 workers and Targeted
Section 3 workers), but not in the denominators (i.e., all labor hours
worked), HUD is also recognizing the value of this more challenging
effort to create opportunities in the professional services context.
Section 75.25 would also provide that a recipient that does not
meet the Section 3 benchmarks described in Sec. 75.21 would be
required to report on its qualitative efforts. HUD is considering some
of the following to signify qualitative efforts: Outreach efforts to
generate job applicants who are Targeted Section 3 workers; direct on-
the job training (including apprenticeships); indirect training such as
arranging for, contracting for, or paying tuition for, off-site
training technical assistance to help Section 3 workers; and outreach
efforts to identify and secure bids from Section 3 business concerns.
HUD plans to provide a form for ease in reporting qualitative
reporting. All reporting either under the general reporting framework
or the qualitative reporting requirement must be submitted annually to
HUD in a manner consistent with reporting requirements for the
applicable HUD program. As discussed in this preamble, HUD believes
that requiring reporting consistent with existing reports will decrease
administrative burden on recipients, and HUD will continue to look for
ways to streamline reporting in other ways, such as using existing
program-specific reporting systems. The proposed rule further allows
projects to be reported on a project-by-project basis, with each annual
report reflecting projects completed within the reporting year.
Section 75.27 would establish contract requirements for Section 3
project recipients. Specifically, the proposed rule would require that
a recipient of a Section 3 project include language applying Section 3
to any subrecipient agreement, program regulatory agreement, or
contract for a Section 3 project. The proposed rule would also require
that recipients of Section 3 projects ensure that subrecipients,
contractors, and subcontractors meet the requirements in Sec. 75.19.
As noted in this preamble, HUD is not codifying the language that
recipients and contractors working on Section 3 projects are required
to include in subrecipient agreements and subcontracts and is limiting
the requirement to include language only to the contract level. HUD
believes these changes will reduce the burden on the regulated entity,
but HUD notes that it does not change the requirement that Section 3
project hiring must be consistent with the statutory requirements in
Sec. 75.19.
[[Page 13188]]
Subpart D--Provisions for Multiple Funding Sources, Recordkeeping, and
Compliance
Subpart D sets out the requirements for recipients of multiple
types of HUD financial assistance subject to Section 3. The sections
include compliance requirement for recipients when in receipt of
multiple funding sources (Sec. 75.29); recordkeeping requirements
(Sec. 75.31); and compliance requirements (Sec. 75.33).
Section 75.29 would provide requirements for recipients to follow
when in receipt of multiple funding sources. Section 75.29(a) would
provide that if a housing rehabilitation, housing construction, or
other public construction project is subject to Section 3 requirements
pursuant to both Sec. 75.3, paragraphs (a)(1) and (2), the recipient
must follow subpart B of this proposed rule for the public housing
financial assistance funds and may follow either subpart B or subpart C
for the housing and community development financial assistance funds.
For example, when a PHA receives public housing financial assistance
and a community development block grant for a project to build a
playground, the PHA can follow either option in paragraph (a) for the
community development block grant funds to comply with Section 3
requirements. For the funding under Sec. 75.3(a)(2), a Targeted
Section 3 worker is any worker who meets the definition of a Targeted
Section 3 worker in either subpart B or subpart C of this part. As with
other sections in the rule, Sec. 75.29 provides two different
alternatives depending on whether PHAs will be required in a final rule
to report using labor hours or new hires. If the final rule provides
for the use of new hires for public housing financial assistance, when
multiple funding sources are used PHAs would be required to report both
labor hours and new hires.
The section also proposes in paragraph (b) that if a housing
rehabilitation, housing construction, or other public construction
project is subject to Section 3 pursuant to multiple housing and
community development financial assistance programs, the recipient or
recipients must follow subpart C of this part and report to one HUD
program office, as prescribed by HUD. This section will make the
application of Section 3 requirements easier for recipients that work
with multiple funding sources and ease reporting burden. For example,
when CDBG funds and a Lead Hazard Control grant are combined, the
recipients would follow the paragraph (b) requirements to comply with
Section 3 requirements. In this case, HUD would designate reporting to
only one program office.
Section 75.31 would require that HUD be provided access to records,
reports, and other documents or items that are maintained to
demonstrate compliance with the requirements of this part, or that are
maintained in accordance with the regulations governing the specific
HUD program. This section also provides directions on what
documentation must be maintained for Section 3 workers and Targeted
Section 3 workers. For a Section 3 worker, the recipient would be
required to maintain certification, or ensure that a subrecipient,
contractor, or subcontractor that employs the worker maintains
certification that the worker either meets the income limit established
by HUD, the worker participates in a means-tested program such as
public housing or Section-8 assisted housing, that the worker's
residency is in a qualified census tract or that the worker is employed
by a Section 3 business.
For a Targeted Section 3 worker, the recipient subject to subpart B
must maintain certification, or ensure that a contractor or
subcontractor that employs the worker maintains certification that the
worker resides in public housing or Section-8 assisted housing or the
worker is employed by a Section 3 business. A third option under
Alternative 1 and 2 is a certification that the employee is a
YouthBuild participant.
For a Targeted Section 3 worker, the recipient subject to subpart C
would be required to maintain a certification, or ensure that a
subrecipient, contractor, or subcontractor that employs the worker
maintains certification that the worker's residence is within 1 mile of
the work site or, if fewer than 5,000 people live within 1 mile of a
work site, within a circle centered on the work site that is sufficient
to encompass a population of 5,000 people according to the most recent
U.S. Census; that the worker is employed by a Section 3 business; or
that the worker is a YouthBuild participant. This section also requires
that documentation is maintained for the time period required for
record retentions in accordance with applicable program regulations, or
in the absence of applicable program regulations, 2 CFR part 200.
Section 75.33 proposes the compliance requirements for recipients.
It would require that records demonstrating compliance be maintained
and provides that HUD would conduct compliance and enforcement actions
in conjunction with normal program oversight. It also notes that
complaints alleging failure of compliance with part 75 may be reported
to the HUD program office responsible for the public housing financial
assistance or Section 3 project. HUD believes that the Section 3
requirements should be handled consistent with other program
requirements that a recipient is subject to when accepting HUD funds.
As result, this proposed rule provides that while HUD would monitor
compliance with the requirements, the applicable HUD program office
would determine appropriate methods by which to oversee Section 3
compliance. HUD would be able to impose appropriate remedies and
sanctions in accordance with the laws and regulations for the program
under which the violation was found. HUD would continue to compile the
information in a report on all expenditures subject to Section 3 for
release to the public, and HUD believes providing for a program-
specific implementation, while maintaining consistent review processes
across programs, will ease burden on the entities subject to the
Section 3 requirements.
III. Specific Questions for Comment
While HUD welcomes comments on all aspects of this proposed rule,
HUD specifically requests comments on the following:
1. HUD seeks comments on the use of the statutory terms ``best
efforts'' and ``greatest extent feasible'' in this proposed rule.
Specifically, HUD seeks comments on whether this proposed rule should
define these terms, whether the two terms should be considered
interchangeable, whether only one term should be used, how the proposed
rule should apply these terms relative to HUD's efforts to increase
employment and training opportunities for low- and very low-income
persons, and how recipients can most effectively/efficiently
demonstrate they have satisfied these definitions in reporting to HUD.
In accordance with the Section 3 statute, both HUD's existing Section 3
rule and this proposed rule do not provide an absolute mandate that
employers hire Section 3 workers or that HUD funding recipients provide
contracting opportunities to Section 3 businesses. Such a mandate would
be infeasible, as there could be situations where no Section 3 workers
or businesses are available or are qualified. However, HUD emphasizes
its intention that the terms ``best efforts'' and ``greatest extent
feasible'' should be read as very narrow qualifiers and seeks comment
on how to best convey that.
[[Page 13189]]
As background, HUD's existing Section 3 rule provides that
employment and other economic opportunities generated by certain HUD
financial assistance must be directed to low and very low-income
persons to the greatest extent feasible. The term ``best efforts'' is
not used in the existing rule. This proposed rule contains requirements
that more closely track the language of the Section 3 statute. Under
this proposed rule, PHAs and other recipients receiving public housing
financial assistance and their contractors and subcontractors must make
their ``best efforts'' to provide employment and training opportunities
generated by the public housing financial assistance to Section 3
workers in the statutorily-mandated order of priority, and must make
their ``best efforts'' to award contracts and subcontracts to business
concerns that provide economic opportunities to Section 3 workers in
the statutorily-mandated order of priority. Also, following the Section
3 statute, this proposed rule would provide that: To the ``greatest
extent feasible,'' recipients of funds in other HUD programs that
provide housing and community development assistance must ensure that
employment and training opportunities arising in connection with
Section 3 projects are provided to Section 3 workers within the
metropolitan area (or nonmetropolitan county) in which the project is
located, and where feasible, priority should be given to specific
categories of Section 3 workers; and contracts for work awarded in
connection with Section 3 projects should be provided to Section 3
business concerns that provide economic opportunities to Section 3
workers residing within the metropolitan area (or nonmetropolitan
county) in which the project is located, to the ``greatest extent
feasible.''
