[Federal Register Volume 84, Number 65 (Thursday, April 4, 2019)]
[Proposed Rules]
[Pages 13177-13199]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-06495]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 5, 14, 75, 91, 92, 93, 135, 266, 570, 576, 578, 905, 
964, 983, and 1000

[Docket No. FR-6085-P-01]
RIN 2501-AD87


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

AGENCY: Office of the Assistant Deputy Secretary for Field Policy and 
Management, HUD.

ACTION: Proposed rule.

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SUMMARY: Section 3 of the Housing and Urban Development Act of 1968, as

[[Page 13178]]

amended by the Housing and Community Development Act of 1992 (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. In accordance with 
statutory authority, HUD is charged with the responsibility to 
implement and enforce Section 3. HUD's regulations implementing the 
requirements of Section 3 have not been updated since 1994 and are not 
as effective as HUD believes they could be. This proposed rule would 
update HUD's Section 3 regulations to create more effective incentives 
for employers to retain and invest in their low- and very low-income 
workers, streamline reporting requirements by aligning them with 
typical business practices, provide for program-specific oversight, and 
clarify the obligations of entities that are covered by Section 3. The 
purpose of these changes is to increase the impact of the Section 3 
requirements for low- and very low-income persons, increase compliance 
with Section 3 requirements, and reduce regulatory burden. HUD is also 
publishing elsewhere in this issue of the Federal Register a proposed 
notification for comment that would set initial benchmarks for 
measuring Section 3 compliance with the final rule.

DATES: Comment Due Date: June 3, 2019.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule. Communications must refer to the above docket number and 
title. There are two methods for submitting public comments. All 
submissions must refer to the above docket number and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street SW, Room 10276, 
Washington, DC 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
www.regulations.gov. HUD strongly encourages commenters to submit 
comments electronically. Electronic submission of comments allows the 
commenter maximum time to prepare and submit a comment, ensures timely 
receipt by HUD, and enables HUD to make them immediately available to 
the public. Comments submitted electronically through the 
www.regulations.gov website can be viewed by other commenters and 
interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.

    Note: To receive consideration as public comments, comments must 
be submitted through one of the two methods specified above. Again, 
all submissions must refer to the docket number and title of the 
rule.

    No Facsimile Comments. Facsimile (fax) comments are not acceptable.
    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available for 
public inspection and copying between 8 a.m. and 5 p.m., weekdays, at 
the above address. Due to security measures at the HUD Headquarters 
building, an appointment to review the public comments must be 
scheduled in advance by calling the Regulations Division at 202-708-
3055 (this is not a toll-free number). Individuals with speech or 
hearing impairments may access this number via TTY by calling the 
Federal Relay Service at 800-877-8339. Copies of all comments submitted 
will be available for inspection and downloading at 
www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: For Public Housing Financial 
Assistance: Merrie Nichols-Dixon, Director, Office of Policy Program 
and Legislation, Office of Public and Indian Housing, Department of 
Housing and Urban Development, 451 7th Street SW, Room 3178, 
Washington, DC 20410; telephone 202-402-4673 (not a toll-free number); 
for Community Development Block Grant (CDBG)/CDBG Disaster Recovery/
Section 108 Loan Guarantee Program: Jessie Handforth Kome, Deputy 
Director, Office of Block Grant Assistance, Office of Community 
Planning and Development, Department of Housing and Urban Development, 
451 7th Street SW, Room 7286, Washington, DC 20410; telephone 202-402-
5539 (voice/TDD) (not a toll-free numbers); for HOME or Housing Trust 
Fund Section 3 projects: Virginia Sardone, Director, Office of 
Affordable Housing Program, Office of Community Planning and 
Development, Department of Housing and Urban Development, 451 7th 
Street SW, Room 10168, Washington, DC 20410; telephone 202-402-4606 
(not a toll-free number), and for Office of Housing programs: Thomas R. 
Davis, Director, Office of Recapitalization, Office of Housing, 
Department of Housing and Urban Development, 451 7th Street SW, Room 
6230, Washington, DC 20410; telephone 202-402-7549 (voice/TDD) (these 
are not toll-free numbers). Persons with hearing or speech impairments 
may access this number through TTY by calling the Federal Relay 
Service, at toll-free, 800-877-8339. General email inquiries regarding 
Section 3 may be sent to: [email protected].

