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The Section 3 Compliance Risks PHAs Can’t Afford to Overlook

Updated: Jul 14, 2025


⚠️ The Section 3 Compliance Risks PHAs Can’t Afford to Overlook

Section 3 isn’t just a requirement—it’s a responsibility with real consequences.

When it comes to Section 3 compliance, the risks of non-compliance definitely don’t stop at your agency—they extend to your contractors and their subcontractors as well.


PHAs that receive federal housing assistance are not only expected to create opportunities for low-income residents and businesses but are also accountable for ensuring their contractors and subcontractors do the same.


HUD holds PHAs accountable for ensuring that everyone involved is meeting Section 3 obligations. These risks apply to all HUD public housing financial assistance—operating funds, capital funds, and development assistance—each of which triggers Section 3 compliance requirements.


🔍 Here’s How Those Risks Break Down


For Your Agency

  • HUD findings that cite lack of oversight or documentation

  • Delays in funding approvals or disbursements

  • Corrective action plans that consume time and resources

  • Failure to provide economic opportunities to low-income residents and Section 3 businesses within your community

  • Undermining the intent of HUD’s Section 3 mandate

  • Reputational damage with HUD and your community

  • Potential clawbacks of funds if compliance failures are significant


For Contractors and Subcontractors

  • Termination of contracts for failure to meet Section 3 requirements

  • Withholding of payments until compliance issues are resolved

  • Required corrective action plans to address deficiencies

  • Suspension or debarment from future HUD-funded opportunities

  • Referral to HUD’s Office of Inspector General (OIG) for potential legal action in cases of fraud or misrepresentation


🚨 Bottom Line:

Non-compliance by your contractors or their subcontractors becomes your problem. HUD expects PHAs to monitor and enforce compliance across the entire project team.



Let’s schedule a quick call to discuss how ARTOVIA can help your agency stay fully compliant.


Jeanne Burke

Section 3 Expert

 
 
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