2. HUD specifically requests comments on the proposal to move to
labor hours or retain new hires for public housing financial assistance
reporting and tracking. As discussed above, HUD believes that tracking
labor hours consistent with existing tracking for prevailing wage
requirements would reduce burden on recipients. HUD also believes that
tracking labor hours will better allow HUD to determine if long-term
employment opportunities are being generated. Unlike a labor hours
measure, the new hire measure does not consider the share of actual
work done by low- and very low-income workers, and new Section 3 hires
may not be given the opportunity to work a substantial number of hours.
By using a new hire measure, the Section 3 obligation is fulfilled by
hiring Section 3 workers for jobs of any duration, rather than
prioritizing opportunities for sustained employment. Additionally,
using a new hire measure explicitly values entry rather than retention
of workers, and thus provides an incentive for high turnover. While HUD
believes that using labor hours for all financial assistance subject to
Section 3 requirements will reduce burden, HUD has heard from some PHAs
that they may prefer to maintain the use of new hires. HUD requests
those PHAs provide feedback on why maintaining the new hire framework
is a benefit. HUD seeks comments from PHAs on alternative 2 regulatory
language that would retain the new hire framework for tracking public
housing financial assistance, but with the same benchmarking
requirements that are in this proposed rule. HUD also seeks comments on
how retaining new hires for public housing financial assistance while
using labor hours for Section 3 projects will work for recipients,
contractors, and subcontractors, especially for those who work with
multiple funding sources.
3. As discussed in this preamble, this proposed rule would set the
threshold for applicability of Section 3 requirements for Section 3
projects to when the amount of the assistance to the project exceeds
$200,000. HUD also provides that all projects that receive funding from
HUD's Lead Hazard Control and Healthy Homes programs are covered, and
notes that Section 8 programs were not included in the Section 3
statute and are not covered in this rule. HUD seeks comment on whether
an alternate threshold would be more appropriate or equally effective
to the proposed $200,000 per project threshold. HUD also seeks comment
on the inclusion of all projects under the HUD's Lead Hazard Control
and Healthy Homes programs and exclusion of Section 8 programs.
In addition to seeking comments on an appropriate per project
threshold, HUD seeks comments on whether the threshold for Section 3
projects should be established by project, total funding received by
the recipient, or whether the threshold should be based on total funds
expended by a recipient. Establishing a project threshold has
advantages in that it ties Section 3 obligations to the specific
projects that are generating economic opportunities. However, HUD
understands that there may be disadvantages to using a threshold based
on project size. The term ``project'' is defined differently by
different HUD programs, which could make a uniform application of this
rule difficult. Also, recipients might be able to change the scope of
what would be considered a ``project'' to avoid compliance with Section
3.
If HUD were to use a threshold based on total funding a recipient
receives, rather than a per-project threshold, HUD seeks comment on
whether the $200,000 threshold included in this proposed rule should be
maintained, or whether the rule should adopt a different threshold.
Using the $200,000 threshold as proposed in this rule, HUD estimates
that less than 4 percent of grantees receiving funds from HUD's Office
of Community Planning and Development Program will be exempt from
Section 3, and less than 0.1 percent of total awards will be exempt.
Applying a larger recipient threshold, such as $400,000, would increase
the number of recipients exempted from Section 3 requirements to 20
percent and only increase the amount of funding exempt from Section 3
coverage to 1.5 percent. This would significantly reduce compliance
burden from the current rule for smaller grantees without significantly
reducing the funds subject to Section 3.
4. HUD seeks comment on HUD's proposal to include hours worked by
Section 3 business employees in the Targeted Section 3 Worker
definitions as a way to report all Section 3 activities in a single
metric rather than reporting on Section 3 business concern
participation separately through the existing aggregate dollars spent
calculation. HUD also seeks comment on whether the changes to the
Section 3 business concern definition are appropriate to the proposed
new framework, especially the change that to qualify as a Section 3
business over 75 percent of the labor hours performed for the business
must be performed by low- or very low-income persons versus the current
requirement that 30 percent of permanent, full-time employee, include
persons who are currently Section 3 residents, or within 3 years of the
date of first employment with the business concern were Section 3
residents.
5. As explained by this preamble, this proposed rule would provide
that small PHAs would not be required to report labor hour or new hire
figures to HUD. HUD seeks comment on whether small PHAs should be
required to report as other PHAs are if they put out a bid for a single
procurement that exceeds the project threshold discussed in the above
paragraph.
6. HUD seeks comments on whether Section 3 requirements, as it
applies to Section 3 projects, should apply to all subcontractors, and
whether at a certain level HUD should consider reducing the
[[Page 13190]]
reporting or compliance burden for subcontractors.
7. HUD requests comment on whether its initial and future
benchmarks should include benchmarks for both the number of labor hours
worked by Section 3 workers divided by the total number of labor hours
for all workers and the number of labor hours worked by Targeted
Section 3 workers divided by the total number of labor hours for all
workers. Alternatively, HUD seeks comment on limiting the benchmark to
include Targeted Section 3 workers only.
8. For Section 3 projects, the statute requires that ``where
feasible, priority should be given to low- and very low-income persons
residing within the service area of the project or the neighborhood in
which the project is located.'' The statute does not define
``neighborhood'' or ``service area'' for purposes of how recipients
determine where they should focus their prioritization. The lack of
definitions complicates compliance for contractors, subcontractors, and
grantees receiving multiple types of HUD financial assistance. HUD
proposes to provide a definition for recipients to use when
prioritizing and reporting workers for Section 3 projects. The
definition differs from existing regulatory definitions and local or
state definitions, and HUD specifically requests comment on whether the
definition works for recipients or if a different definition for
``neighborhood'' or ``service area'' is needed for purposes of Section
3. HUD also asks whether the 1 mile and 5,000 population radius is an
appropriate geographic size of a `neighborhood' or `service area'.
9. HUD provides that a Targeted Section 3 worker includes current
YouthBuild participants and asks whether that definition should be
expanded to include previous YouthBuild workers that are under 24 years
of age or those who are still eligible to participate in YouthBuild,
but may have graduated out of the program.
IV. Findings and Certifications
Regulatory Review--Executive Orders 12866 and 13563
Under Executive Order 12866 (Regulatory Planning and Review), a
determination must be made whether a regulatory action is significant
and, therefore, subject to review by the Office of Management and
Budget (OMB) in accordance with the requirements of the order.
Executive Order 13563 (Improving Regulations and Regulatory Review)
directs executive agencies to analyze regulations that are ``outmoded,
ineffective, insufficient, or excessively burdensome, and to modify,
streamline, expand, or repeal them in accordance with what has been
learned.'' Executive Order 13563 also directs that, where relevant,
feasible, and consistent with regulatory objectives, and to the extent
permitted by law, agencies are to identify and consider regulatory
approaches that reduce burdens and maintain flexibility and freedom of
choice for the public.
This rule was determined to be a ``significant regulatory action''
as defined in Section 3(f) of the order (although not an economically
significant regulatory action under the order). Consistent with
Executive Order 13563, this rule creates new part 75 regulations that
would replace the part 135 regulations, with the intention to make
compliance with Section 3 more effective and less burdensome, and
therefore, help to contribute to job creation for low- and very low-
income persons. As noted earlier in this preamble, HUD has prepared an
initial Regulatory Impact Analysis (RIA) that addresses the costs and
benefits of the proposed rule. HUD's RIA is part of the docket file for
this rule.
The docket file is available for public inspection in the
Regulations Division, Office of the General Counsel, Room 10276, 451
7th Street SW, Washington, DC 20410-0500. Due to security measures at
the HUD Headquarters building, please schedule an appointment to review
the docket file by calling the Regulations Division at 202-402-3055
(this is not a toll-free number). Individuals with speech or hearing
impairments may access this number via TTY by calling the Federal Relay
Service at toll-free 800-877-8339.