SUPPLEMENTARY INFORMATION:

Executive Summary

Purpose of Regulatory Action

    This proposed rule would update the regulations implementing 
Section 3. The purpose of Section 3 is to ensure that employment, 
training, contracting, and other economic opportunities generated by 
certain HUD financial assistance are directed to low- and very low-
income persons, particularly those who receive government assistance 
for housing, and for businesses to provide economic opportunities to 
low- and very low-income persons. As noted in the summary of this 
preamble, the regulations for Section 3 have not been updated in over 
20 years. HUD's experience in administering Section 3 over time has 
provided insight as to how HUD could improve the effectiveness of its 
Section 3 regulations. Additionally, HUD has heard from the public that 
there is a need for regulatory changes to clarify and simplify the 
existing requirements. HUD has concluded that regulatory changes are 
needed to streamline Section 3 and more effectively benefit recipients 
of HUD financial assistance to achieve the purposes of the Section 3 
statute.\1\
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    \1\ As discussed later in this preamble, this proposed rule 
would define recipients to mean any entity that receives directly 
from HUD Section 3 public housing financial assistance or other 
financial assistance that funds a Section 3 project, including, but 
not limited to: Any State, local government, instrumentality, Public 
Housing Authority, Indian tribe, tribal organization, or other 
public agency, public or private nonprofit organizations.
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Summary of the Major Provisions of This Regulatory Action

    The following provides an overview of the more significant 
provisions of this proposed rule.
Promote Sustained Employment and Career Development
    The new rule includes multiple elements designed to increase 
Section 3's impact in directing employment opportunities for the people 
served by HUD financial assistance programs and sustaining employment. 
The new rule proposes the tracking and reporting of

[[Page 13179]]

