Section 3 is a requirement from the US Department of Housing and Urban Development (HUD) designed to ensure that its funds for housing and community development activities also provide employment opportunities for low-income people. Projects covered under Section 3 should follow the guidance based on the timing of the project commitment, as described below.
Update: HUD revised the Section 3 regulations to streamline processes and target more low- and very-low income individuals. The new rule became effective November 30, 2020, and recipients of federal funds are expected to comply with the new requirements starting July 1, 2021. The federal guidance creates a transition period between November 30, 2020, and June 30, 2021. Between now and July 1, 2021, the North Carolina Housing Finance Agency will be updating our Section 3 guidelines, procedures and forms to be compliant with the new regulations. Until these guidelines are released, Section 3 covered projects should follow the guidance based on the timing of the project commitment, as described below.
Section 3 Requirements Based on Commitment Date:
Projects Committed prior to November 30, 2020
- Old Section 3 regulations will continue to apply.
- The NC Housing Finance Agency may update the summary report instructions and forms to comply with new federal tracking systems. Project owners must use new reports, as applicable, after they are released by the Agency.
Projects Committed on or after November 30, 2020, and prior to July 1, 2021
- The new Section 3 regulations apply to Section 3 covered projects committed during this period.
- It is the Agency’s expectations that projects committed during this timeframe will utilize updated Section 3 policies and procedures, as soon as they are released.
- All projects committed during this period will be required to use the new Section 3 policies starting July 1, 2021.
Projects committed on or after July 1, 2021
- All projects must adhere to new regulations, tracking and reporting requirements.
Highlights of the changes required by the new regulations can be see below. The new rule:
- Removed the requirement to track new hires and instead focuses on tracking the labor hours worked by Section 3 Workers and Targeted Section 3 Workers.
- Replaced Section 3 Resident with a new Section 3 Worker.
- Added the Targeted Section 3 Worker requirement.
- Updated the definition of a Section 3 Business Concern.
- Altered benchmark requirements stating that now 25% of the total labor hours must be worked by Section 3 Workers and 5% of the total labor hours must be worked by Targeted Section 3 Workers.
- Instituted a single applicability threshold.
A summary of the Final Rule can be found here and the complete Section 3 Final Rule can be found at 24 CFR Part 75. The old regulations can be found at 24 CFR Part 135.
Note: Please make sure to clear your browser cache to ensure proper viewing of hyperlinked documents:
Guidance for Projects Committed On or After November 30, 2020
NC Housing Finance Agency Section 3 Guidance
Section 3 Business Certification
Section 3 Compliance Certification
Section 3 Worker Certification - HUD Form 4736A
Section 3 Summary Report
Section 3 Quarterly Summary Report
Section 3 Subcontractor Form
Section 3 Training Slides
Guidance for Projects Committed Prior to November 30, 2020
Legacy Rental Development Guidance Packet
Legacy Projects Section 3 Summary Report
