Section 3 Reporting
Overview (24 CFR §75.25, formerly §135.90)
The reporting requirement applies to all TDHCA programs accessing HUD Section 3-covered funds that allow any construction, demolition, or rehab and meet the $200,000 project threshold (HOME, NHTF, NSP, ESG, CDBG), including lower-tier contracts, and their subcontractors. Primary contract awardee must submit to TDHCA one report that contains a combined summary of both their own Section 3 work hour activities and those of contractors they hired (24 CFR §75.25 Reporting). TDHCA enters these data in IDIS (Integrated Disbursement and Information System). TDHCA asks contract awardees to submit a completed report before their final (or retainage) draw. Recipients, subrecipients, employers, must maintain records and certifications demonstrating compliance with the rule.
Because the Final Rule defines “project” more narrowly, the vast majority of single-family HOME, ESG and CDBG projects (Single-Family contract activities, less than $200,000) will no longer need to report on Section 3. Most TDHCA projects subject to Section 3 will come through Multi-family programs (HOME, National Housing Trust Fund [NHTF] and Neighborhood Stabilization Program Grants [NSP]). Borrowing instruments, regulated by HUD, such as bonds and bank loans, do not need to comply with Section 3, based on those regulatory frameworks. They only count if combined with other eligible program funds.
General Concepts
“Goals” and “benchmarks” may appear interchangeably in the rule and guidance. The 2020 “Final Rule” changes the unit of goal measurement from “new hires” to “Section 3 work hours”, as a percentage of all hours worked on a project. The geography has changed somewhat; the program still prioritizes local workers but a subset of “Section 3 workers”, called “targeted Section 3 workers” must reside in a circumscribed area – either a 1-mile radius from the project site or a circular area centered on the project site and housing at least 5,000 persons. The time limit for counting Section 3 workers includes employees having worked for a Section 3 business for 5 years.
An agency that fails to meet Section 3 benchmarks must report on the qualitative nature of its activities and those of its contractors and subcontractors (24 CFR §75.15(b) and §75.25(b)) in a method prescribed by HUD program offices. These activities should demonstrate a good faith effort to improve economic opportunities for low-income persons in the general vicinity of the project, irrespective of the direct benefit to the subrecipient or contractor.
HUD will periodically revise the metrics of its “Section 3 benchmarks” (income limits, Section 3 work hours as a percentage of total work hours, etc.) and publish them in the Federal Register.
TDHCA, as the entity receiving funds from HUD and dispersing them to awardees in Texas, remains the “recipient” (in HUD rules and guidance). As such, TDHCA bears responsibility for reporting to HUD via Integrated Disbursement and Information System (IDIS) using data compiled from its subrecipient agencies and housing contract awardees. The data reported at the activity level in IDIS will populate into the CAPER and a Section 3 Microstrategy report (available through IDIS), eliminating the need for a separate annual Section 3 reporting system.
Submission Timing
Contract awardee submits to TDHCA a summary of their efforts to comply with Section 3, in the funding draw workbook, prior to final disbursement. A program specialist at TDHCA will enter the subrecipient’s (contractor’s) Section 3 accomplishments and efforts into HUD’s IDIS reporting system.
If you have any questions, please contact your program’s contract specialist, or TDHCA Program Services staff.