Environmental Impact
The proposed rule does not direct, provide for assistance or loan
and mortgage insurance for, or otherwise govern or regulate, real
property acquisition, disposition, leasing, rehabilitation, alteration,
demolition, or new construction, or establish, revise, or provide for
standards for construction or construction materials, manufactured
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this
proposed rule is categorically excluded from environmental review under
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).
Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538)
(UMRA) establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and on the private sector. This proposed rule does not
impose a Federal mandate on any state, local, or tribal government, or
on the private sector, within the meaning of UMRA.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) generally
requires an agency to conduct a regulatory flexibility analysis of any
rule subject to notice and comment rulemaking requirements, unless the
agency certifies that the rule will not have a significant economic
impact on a substantial number of small entities. As has been discussed
in this preamble, this rule proposes to update HUD's Section 3
regulations and replace them with a new 24 CFR part 75, for which the
objective is to increase employment opportunities for low- and very
low-income persons and businesses that are owned by or employ such
persons. These entities generally are small and therefore strengthening
the requirements of Section 3 should benefit small businesses that are
Section 3 businesses. This rule also considers the burden on small
PHAs, defined in this proposed rule as a public housing authority that
manages or operates fewer than 250 public housing units, and reduces
the burden on them through a new streamlined reporting process that
would not require them to report labor hours or new hires. There are
approximately 2,950 PHAs, of which approximately 2,250 are small.
As more fully discussed in the accompanying RIA, the number of
economic opportunities generated for Section 3 residents and businesses
will not increase to the degree that this rule would have a significant
economic impact on a substantial number of small entities. In addition,
for those small entities that must comply with this proposed rule, the
changes made by this proposed rule are designed to reduce burden on
them, as well as all recipients. The current recordkeeping and
reporting requirements for Section 3 is 90,180 hours with a cost of
$1,817,000. HUD estimated that this new rule will reduce the number of
hours by 68 percent to 25,910 hours. The biggest reduction will be for
small PHAs that will no longer need to do quantitative analysis with a
total estimated time saving of 12,375 hours with a cost of $281,036, or
approximately $125 for small PHAs. HUD also anticipates an across the
board savings in recordkeeping given the time savings resulting from
less time reporting new hires as a separate metric.
[[Page 13191]]
For these reasons, HUD has determined that this rule would not have a
significant economic impact on a substantial number of small entities.
Notwithstanding HUD's determination that this rule will not have a
significant effect on a substantial number of small entities, HUD
specifically invites comments regarding any less burdensome
alternatives to this rule that will meet HUD's objectives as described
in this preamble.
Executive Order 13132, Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either: (1) Imposes substantial direct compliance costs on State and
local governments and is not required by statute, or (2) preempts State
law, unless the agency meets the consultation and funding requirements
of Section 6 of the Executive Order. This proposed rule does not have
federalism implications and does not impose substantial direct
compliance costs on State and local governments nor preempt state law
within the meaning of the Executive Order.
Paperwork Reduction Act
Currently, 24 CFR part 135 requires that all recipients track and
report Section 3 information to HUD, includes prescriptive contractual
language, requires compliance by contractors of the Section 3
requirements, contains reporting and recordkeeping requirements, and
provides for the filing of Section 3 complaints. Section 3 Performance
Evaluation and Registration System (SPEARS) is the main site in which
HUD captures the number of Section 3 residents hired and the amount of
contracts awarded to Section 3 businesses. The existing information
collection requirement for these requirements has been approved by the
Office of Management and Budget (OMB) under the Paperwork Reduction Act
of 1995 (44 U.S.C. 3501-3520) and assigned OMB control number 2529-
0043.
The proposed rule would change the existing reporting requirement
to decrease qualitatively those who need to report, excluding small
PHAs and recipients of Section 3 projects under the $200,000 threshold,
and require reporting only once a year by recipients of completed
projects. HUD provides in Sec. Sec. 75.15 and 75.25 that recipients
would be required to submit reports to HUD annually either in a
qualitative form or quantitative form. HUD includes all the large PHAs
in the Sec. 75.15(a) reporting number for reporting on the Section 3
benchmarks and estimates 2 hours to track and report annually given the
amount of funds handled by these PHAs. HUD also estimates that a PHA
will employ approximately seven contractors or subcontractors each
fiscal year that would need to track and report up to the PHA, each at
one-half an hour for reporting time. Lastly, HUD estimates that 5
percent of the 700 large PHAs may fail the Section 3 benchmarks and
would need to report on their qualitative efforts along with the 2,250
small PHAs and estimates that such reporting would take one-half an
hour.
As for Sec. 75.25(a), HUD estimates that 66 percent of most
program recipients would complete projects in a fiscal year that need
to be reported except that for the HOME program, HUD estimates that 90
percent of HOME recipients would complete projects in a fiscal year, at
an estimate of 3,600 recipients. Given these projects are more diverse
in size, HUD estimates that the average time to report on the Section 3
benchmarks for recipients would be 1 hour. HUD also estimates that a
Section 3 project will engage approximately five contractors or
subcontractors each fiscal year that would also need to track and
report up to the Section 3 project recipient, each at one-half an hour
for reporting time. Lastly, HUD estimates that 5 percent of the 3,600
recipients may fail the Section 3 benchmarks and would need to report
on their qualitative efforts and estimates that such reporting would
take one-half an hour.
HUD also notes that the rule no longer requires the inclusion of
prescriptive contractual language. See Sec. Sec. 75.17 and 75.27. HUD
believes that this change will result in a de minimis upfront burden
related to updating contracts, if recipients, subrecipients and
contractors chose to do so, but that removing the requirement will
actually reduce burden on recipients, subrecipients, and contractors on
a sustained basis by giving them flexibility to use alternative or
existing contractual language. HUD also provides for recordkeeping
requirements at Sec. 75.31 and believes that the maintaining of
records by recipients will take a recipient approximately 2 hours.
However, HUD notes that some programs, such as HOME, already have
recordkeeping requirements that are part of existing approved
Information Collection Requests and, thus, excludes those programs from
the burden matrix. Lastly, HUD maintains the option for individuals to
file complaints and retains the frequency number that was in the
existing Section 3 reporting burden.
In accordance with the Paperwork Reduction Act, an agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information, unless the collection displays a currently
valid OMB control number. The current recordkeeping requirements for
Section 3 is 90,180 hours with a cost of $1,817,000. HUD estimates that
this new rule will reduce the number of hours by 68 percent to 25,910
hours for a total cost savings of approximately $1.2 million. The
overall reporting and recordkeeping burden is estimated as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Frequency of
Information collection Number of response per Burden hour Annual burden Hourly cost Annual cost
respondents annum per response hours per response
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 75.15(a) Labor Hour or New Hire Reporting for PHA 700 1 2 1,400 $22.71 $31,794.00
Sec. 75.15(a) Labor Hour or New Hire Reporting for 4,900 1 0.5 2,450 22.71 55,639.50
Contractors or Subcontractors of PHAs..................
Sec. 75.15(b)-(d) Qualitative Reporting for PHAs...... 2,300 1 0.5 1,150 22.71 26,116.50
Sec. 75.25(a) Labor Hour Reporting for Section 3 3,600 1 1 3,600 22.71 81,756.00
Projects...............................................
Sec. 75.25(a) Labor Hour Reporting for Contractors and 10,800 1 0.5 5,400 22.71 122,634.00
Subcontractors on Section 3 Projects...................
Sec. 75.25(b) Qualitative Reporting for Section 3 180 1 0.5 90 22.71 2,043.90
Projects...............................................
[[Page 13192]]
Sec. 75.31 Recordkeeping.............................. 5,900 1 2 11,800 22.71 267,978.00
Sec. 75.33 Complaints................................. 20 1 1 20 10.00 200.00
-----------------------------------------------------------------------------------------------
Total............................................... .............. .............. .............. 25,910.00 .............. 588,161.90
--------------------------------------------------------------------------------------------------------------------------------------------------------
In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments
from members of the public and affected agencies concerning the
information collection requirements in the proposed rule regarding:
(1) Whether the proposed collection of information is necessary for
the proper performance of the functions of the agency, including
whether the information will have practical utility;
(2) The accuracy of the agency's estimate of the burden of the
proposed collection of information;
(3) Whether the proposed collection of information enhances the
quality, utility, and clarity of the information to be collected; and
(4) Whether the proposed information collection minimizes the
burden of the collection of information on those who are to respond;
including through the use of appropriate automated collection
techniques or other forms of information technology (e.g., permitting
electronic submission of responses).
