Section 3 Clause
All Section 3 covered contracts shall include the following clause (referred to as the “Section 3 Clause”):
- A. The work to be performed under this contract is subject to the requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. 1701u (section 3). The purpose of section 3 is to ensure that employment and other economic opportunities generated by HUD assistance or HUD-assisted projects covered by section 3, shall, to the greatest extent feasible, be directed to low- and very low-income persons, particularly persons who are recipients of HUD assistance for housing.
- B. The parties to this contract agree to comply with HUD’s regulations in 24 CFR Part 135, which implement section 3. As evidenced by their execution of this contract, the parties to this contract certify that they are under no contractual or other impediment that would prevent them from complying with the part 135 regulations.
- C. The contractor agrees to send to each labor organization or representative of workers with which the contractor has a collective bargaining agreement or other understanding, if any, a notice advising the labor organization or workers’ representative of the contractor’s commitments under this section 3 clause, and will post copies of the notice in conspicuous places at the work site where both employees and applicants for training and employment positions can see the notice. The notice shall describe the section 3 preference, shall set forth minimum number and job titles subject to hire, availability of apprenticeship and training positions, the qualifications for each; and the name and location of the person(s) taking applications for each of the positions; and the anticipated date the work shall begin.
- D. The contractor agrees to include this section 3 clause in every subcontract subject to compliance with regulations in 24 CFR Part 135, and agrees to take appropriate action, as provided in an applicable provision of the subcontract or in this section 3 clause, upon a finding that the subcontractor is in violation of the regulations in 24 CFR Part 135. The contractor will not subcontract with any subcontractor where the contractor has notice or knowledge that the subcontractor has been found in violation of the regulations in 24 CFR Part 135.
- E. The contractor will certify that any vacant employment positions, including training positions, that are filled (1) after the contractor is selected by before the contract is executed, and (2) with persons other than those to whom the regulations of 24 CFR part 135 require employment opportunities to be directed, were not filled to circumvent the contractor’s obligations under 24 CFR part 135.
- F. Noncompliance with HUD’s regulations in 24 CFR part 135 may result in sanctions, termination of this contract for default, and debarment or suspension from future HUD assisted contracts.
Section 3 is a provision of the Housing and Urban Development (HUD) Act of 1968 that helps foster local economic development, neighborhood economic improvement, and individual self-sufficiency. The Section 3 program requires that recipients of certain HUD financial assistance, to the greatest extent feasible, provide job training, employment, and contracting opportunities for low- or very-low income residents in connection with projects and activities in their neighborhoods.
Section 3 is a starting point to obtain job training, employment and contracting opportunities. From this integral foundation coupled with other resources comes the opportunity for economic advancement and self-sufficiency.
• Federal, state and local programs
• Advocacy groups
• Community and faith-based organizations
Section 3 is a starting point to homeownership. Once a Section 3 resident has obtained employment or contracting opportunities they have begun the first step to self-sufficiency.
Remember, “It doesn’t have to be fields of dreams”. Homeownership is achievable. For more information visit our HUD website.
Section 3 residents are:
• Public housing residents or
• Persons who live in the area where a HUD-assisted project is located and who have a household income that falls below HUD’s income limits.
Determining Income Levels
• Low income is defined as 80% or below the median income of that area.
• Very low income is defined as 50% or below the median income of that area.
A business that:
• Is 51 percent or more owned by Section 3 residents;
• Employs Section 3 residents for at least 30 percent of its full-time, permanent staff; or
• Provides evidence of a commitment to subcontract to Section 3 business concerns, 25 percent or more of the dollar amount of the awarded contract.
Section 3 applies to HUD-funded Public and Indian Housing assistance for development, operating, and modernization expenditures.
Section 3 also applies to certain HUD-funded Housing and Community Development projects that complete housing rehabilitation, housing construction, and other public construction.
What types of economic opportunities are available under Section 3?
• Job training
Any employment resulting from these expenditures, including administration, management, clerical support, and construction, is subject to compliance with Section 3.
Examples of Opportunities include:
• Appliance repair
• Carpet Installation
• Elevator Construction
• Iron Works
• Machine Operation
• Payroll Photography
• Printing Purchasing
• Tile setting
• Word processing
Recipients of HUD financial assistance will award the economic opportunities. They and their contractors and subcontractors are required to provide, to the greatest extent feasible, economic opportunities consistent with existing Federal, State, and local laws and regulations.
For training and employment:
• Persons in public and assisted housing
• Persons in the area where the HUD financial assistance is spent
• Participants in HUD Youthbuild programs
• Homeless persons
• Businesses that meet the definition of a Section 3 business concern
Businesses can recruit Section 3 residents in public housing developments and in the neighborhoods where the HUD assistance is being spent. Effective ways of informing residents about available training and job opportunities are:
• Contacting resident organizations, local community development and employment agencies
• Distributing flyers
• Posting signs
• Placing ads in local newspapers
Recipients are required, to the greatest extent feasible, to provide all types of employment opportunities to low and very low-income persons, including permanent employment and long-term jobs.
Recipients and contractors are encouraged to have Section 3 residents make up at least 30 percent of their permanent, full-time staff.
A Section 3 resident who has been employed for 3 years may no longer be counted towards meeting the 30 percent requirement. This encourages recipients to continue hiring Section 3 residents when employment opportunities are available.
There is a complaint process. Section 3 residents, businesses, or a representative for either may file a complaint if it seems a recipient is violating Section 3 requirements are being on a HUD-funded project.
Yes. HUD monitors the performance of contractors, reviews annual reports from recipients, and investigates complaints. HUD also examines employment and contract records for evidence that recipients are training and employing Section 3 residents and awarding contracts to Section 3 businesses.
You can file a written complaint with your local HUD Field Office.
A written complaint should contain:
• Name and address of the person filing the complaint
• Name and address of subject of complaint (HUD recipient, contractor or subcontractor)
• Description of acts or omissions in alleged violation of Section 3
• Statement of corrective action sought i.e. training, employment or contracts