Section 3 Thresholds: When Compliance Is Required

pbarcelona8
Jul 13
2 min read

Updated: Jul 27

📊 Section 3 Thresholds: When Compliance Is Required

Section 3 requirements don’t apply to every HUD-funded project — but when they do, it’s because specific funding thresholds have been met. Understanding these thresholds is essential for compliance.

💰 What Triggers Section 3?

Section 3 applies when:

HUD housing and community development financial assistance to the project exceeds $200,000 (CDBG, HOME, etc.) (housing rehab, construction, and other public construction)
OR the project receives $100,000 or more in Lead Hazard Control and Healthy Homes (LHCHH) funding

📌 Note: LHCHH funding is not counted toward the $200,000 threshold for other HUD assistance — it has its own $100,000 threshold.

🏢 What About Public Housing?

There is no threshold for public housing financial assistance. Section 3 applies to all public housing programs, regardless of the dollar amount.

📋 What Happens Once Thresholds Are Met?

When Section 3 is triggered, recipients, contractors, and subcontractors must:

Include Section 3 Provisions in Procurement Documents, Contracts and Subcontracts – Each party is responsible for ensuring that HUD-compliant Section 3 language is incorporated into all procurement documents, prime contracts, and subcontracts. Provisions must clearly state Section 3 obligations, be legally enforceable, and flow down to all lower-tier entities.
Meet HUD’s labor hour benchmarks:
- At least 25% of total labor hours must be performed by Section 3 workers
- At least 5% of total labor hours must be performed by Targeted Section 3 workers
Prioritization of effort:
All parties must certify they will make — and have made — best efforts to provide employment, training and contracting opportunities to Section 3 workers and businesses in the priority order outlined in HUD’s regulations.
Monitor Compliance Within Their Tier – Recipients must oversee the compliance of their contractors. Contractors must oversee the compliance of their subcontractors.
Maintain records that comply with Section 3 requirements.

If benchmarks are not met, recipients, contractors, and subcontractors must document their qualitative efforts to comply.

⚠️ Common Missteps

Assuming Section 3 doesn't apply because only a portion of the project is HUD-funded
Overlooking Lead Hazard Control and Healthy Homes (LHCHH) thresholds
Failing to track Section 3 labor hours
Not making a good faith effort to engage Section 3 workers and business concerns
Neglecting to prioritize economic opportunities for low-income residents and Section 3 business concerns
Overlooking documentation and reporting requirements after Section 3 is triggered