Interested persons are invited to submit comments regarding the
information collection requirements in this rule. The proposed
information collection requirements in this rule have been submitted to
OMB for review under section 3507(d) of the Paperwork Reduction Act.
Under the provisions of 5 CFR part 1320, OMB is required to make a
decision concerning this collection of information between 30 and 60
days after the publication date. Therefore, a comment on the
information collection requirements is best assured of having its full
effect if OMB receives the comment within 30 days of the publication.
This time frame does not affect the deadline for comments to the agency
on the proposed rule, however. Comments must refer to the proposed rule
by name and docket number (FR-6085) and must be sent to:
HUD Desk Officer, Office of Management and Budget, New Executive Office
Building, Washington, DC 20503, Fax number: 202- 395-6947, and
Colette Pollard, HUD Reports Liaison Officer, Department of Housing and
Urban Development, 451 7th Street SW, Room 2204, Washington, DC 20410
Interested persons may submit comments regarding the information
collection requirements electronically through the Federal eRulemaking
Portal at https://www.regulations.gov. HUD strongly encourages
commenters to submit comments electronically. Electronic submission of
comments allows the commenter maximum time to prepare and submit a
comment, ensures timely receipt by HUD, and enables HUD to make them
immediately available to the public. Comments submitted electronically
through the https://www.regulations.gov website can be viewed by other
commenters and interested members of the public. Commenters should
follow the instructions provided on that site to submit comments
electronically.
List of Subjects
24 CFR Part 5
Administrative practice and procedure, Aged, Claims, Crime,
Government contracts, Grant programs-housing and community development,
Individuals with disabilities, Intergovernmental relations, Loan
programs-housing and community development, Low- and moderate-income
housing, Mortgage insurance, Penalties, Pets, Public housing, Rent
subsidies, Reporting and recordkeeping requirements, Social security,
Unemployment compensation, Wages.
24 CFR Part 14
Claims, Equal access to justice, Lawyers, Reporting and
recordkeeping requirements.
24 CFR Part 75
Administrative practice and procedure, Community development,
Government contracts, Grant programs--housing and community
development, Housing, Loan programs--housing and community development,
Reporting and recordkeeping requirements, Small businesses.
24 CFR Part 91
Aged, Grant programs-housing and community development, Homeless,
Individuals with disabilities, Low- and moderate-income housing,
Reporting and recordkeeping requirements.
24 CFR Part 92
Administrative practice and procedure, Low- and moderate-income
housing, Manufactured homes, Rent subsidies, Reporting and
recordkeeping requirements.
24 CFR Part 93
Administrative practice and procedure, Grant programs-housing and
community development, Low- and moderate-income housing, Manufactured
homes, Rent subsidies, Reporting and recordkeeping requirements.
24 CFR Part 135
Administrative practice and procedure, Community development, Equal
employment opportunity, Government contracts, Grant programs--housing
and community development, Housing, Loan programs--housing and
community development, Reporting and recordkeeping requirements, Small
businesses.
24 CFR Part 266
Intergovernmental relations, Low- and moderate-income housing,
Mortgage insurance, Reporting and recordkeeping requirements.
24 CFR Part 570
Administrative practice and procedure, American Samoa, Community
development block grants, Grant programs--education, Grant programs-
housing and community development, Guam, Indians, Loan programs--
housing and community development, Low- and moderate-income housing,
Northern Mariana Islands, Pacific Islands Trust Territory, Puerto Rico,
Reporting and recordkeeping requirements, Student aid, Virgin Islands.
24 CFR Part 576
Community facilities, Grant programs--housing and community
development, Grant programs--social programs, Homeless, Reporting and
recordkeeping requirements.
24 CFR Part 578
Community development, Community facilities, Grant programs--
[[Page 13193]]
housing and community development, Grant programs--social programs,
Homeless, Reporting and recordkeeping requirements.
24 CFR Part 905
Grant programs--housing and community development, Public housing,
Reporting and recordkeeping requirements.
24 CFR Part 964
Grant programs--housing and community development, Public housing,
Reporting and recordkeeping requirements.
24 CFR Part 983
Grant programs--housing and community development, Low- and
moderate-income housing, Rent subsidies, Reporting and recordkeeping
requirements.
24 CFR Part 1000
Aged, Community development block grants, Grant programs--housing
and community development, Grant programs--Indians, Indians,
Individuals with disabilities, Public housing, Reporting and
recordkeeping requirements.
Accordingly, for the reasons described in the preamble, HUD
proposes to amend 24 CFR parts 5, 14, 75, 91, 92, 93, 135, 266, 570,
576, 578, 905, 964, 983, and 1000 as follows:
PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS
0
1. The authority for part 5 is revised to read as follows:
Authority: 12 U.S.C. 1701u and 1701x; 42 U.S.C. 1437a, 1437c,
1437d, 1437f, 1437n, 3535(d); Sec. 327, Pub. L. 109-115, 119 Stat.
2936; Sec. 607, Pub. L. 109-115, 119 Stat. 3051 (42 U.S.C. 14043e et
seq.); E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258; and E.O.
13559, 75 FR 71319, 3 CFR 2010 Comp., p. 273.
Sec. 5.105 [Amended]
0
2. Amend Sec. 5.105(a) by removing ``; section 3 of the Housing and
Urban Development Act of 1968 (12 U.S.C. 1701u) and implementing
regulations at 24 CFR part 135.''
PART 14--IMPLEMENTATION OF THE EQUAL ACCESS TO JUSTICE ACT IN
ADMINISTRATIVE PROCEEDINGS
0
3. The authority for part 14 continues to read as follows:
Authority: 5 U.S.C. 504(c)(1); 42 U.S.C. 3535(d).
Sec. 14.115 [Amended]
0
4. Amend Sec. 14.115 by removing and reserving paragraph (a)(5).
0
5. Add part 75 to read as follows:
PART 75--ECONOMIC OPPORTUNITIES FOR LOW- AND VERY LOW-INCOME
PERSONS
Sec.
Subpart A--General Provisions
75.1 Purpose.
75.3 Applicability.
75.5 Definitions.
75.7 Requirements applicable to HUD NOFAs for Section 3 covered
programs.
Subpart B--Additional Provisions for Public Housing Financial
Assistance
75.9 Requirements.
75.11 Targeted Section 3 worker for public housing financial
assistance.
75.13 Section 3 safe harbor.
75.15 Reporting.
75.17 Contract provisions.
Subpart C--Additional Provisions for Housing and Community Development
Financial Assistance
75.19 Requirements.
75.21 Targeted Section 3 worker for housing and community
development financial assistance.
75.23 Section 3 safe harbor.
75.25 Reporting.
75.27 Contract provisions.
Subpart D--Provisions for Multiple Funding Sources, Recordkeeping, and
Compliance
75.29 Multiple funding sources.
75.31 Recordkeeping.
75.33 Compliance.
Authority: 12 U.S.C. 1701u; 42 U.S.C. 3535(d).
Subpart A--General Provisions
Sec. 75.1 Purpose.
This part establishes the requirements to be followed to ensure the
objectives of Section 3 of the Housing and Urban Development Act of
1968 (12 U.S.C. 1701u) (Section 3) are met. The purpose of Section 3 is
to ensure that economic opportunities, most importantly employment,
generated by certain HUD financial assistance shall be directed to low-
and very low-income persons, particularly those who are recipients of
government assistance for housing or residents of the community in
which the Federal assistance is spent.
Sec. 75.3 Applicability of Section 3.
(a) General applicability. Section 3 applies to public housing
financial assistance and Section 3 projects, as follows:
(1) Public housing financial assistance. Public housing financial
assistance means:
(i) Development assistance provided pursuant to section 5 of the
United States Housing Act of 1937 (the 1937 Act);
(ii) Operations and management assistance provided pursuant to
section 9(e) of the 1937 Act; and
(iii) Development, modernization, and management assistance
provided pursuant to section 9(d) of the 1937 Act.
(2) Section 3 projects. (i) Section 3 projects means housing
rehabilitation, housing construction, and other public construction
projects assisted under HUD programs that provide housing and community
development financial assistance when the amount of assistance to the
project exceeds a threshold of $200,000. This threshold does not apply
where the assistance is from the Lead Hazard Control and Healthy Homes
programs, as authorized by section 501 of the Housing and Urban
Development Act of 1970 (12 U.S.C. 1701z-1), the Lead-Based Paint
Poisoning Prevention Act (42 U.S.C 4801 et seq.); and the Residential
Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851 et seq.)
