US Housing and Urban Development (HUD) Section 3: New Final Rule 2020, 24 CFR 75, and Benchmarks

HUD published the Final Rule for 24 CFR 75 (formerly 24 CFR 135]) in the Federal Register on September 29, 2020 ( The effective date began November 30, 2020, and compliance with the new rule begins on July 1, 2021, at the earliest. TDHCA will apply the Final Rule to new projects with contracts signed after July 1, 2021.

Enhancing and Streamlining the Implementation of Section 3 Requirements for Creating Economic Opportunities for Low- and Very Low-Income Persons and Eligible Businesses: 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.

The 2020 Final Rule shifts the focus from "new hires" to "labor hours worked." Reporting will show percentages of total project labor hours performed by Section 3 workers. These may count existing employees (having qualified as Section 3 workers when hired, within the past five years), as well as new hires. HUD’s requirements for hourly time records allow for standards used for Davis-Bacon, but does not require expensive upgrades for those not currently tracking hours for Davis-Bacon compliance. The new rule encourages contracting with Section 3 businesses, but only as a means of increasing Section 3 labor hours worked. Program oversight shifts from Fair Housing and Equal Opportunity (FHEO) to reside with the program-administering HUD offices. The new rule can be found at the following link:

Section 3 applies to all programs accessing HUD Section 3-covered funds that allow any construction, demolition, or rehab and meet the $200,000 project threshold. These programs include HOME Investment Partnerships (usually multi-family), National Housing Trust Fund (NHTF), Neighborhood Stabilization Program (NSP), Emergency Solutions Grants (ESG) Program, and Community Development Block Grant (CDBG).

Because of anticipated, periodic updates, HUD publishes the reporting "Benchmarks," separately. Find the current Section 3 Benchmark notice at

Awardees of contracts under these HUD programs may want to study the new Part 75 regulations in HUD’s Self-Paced Training for Section 3 (24 CFR 75), found at

More guidance will follow as obtained from HUD:

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