The project is the site or sites together with any building(s) and
improvements located on the site(s) that are under common ownership,
management, and financing.
(ii) HUD may adjust the threshold provided in paragraph (a)(2)(i)
of this section not less than every 5 years based on a national
construction cost inflation factor, and new thresholds will be
published in the Federal Register, subject to public comment.
(iii) The requirements in this part apply to an entire Section 3
project, regardless of whether the project is fully or partially
assisted under HUD programs that provide housing and community
development financial assistance.
(b) Contracts for materials. Section 3 requirements do not apply to
material supply contracts.
(c) Indian and Tribal preferences. Contracts, subcontracts, grants,
or subgrants subject to section 7(b) of the Indian Self-Determination
and Education Assistance Act (25 U.S.C. 5307(b)) or subject to tribal
preference requirements as authorized under 101(k) of the Native
American Housing Assistance and Self-Determination Act (25 U.S.C.
4111(k)) must provide preferences in employment, training, and business
opportunities to Indians and Indian organizations, and are therefore
not subject to the requirements of this part.
(d) Other HUD assistance and other Federal assistance. Recipients
that are not subject to Section 3 are encouraged to consider ways to
support the purpose of Section 3.
[[Page 13194]]
Sec. 75.5 Definitions.
The terms HUD, Public housing, and Public Housing Agency (PHA) are
defined in 24 CFR part 5. The following definitions also apply to this
part:
1937 Act means the United States Housing Act of 1937, 42 U.S.C.
1437 et seq.
Contractor means any entity entering into a contract with:
(1) A recipient to perform work in connection with the expenditure
of public housing financial assistance or for work in connection with a
Section 3 project; or
(2) A subrecipient for work in connection with a Section 3 project.
Labor hours means the number of paid hours worked by persons on a
Section 3 project or employed with funds that include public housing
financial assistance.
Low-income person means a person as defined in section 3(b)(2) of
the 1937 Act.
Material supply contracts means contracts for the purchase of
products and materials, including, but not limited to, lumber, drywall,
wiring, concrete, pipes, toilets, sinks, carpets, and office supplies.
Alternative 2--Definition of New Hire
New hire means a full- or part-time employee for permanent,
temporary, or seasonal employment opportunities who:
(1) Was not on the payroll of the PHA, or the PHA's contractor or
subcontractor, or other recipient receiving public housing financial
assistance funds at the beginning of the award of public housing
financial assistance; or
(2) Was hired by contractors or subcontractors on a per-project
basis as a result of receiving public housing financial assistance.
Professional services means non-construction services, including,
but not limited to, contracts for legal services, financial consulting,
accounting services, environmental assessment, architectural services,
and civil engineering services.
Public housing financial assistance means assistance as defined in
Sec. 75.3(a)(1).
Public housing project is defined in 24 CFR 905.108.
Qualified census tract means any census tract (or equivalent
geographic area defined by the Bureau of the Census) in which at least
50 percent of households have an income of less than 60 percent of Area
Median Gross Income (AMGI); or where the poverty rate is at least 25
percent and where the census tract is designated as a qualified census
tract by HUD.
Recipient means any entity that receives directly from HUD public
housing financial assistance or housing and community development
assistance that funds Section 3 projects, including, but not limited
to, any State, local government, instrumentality, PHA, Indian tribe,
tribal organization, or other public agency, public or private
nonprofit organization.
Section 3 means section 3 of the Housing and Urban Development Act
of 1968, as amended (12 U.S.C. 1701u).
Section 3 business concern means:
(1) A business concern that meets one of the following criteria:
(i) It is at least 51 percent owned by low- or very low-income
persons;
(ii) Over 75 percent of the labor hours performed for the business
are performed by low- or very low-income persons; or
(iii) It is a business at least 25 percent owned by current public
housing residents or residents who currently live in Section 8-assisted
housing.
(2) The status of a Section 3 business concern shall not be
negatively affected by a prior arrest or conviction of its owner(s) or
employees.
(3) Nothing in this part shall be construed to require the
contracting or subcontracting of a Section 3 business concern. Section
3 business concerns are not exempt from meeting the specifications of
the contract.
Section 3 project means a project defined in Sec. 75.3(a)(2).
Section 3 worker means:
(1) Any worker who fits one of the following categories:
(i) The worker's income is below the income limit established by
HUD.
(ii) The worker lives in a qualified census tract.
(iii) The worker is employed by a Section 3 business concern.
(2) The status of a Section 3 worker shall not be negatively
affected by a prior arrest or conviction.
(3) Nothing in this part shall be construed to require the
employment of someone who meets this definition of a Section 3 worker.
Section 3 workers are not exempt from meeting the qualifications of the
position to be filled.
Section 8-assisted housing refers to housing receiving project-
based rental assistance or tenant-based assistance under section 8 of
the 1937 Act.
Service area or the neighborhood of the project means an area
within one mile of the Section 3 project or, if fewer than 5,000 people
live within one mile of a Section 3 project, within a circle centered
on the Section 3 project that is sufficient to encompass a population
of 5,000 people according to the most recent U.S. Census.
Small PHA means a public housing authority that manages or operates
fewer than 250 public housing units.
Subcontractor means any entity that has a contract with a
contractor to undertake a portion of the contractor's obligation to
perform work in connection with the expenditure of public housing
financial assistance or for a Section 3 project.
Subrecipient has the meaning provided in the applicable program
regulations, or in 2 CFR 200.93.
Targeted Section 3 worker has the meanings provided in Sec. 75.11,
Sec. 75.21, or Sec. 75.29, and does not exclude an individual that
has a prior arrest or conviction.
Very low-income person means the definition for this term set forth
in Section 3(b)(2) of the 1937 Act.
YouthBuild programs refers to YouthBuild programs receiving
assistance under the Workforce Innovation and Opportunity Act (29
U.S.C. 3226).
Sec. 75.7 Requirements applicable to HUD NOFAs for Section 3 covered
programs.
All notices of funding availability (NOFAs) issued by HUD that
announce the availability of funding covered by Sec. 75.3 will include
notice that this part is applicable to the funding and may include, as
appropriate for the specific NOFA, points or bonus points for Section 3
plans.
Subpart B--Additional Provisions for Public Housing Financial
Assistance
Sec. 75.9 Requirements.
(a) Employment and training. (1) Consistent with existing Federal,
state, and local laws and regulations, PHAs or other recipients
receiving public housing financial assistance, and their contractors
and subcontractors, must make their best efforts to provide employment
and training opportunities generated by the public housing financial
assistance to Section 3 workers.
(2) PHAs or other recipients, and their contractors and
subcontractors, must make their best efforts described in paragraph
(a)(1) of this section to Section 3 workers in the following order of
priority:
(i) To residents of the public housing projects for which the
public housing financial assistance is expended;
(ii) To residents of other public housing projects managed by the
PHA that is expending the assistance or to residents of Section 8-
assisted housing managed by the PHA;
[[Page 13195]]
(iii) To participants in YouthBuild programs; and
(iv) To low- and very low-income persons residing within the
metropolitan area (or nonmetropolitan county) in which the assistance
is expended.
(b) Contracting. (1) Consistent with existing Federal, state, and
local laws and regulations, PHAs and other recipients of public housing
financial assistance, and their contractors and subcontractors, must
make their best efforts to award contracts and subcontracts to business
concerns that provide economic opportunities to Section 3 workers.
(2) PHAs and other recipients, and their contractors and
subcontractors, must direct the efforts described in paragraph (b)(1)
of this section in the following order of priority:
(i) To Section 3 business concerns that provide economic
opportunities for residents of the public housing projects for which
the assistance is provided;
(ii) To Section 3 business concerns that provide economic
opportunities for residents of other public housing projects managed by
the PHA that is providing the assistance or for residents of Section 8-
assisted housing managed by the PHA;
(iii) To YouthBuild programs; and
(iv) To Section 3 business concerns that provide economic
opportunities to Section 3 workers residing within the metropolitan
area (or nonmetropolitan county) in which the assistance is provided.
Sec. 75.11 Targeted Section 3 worker for public housing financial
assistance.
Alternative 1--Paragraph (a)
(a) Targeted Section 3 worker. A Targeted Section 3 worker for
public housing financial assistance means:
(1) A worker employed by a Section 3 business concern; or
(2) A worker who currently is or who was when hired by the worker's
current employer:
(i) A resident in a public housing project or Section 8-assisted
housing;
(ii) A resident of other projects managed by the PHA that is
expending assistance; or
(iii) A current YouthBuild participant.
Alternative 2--Paragraph (a)
(a) Targeted Section 3 worker. A Targeted Section 3 worker for
public housing financial assistance means:
(1) A new hire employed by a Section 3 business concern; or
(2) A new hire employed by the worker's current employer, who is
also one of the following:
(i) A resident in a public housing project or Section 8-assisted
housing;
(ii) A resident of other projects managed by the PHA that is
expending assistance; or
(iii) A current YouthBuild.
(b) [Reserved]
Sec. 75.13 Section 3 safe harbor.
(a) General. PHAs and other recipients will be considered to have
complied with requirements in this part, in the absence of evidence to
the contrary if they:
(1) Certify that they have followed the prioritization of effort in
Sec. 75.9; and
(2) Meet or exceed the applicable Section 3 benchmarks as described
in paragraph (b) of this section.
(b) Establishing benchmarks. (1) HUD will establish Section 3
benchmarks for Section 3 workers or Targeted Section 3 workers or both
through a document published in the Federal Register. HUD may establish
a single nationwide benchmark for Section 3 workers and a single
nationwide benchmark for Targeted Section 3 workers, or may establish
multiple benchmarks based on geography, the type of public housing
financial assistance, or other variables. HUD will update the
benchmarks through a document published in the Federal Register,
subject to public comment, not less frequently than once every 3 years.
(2) In establishing the Section 3 benchmarks, HUD may consider the
industry averages worked by specific categories of workers or in
different localities or regions; prior reports pursuant to this
section; and any other factors HUD deems important. In establishing the
Section 3 benchmarks, HUD will exclude professional services.
Alternative 1--Paragraph (b)(3)
(3) Section 3 benchmarks will consist of the following two ratios:
(i) The number of labor hours worked by Section 3 workers divided
by the total number of labor hours worked by all workers funded by
public housing financial assistance in the PHA's or other recipient's
fiscal year.
(ii) The number of labor hours worked by Targeted Section 3
workers, as defined in Sec. 75.11(a), divided by the total number of
labor hours worked by all workers funded by public housing financial
assistance in the PHA's or other recipient's fiscal year.
Alternative 2--Paragraph (b)(3)
(3) Section 3 benchmarks will consist of the following two ratios:
(i) The number of new hires that are Section 3 workers divided by
the total number of new hires funded by public housing financial
assistance in the PHA's or other recipient's fiscal year.
(ii) The number of new hires that are Targeted Section 3 workers,
as defined in Sec. 75.11(a), divided by the total number of new hires
funded by public housing financial assistance in the PHA's or other
recipient's fiscal year.
Sec. 75.15 Reporting.
Alternative 1--Paragraph (a)
(a) Reporting of labor hours. (1) For public housing financial
assistance, PHAs and other recipients must report in a manner
prescribed by HUD:
(i) The total number of labor hours worked;
(ii) The total number of labor hours worked by Section 3 workers;
and
(iii) The total number of labor hours worked by Targeted Section 3
workers.
(2) The labor hours reported under paragraph (a)(1) of this section
must include the total number of labor hours worked with public housing
financial assistance for the PHA's or other recipient's fiscal year,
including labor hours worked by any contractors and subcontractors that
the PHA or other recipient is required, or elects pursuant to paragraph
(a)(3) of this section, to report.
(3) PHAs and other recipients reporting under this section, as well
as contractors and subcontractors who report to PHAs and recipients,
may report labor hours by Section 3 workers, under paragraph (a)(1)(ii)
of this section, and labor hours by Targeted Section 3 workers, under
paragraph (a)(1)(iii) of this section, from professional services
without including labor hours from professional services in the total
number of labor hours worked under paragraph (a)(1)(i) of this section.
If a contract covers both professional services and other work and the
PHA, other recipient, contractor, or subcontractor chooses not to
report labor hours from professional services, the labor hours under
the contract that are not from professional services must still be
reported.
(4) PHAs and other recipients may report on the labor hours of a
contractor or subcontractor based on the contractor or subcontractor's
good faith assessment of the labor hours of a full-time or part-time
employee if the contractor or subcontractor is not subject to other
requirements specifying time and attendance reporting, or does not
otherwise track labor hours.
Alternative 2--Paragraph (a)
(a) Reporting of new hires. (1) For public housing financial
assistance, PHAs and other recipients must report in a form prescribed
by HUD:
[[Page 13196]]
(i) The total number of new hires;
(ii) The total number of new hires that are Section 3 workers; and
(iii) The total number of new hires that are Targeted Section 3
workers.
(2) The new hires reported, under paragraph (a)(1)(i) of this
section, must include the total number of new hires funded by public
housing financial assistance for the PHA's or other recipient's fiscal
year, including new hires funded by any contractors and subcontractors
that the PHA or other recipient is required, or elects pursuant to
paragraph (a)(3) of this section, to report.
(3) PHAs and other recipients reporting under this section, as well
as contractors and subcontractors who report to PHAs and recipients,
may report new hires of Section 3 workers, under paragraph (a)(1)(ii)
of this section, and new hires of Targeted Section 3 workers, under
paragraph (a)(1)(iii) of this section, performing professional services
without including hires in professional services in the total number of
new hires under paragraph (a)(1)(i) of this section. If a contract
covers both professional services and other work and the PHA,
recipient, contractor, or subcontractor chooses not to report new hires
performing professional services, the new hires under the contract that
are not performing professional services must still be reported.
(b) Additional reporting if Section 3 benchmarks are not met. If
the PHA's or other recipient's reporting under paragraph (a) of this
section indicates that the PHA or other recipient has not met the
Section 3 benchmarks described in Sec. 75.11, the PHA or other
recipient will be required to report in a form prescribed by HUD on the
qualitative nature of its activities or those of its contractors and
subcontractors.
(c) Reporting frequency. Unless otherwise provided, PHAs or other
recipients will report annually to HUD under paragraph (a) of this
section, and where required under paragraph (b) of this section, in a
manner consistent with reporting requirements for the applicable HUD
program.
(d) Reporting by Small PHAs. Small PHAs will not be required to
report under paragraph (a) of this section. Small PHAs are required to
report on their qualitative efforts, as described in paragraph (b) of
this section, in a manner consistent with reporting requirements for
the applicable HUD program.
Sec. 75.17 Contract provisions.
(a) PHAs or other recipients must include language in any agreement
or contract to apply Section 3 to contractors.
(b) PHAs or other recipients must require contractors to include
language in any contract or agreement to apply Section 3 to
subcontractors.
(c) PHAs or other recipients must require all contractors and
subcontractors to meet the requirements of Sec. 75.9, regardless of
whether Section 3 language is included in contracts.
Subpart C--Additional Provisions for Housing and Community
Development Financial Assistance
Sec. 75.19 Requirements.
(a) Employment and training. (1) To the greatest extent feasible,
and consistent with existing Federal, state, and local laws and
regulations, recipients covered by this subpart shall ensure that
employment and training opportunities arising in connection with
Section 3 projects are provided to Section 3 workers within the
metropolitan area (or nonmetropolitan county) in which the project is
located.
(2) Where feasible, recipients should provide opportunities and
training described in paragraph (a)(1) of this section to:
(i) Section 3 workers residing within the service area or the
neighborhood of the project; and
(ii) Participants in YouthBuild programs.
(b) Contracting. (1) To the greatest extent feasible, and
consistent with existing Federal, state, and local laws and regulations
recipients covered by this subpart shall ensure contracts for work
awarded in connection with Section 3 projects are provided to Section 3
businesses concerns that provide economic opportunities to Section 3
workers residing within the metropolitan area (or nonmetropolitan
county) in which the project is located.
(2) Where feasible, recipients should direct the efforts described
in paragraph (b)(1) of this section to:
(i) Section 3 business concerns that provide economic opportunities
to Section 3 workers residing within the service area or the
neighborhood of the project; and
(ii) YouthBuild programs.
Sec. 75.21 Targeted Section 3 worker for housing and community
development financial assistance.
(a) For purposes of this subpart, a Targeted Section 3 worker is:
(1) A worker employed by a Section 3 business concern; or
(2) A worker who is or was when hired by the worker's current
employer:
(i) Living within the service area or the neighborhood of the
project, as defined in Sec. 75.5; or
(ii) A current YouthBuild participant.
(b) [Reserved]
Sec. 75.23 Section 3 safe harbor.
(a) General. Recipients will be considered to have complied with
requirements in this part, in the absence of evidence to the contrary
if they:
(1) Certify that they have followed the prioritization of effort in
Sec. 75.19; and
(2) Meet or exceed the applicable Section 3 benchmark as described
in paragraph (b) of this section.
(b) Establishing benchmarks. (1) HUD will establish Section 3
benchmarks for Section 3 workers or Targeted Section 3 workers or both
through a document published in the Federal Register. HUD may establish
a single nationwide benchmark for Section 3 workers and a single
nationwide benchmark for Targeted Section 3 workers, or may establish
multiple benchmarks based on geography, the nature of the Section 3
project, or other variables. HUD will update the benchmarks through a
document published in the Federal Register, subject to public comment,
not less frequently than once every 3years.
(2) In establishing the Section 3 benchmarks, HUD may consider the
industry averages for labor hours worked by specific categories of
workers or in different localities or regions; averages for labor hours
worked by Section 3 workers and Targeted Section 3 workers as reported
by recipients pursuant to this section; and any other factors HUD deems
important. In establishing the Section 3 benchmarks, HUD will exclude
labor hours associated with professional services from the total labor
hours, the labor hours worked by Section 3 workers, and the labor hours
worked by Targeted Section 3 workers.
(3) Section 3 benchmarks will consist of the following two ratios:
(i) The number of labor hours worked by Section 3 workers divided
by the total number of labor hours worked by all workers on a Section 3
project.
(ii) The number of labor hours worked by Targeted Section 3 workers
divided by the total number of labor hours worked by all workers on a
Section 3 project.
Sec. 75.25 Reporting.
(a) Reporting of labor hours. (1) For Section 3 projects,
recipients must report in a manner prescribed by HUD:
(i) The total number of labor hours worked;
(ii) The total number of labor hours worked by Section 3 workers;
and
[[Page 13197]]
(iii) The total number of labor hours worked by Targeted Section 3
workers.
(2) The labor hours reported under paragraph (a)(1) of this section
must include the total number of labor hours worked on a Section 3
project, including labor hours worked under any subrecipients,
contractors, and subcontractors that the recipient is required, or
elects pursuant to paragraph (a)(3) of this section, to report.
(3) Recipients reporting under this section, as well as contractors
and subcontractors who report to PHAs and recipients, may report labor
hours by Section 3 workers, under paragraph (a)(1)(ii) of this section,
and labor hours by Targeted Section 3 workers, under paragraph
(a)(1)(iii) of this section, from professional services without
including labor hours from professional services in the total number of
labor hours worked under paragraph (a)(1)(i) of this section. If a
contract covers both professional services and other work and the
recipient or contractor or subcontractor chooses not to report labor
hours from professional services, the labor hours under the contract
that are not from professional services must still be reported.
(4) Recipients may report on the labor hours of a contractor or
subcontractor based on the contractor or subcontractor's good faith
assessment of the labor hours of a full-time or part-time employee if
the contractor or subcontractor is not subject to other requirements
specifying time and attendance reporting, or does not otherwise track
labor hours.
(b) Additional reporting if Section 3 benchmarks are not met. If
the recipient's reporting under paragraph (a) of this section indicates
that the recipient has not met the Section 3 benchmarks described in
Sec. 75.23, the recipient must report in a form prescribed by HUD on
the qualitative nature of the activities the recipient or its
contractors and subcontractors pursued in order to comply with this
part.
(c) Reporting frequency. Unless otherwise provided, recipients must
report annually to HUD under paragraph (a) of this section, and, where
required, under paragraph (b) of this section, on all projects
completed within the reporting year in a manner consistent with
reporting requirements for the applicable HUD program.
Sec. 75.27 Contract provisions.
(a) Recipients must include language applying Section 3
requirements in any subrecipient agreement or contract for a Section 3
project.
(b) Recipients of Section 3 projects must require subrecipients,
contractors, and subcontractors to meet the requirements of Sec.
75.19, regardless of whether Section 3 language is included in
recipient or subrecipient agreements, program regulatory agreements, or
contracts.
Subpart D--Provisions for Multiple Funding Sources, Recordkeeping,
and Compliance
Sec. 75.29 Multiple funding sources.
(a) If a housing rehabilitation, housing construction or other
public construction project is subject to Section 3 pursuant to Sec.
75.3(a)(1) and (2), the recipient must follow subpart B of this part
for the public housing financial assistance and may follow either
subpart B or C of this part for the housing and community development
financial assistance. For this project, the following applies:
(1) For housing and community development financial assistance, a
Targeted Section 3 worker is any worker who meets the definition of a
Targeted Section 3 worker in either subpart B or C of this part; and
Alternative 1--Paragraph (a)(2)
(2) The recipients of both sources of funding shall report on the
housing rehabilitation, housing construction, or other public
construction project as a whole and shall identify the multiple
associated recipients. PHAs and other recipients must report the
following information:
(i) The total number of labor hours worked on the project;
(ii) The total number of labor hours worked by Section 3 workers on
the project; and
(iii) The total number of labor hours worked by Targeted Section 3
workers on the project.
Alternative 2--Paragraph (a)(2)
(2) The recipients of both sources of funding shall report on the
housing rehabilitation, housing construction, or other public
construction project as a whole and shall identify the multiple
associated recipients.
(i) PHAs and other recipients must report the following
information:
(A) The total number of labor hours worked on the project;
(B) The total number of labor hours worked by Section 3 workers on
the project; and
(C) The total number of labor hours worked by Targeted Section 3
workers, as defined in either subpart B or C of this part, on the
project.
(ii) The PHA must also report the following information:
(A) The total number of new hires on the project;
(B) The total number of Section 3 workers that are new hires on the
project; and
(C) The total number of Targeted Section 3 workers, as defined in
either subpart B or C of this part, that are new hires on the project.
(b) If a housing rehabilitation, housing construction, or other
public construction project is subject to Section 3 because the project
is assisted with funding from multiple programs that exceed the
threshold in Sec. 75.3(a)(2), the recipient or recipients must follow
subpart C of this part, and must report to the applicable HUD program
office, as prescribed by HUD.
Sec. 75.31 Recordkeeping.
(a) HUD shall have access to all records, reports, and other
documents or items of the recipient that are maintained to demonstrate
compliance with the requirements of this part, or that are maintained
in accordance with the regulations governing the specific HUD program
by which the Section 3 project is governed, or the public housing
financial assistance is provided or otherwise made available to the
recipient, contractor, or subcontractor.
(b) Recipients must maintain documentation, or ensure that a
subrecipient, contractor, or subcontractor that employs the worker
maintains certification, to ensure that workers meet the definition of
a Section 3 worker or Targeted Section 3 worker, as follows:
(1) For a worker to qualify as a Section 3 worker, one of the
following must be maintained:
(i) A worker's self-certification that their income is below the
income limit from the prior calendar year;
(ii) A worker's self-certification of participation in a means-
tested program such as public housing or Section 8-assisted housing;
(iii) Certification from a PHA, or the owner or property manager of
project-based Section 8-assisted housing, or the administrator of
tenant-based Section 8-assisted housing that the worker is a
participant in one of their programs;
(iv) An employer's certification that the worker's income from that
employer is below the income limit when based on an employer's
calculation of what the worker's wage rate would translate to if
annualized on a full-time basis;
(v) An employer's confirmation that a worker's residency is in a
qualified census tract; or
(vi) An employer's certification that the worker is employed by a
Section 3 business.
[[Page 13198]]
(2) For a worker to qualify as a Targeted Section 3 worker, one of
the following must be maintained:
(i) For a worker to qualify as a Targeted Section 3 worker under
subpart B of this part:
(A) A worker's self-certification of participation in public
housing or Section 8-assisted housing programs;
(B) Certification from a PHA, or the owner or property manager of
project-based Section 8-assisted housing, or the administrator of
tenant-based Section 8-assisted housing that the worker is a
participant in one of their programs;
(C) An employer's certification that the worker is employed by a
Section 3 business concern; or
Alternative 1--Paragraph (b)(2)(i)(D)
(D) A worker's certification that the worker is a YouthBuild
participant.
Alternative 2--Paragraph (b)(2)(i)(D)
(D) An employer's certification that the worker is a YouthBuild
participant.
(ii) For a worker to qualify as a Targeted Section 3 worker under
subpart C of this part:
(A) An employer's confirmation that a worker's residence is within
1 mile of the work site or, if fewer than 5,000 people live within 1
mile of a work site, within a circle centered on the work site that is
sufficient to encompass a population of 5,000 people according to the
most recent U.S. Census;
(B) An employer's certification that the worker is employed by a
Section 3 business concern; or
(C) A worker's self-certification that the worker is a YouthBuild
participant.
(c) The documentation described in paragraph (b) of this section
must be maintained for the time period required for record retentions
in accordance with applicable program regulations or, in the absence of
applicable program regulations, 2 CFR part 200.
Sec. 75.33 Compliance.
(a) Records of compliance. Each recipient shall maintain adequate
records demonstrating compliance with this part.
(b) Complaints. Complaints alleging failure of compliance with this
part may be reported to the HUD program office responsible for the
public housing financial assistance or the Section 3 project.
(c) Monitoring. HUD will monitor compliance with the requirements
of this part. The applicable HUD program office will determine
appropriate methods by which to oversee Section 3 compliance. HUD may
impose appropriate remedies and sanctions in accordance with the laws
and regulations for the program under which the violation was found.
PART 91--CONSOLIDATED SUBMISSIONS FOR COMMUNITY PLANNING AND
DEVELOPMENT PROGRAMS
0
6. The authority citation for part 91 continues to read as follows:
Authority: 42 U.S.C. 3535(d), 3601-3619, 5301-5315, 11331-11388,
12701-12711, 12741-12756, and 12901-12912.
Sec. 91.215 [Amended]
0
7. Amend Sec. 91.215(j) by removing ``24 CFR part 135'' and adding in
its place ``24 CFR part 75''.
Sec. 91.225 [Amended]
0
8. Amend Sec. 91.225(a)(7) by removing ``24 CFR part 135'' and adding
in its place ``24 CFR part 75''.
Sec. 91.325 [Amended]
0
9. Amend Sec. 91.325(a)(7) by removing ``24 CFR part 135'' and adding
in its place ``24 CFR part 75''.
Sec. 91.425 [Amended]
0
10. Amend Sec. 91.425(a)(1)(vii) by removing ``24 CFR part 135'' and
adding in its place ``24 CFR part 75''.
PART 92--HOME INVESTMENT PARTNERSHIPS PROGRAM
0
11. The authority citation for part 92 continues to read as follows:
Authority: 42 U.S.C. 3535(d), 12 U.S.C. 1701x and 4568.
0
12. Amend Sec. 92.508 as follows:
0
a. Remove paragraph (a)(7)(i)(B);
0
b. Redesignate paragraph (a)(7)(i)(C) as paragraph (a)(7)(i)(B); and
0
c. Add paragraph (a)(7)(xi).
The addition reads as follows:
Sec. 92.508 Recordkeeping.
* * * * *
(a) * * *
(7) * * *
(xi) Documentation of actions undertaken to meet the requirements
of 24 CFR part 75 which implements section 3 of the Housing Development
Act of 1968, as amended (12 U.S.C. 1701u).
* * * * *
PART 93--HOUSING TRUST FUND
0
13. The authority citation for part 93 continues to read as follows:
Authority: 42 U.S.C. 3535(d), 12 U.S.C. 4568.
0
14. Amend Sec. 93.407 as follows:
0
a. Redesignate paragraphs (a)(5)(ii) through (ix) as paragraphs
(a)(5)(iii) through (x);
0
b. Remove paragraph (a)(5)(i)(B);
0
c. Redesignate paragraph (a)(5)(i)(A) as paragraph (a)(5)(ii);
0
d. In newly redesignated paragraph (a)(5)(iv), remove ``24 part 35''
and add in its place ``24 CFR part 35''; and
0
e. Add paragraph (a)(5)(xi).
The addition reads as follows:
Sec. 93.407 Recordkeeping.
* * * * *
(a) * * *
(5) * * *
(xi) Documentation of actions undertaken to meet the requirements
of 24 CFR part 75, which implements section 3 of the Housing and Urban
Development Act of 1968, as amended (12 U.S.C. 1701u).
* * * * *
CHAPTER I--OFFICE OF ASSISTANT SECRETARY FOR EQUAL OPPORTUNITY,
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT [AMENDED]
0
15. Under the authority of 42 U.S.C. 3535(d), in chapter I, remove the
headings for subchapters A and B.
PART 135 [REMOVED]
0
16. Remove part 135.
PART 266--HOUSING FINANCE AGENCY RISK-SHARING PROGRAM FOR INSURED
AFFORDABLE MULTIFAMILY PROJECT LOANS
0
17. The authority citation for part 266 continues to read as follows:
Authority: 12 U.S.C. 1707; 42 U.S.C. 3535(d).
Sec. 266.220 [Amended]
0
18. Amend Sec. 266.220(c) by removing ``; section 3 of the Housing and
Urban Development Act of 1968 (12 U.S.C. 1701u), as implemented by 24
CFR part 135''.
PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS
0
19. The authority citation for part 570 continues to read as follows:
Authority: 12 U.S.C. 1701x, 1701 x-1; 42 U.S.C. 3535(d) and
5301-5320.
Sec. 570.487 [Amended]
0
20. Amend Sec. 570.487(d) by removing ``24 CFR part 135'' and adding
in its place ``24 CFR part 75''.
Sec. 570.607 [Amended]
0
21. Amend Sec. 570.607(b) by removing ``24 CFR part 135'' and adding
in its place ``24 CFR part 75''.
PART 576--EMERGENCY SOLUTIONS GRANTS PROGRAM
0
22. The authority citation for part 576 continues to read as follows:
[[Page 13199]]
Authority: 12 U.S.C. 1701x, 1701 x-1; 42 U.S.C. 11371 et seq.,
42 U.S.C. 3535(d).
Sec. 576.407 [Amended]
0
23. Amend Sec. 576.407(a) by removing ``24 CFR part 135'' and adding
in its place ``24 CFR part 75''.
PART 578--CONTINUUM OF CARE PROGRAM
0
24. The authority citation for part 578 continues to read as follows:
Authority: 12 U.S.C. 1701x, 1701 x-1; 42 U.S.C. 11381 et seq.,
42 U.S.C. 3535(d).
Sec. 578.99 [Amended]
0
25. Amend Sec. 578.99 by removing ``federal'' in the section heading
and adding in its place ``Federal'' and removing ``24 CFR part 135'' in
paragraph (i) and adding in its place ``24 CFR part 75''.
PART 905--THE PUBLIC HOUSING CAPITAL FUND PROGRAM
0
26. The authority citation for part 905 continues to read as follows:
Authority: 42 U.S.C. 1437g, 42 U.S.C. 1437z-2, 42 U.S.C. 1437z-
7, and 3535(d).
Sec. 905.308 [Amended]
0
27. Amend Sec. 905.308(b)(10) by removing ``24 CFR part 135'' and
adding in its place ``24 CFR part 75''.
PART 964--TENANT PARTICIPATION AND TENANT OPPORTUNITIES IN PUBLIC
HOUSING
0
28. The authority citation for part 964 continues to read as follows:
Authority: 42 U.S.C. 1437d, 1437g, 1437r, 3535(d).
Sec. 964.320 [Amended]
0
29. Amend Sec. 964.320 by removing ``24 CFR part 135'' and adding in
its place ``24 CFR part 75''and removing ``24 CFR 135.7'' and adding in
its place ``24 CFR 75.3''.
PART 983--PROJECT-BASED VOUCHER (PBV) PROGRAM
0
30. The authority citation for part 983 continues to read as follows:
Authority: 42 U.S.C. 1437f and 3535(d).
Sec. 983.4 [Amended]
0
31. Amend Sec. 983.4 by removing the definition of ``Section 3--
Training, employment and contracting opportunities in development''.
Sec. 983.154 [Amended]
0
32. Amend Sec. 983.154 by removing and reserving paragraph (c).
PART 1000--NATIVE AMERICAN HOUSING ACTIVITIES
0
32. The authority citation for part 1000 continues to read as follows:
Authority: 25 U.S.C. 4101 et seq.; 42 U.S.C. 3535(d).
0
33. Revise Sec. 1000.42 to read as follows:
Sec. 1000.42 Are the requirements of Section 3 of the Housing and
Urban Development Act of 1968 applicable?
No. Recipients shall comply with Indian preference requirements of
section 7(b) of the Indian Self-Determination and Education Assistance
Act (25 U.S.C. 5307(b)), or employment and contract preference laws
adopted by the recipient's tribe in accordance with section 101(k) of
NAHASDA.
Dated: March 29, 2019.
Matthew F. Hunter,
Assistant Deputy Secretary for Field Policy and Management.
[FR Doc. 2019-06495 Filed 4-3-19; 8:45 am]
BILLING CODE 4210-67-P