labor hours instead of new hires and solicits public comment on whether 
to retain tracking and reporting of new hires in some contexts. The 
current new hire framework, while valuable for measuring entry into 
employment, does not capture the extent to which new hiring 
opportunities are created relative to the total work performed, nor 
whether those opportunities are sustained over time. The proposed focus 
on labor hours would measure total actual employment and the proportion 
of the total employment performed by low- and very low-income workers. 
In addition, the proposed focus on labor hours emphasizes continued 
employment. For example, an exclusive focus on counting new hires 
regards five new hires for one-month opportunities as a more valued 
outcome than one 12-month opportunity, and it does not distinguish 
between full- and part-time employment. A full-time job sustained over 
a long period allows a low- or very low-income worker to gain skills 
and is a strong indicator of progress towards self-sufficiency. A focus 
on labor hours ensures that the 12-month, full time opportunity is 
appropriately recognized. To further encourage employers to invest in 
and retain newly-hired low- and very low-income workers, the proposed 
rule would determine whether someone qualified as a Section 3 worker at 
the time of hire and the employer would continue to count that Section 
3 hire even if in the future the Section 3 worker is no longer a low- 
and very low-income worker.
    HUD held a number of listening sessions with small Public Housing 
Agencies (PHAs), large PHAs, and other entities involved with Section 3 
\2\ and heard from some PHAs that they would prefer to keep reporting 
new hires rather than switch to reporting labor hours. Therefore, while 
HUD believes tracking labor hours is the best option and would simplify 
reporting, HUD is proposing alternative regulatory language that would 
provide for PHAs to report on new hires. After receiving feedback on 
the labor hours and new hires framework in this proposed rule, HUD will 
select either Alternative 1, labor hours, or Alternative 2, new hires, 
for PHAs to use in tracking and reporting on Section 3.
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    \2\ Links [to the listening session notes] will be provided at 
the time the proposed rule is published.
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Align Section 3 Reporting With Standard Business Practices
    As noted above, the new rule proposes the tracking and reporting of 
labor hours, rather than new hires. This is more consistent with 
business practices for most construction contractors working on HUD 
assisted or insured projects, who already track labor hours in their 
payroll systems because they have been subject to prevailing wage 
requirements \3\ HUD believes a consistent labor hour tracking 
mechanism will make compliance with Section 3 easier not only for 
recipients of HUD assistance, but also for contractors and 
subcontractors. The rule also provides for employers who do not track 
hours in detail through a time-and-attendance system, permitting a good 
faith assessment of the labor hours of a full-time or part-time 
employee. The proposed rule does not create an obligation to establish 
a detailed time-and-attendance system.
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    \3\ See 42 U.S.C. 1437j(a), 24 CFR 905.308(b)(3)(ii), 24 CFR 
965.101, 25 U.S.C. 4225(b)(1)(A), and 24 CFR 1006.345(b).
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Proposed Applicability and Reporting Thresholds
    This proposed rule applies to (1) HUD's Public Housing Program, and 
(2) Other programs that provide housing and community development 
assistance. For ease in administration, the rule would provide separate 
definitions for these types of funding and separate subparts relating 
to: (1) Public housing financial assistance, which covers (a) 
development assistance provided pursuant to section 5 of the United 
States Housing Act of 1937 (the 1937 Act), (b) operations and 
management assistance provided pursuant to section 9(e) of the 1937 Act 
(Operating Fund), and (c) development, modernization, and management 
assistance provided pursuant to section 9(d) of the 1937 Act (Capital 
Fund); and (2) Section 3 projects, which means HUD program assistance 
used for housing rehabilitation, housing construction and other public 
construction projects that generally exceed a $200,000 project 
threshold or any Section 3 project funding from HUD's Lead Hazard 
Control and Healthy Homes programs. This proposed rule would clarify 
that contracts, subcontracts, grants, or subgrants subject to section 
7(b) of the Indian Self-Determination and Education Assistance Act (25 
U.S.C. 5307(b)) or subject to tribal preference requirements as 
authorized under 101(k) of the Native American Housing Assistance and 
Self-Determination Act (25 U.S.C. 4111(k)) must provide preferences in 
employment, training, and business opportunities to Indians and Indian 
organizations.
    All recipients of public housing financial assistance and 
recipients that fund a Section 3 project would be required to report on 
whether they have met benchmarks, as explained below. PHAs with fewer 
than 250 units would only be required to report on Section 3 
qualitative efforts and would not be required to report on whether they 
have met the reporting benchmarks.
Reporting and Targeted Section 3 Workers
    HUD's current regulations provide for a safe harbor where 
recipients may demonstrate compliance with Section 3 by certifying 
compliance with the Section 3 priorities and meeting numerical goals 
for the percentage of their new hires that qualify as Section 3 
residents. Under the existing regulations, a Section 3 resident is 
either a public housing resident, or a low- or very low-income person 
who lives in the metropolitan area or nonmetropolitan county where 
assistance is expended. However, the Section 3 statute requires 
recipients of certain financial assistance to target their efforts to 
direct employment and economic opportunities to specific groups of low- 
and very low-income individuals. HUD interprets the statutory 
priorities for the public housing program to be: Residents of the 
public housing projects for which the public housing financial 
assistance is expended, residents of other public housing projects 
managed by the PHA that is expending the assistance or to residents of 
Section 8-assisted housing managed by the PHA, YouthBuild participants, 
and then other low- and very low-income persons within the metropolitan 
area or nonmetropolitan county. For other HUD assistance programs, the 
statutory priorities are: Residents within the service area or the 
neighborhood of the project and YouthBuild participants. There is also 
a statutory contracting priority for businesses that provide economic 
opportunities for the same priority groups. Previously the contracting 
metric was based on the cost of the contract awarded to the Section 3 
business, and now the hours worked by the Section 3 business employees 
will be counted consistent with all other reporting.
    This proposed rule anticipates that recipients would report the 
labor hours performed by ``Section 3 Workers'' as a percentage of the 
total labor hours on a project, and labor hours performed by ``Targeted 
Section 3 Workers'' as a percentage of the total labor hours on a 
project. The proposed rule would also provide an alternative for public 
housing financial assistance where

[[Page 13180]]

reporting would be done by new hires, but with the same three metrics.
    Under this proposed rule, ``Section 3 Workers'' would generally be 
low- or very low-income individuals, or those employed by a business 
that generally provides economic opportunities for low- and very low-
income individuals. This proposed rule creates the new concept of 
``Targeted Section 3 Workers'' so that HUD can track, and recipients 
can target, hiring Section 3 workers in selected categories and those 
who work for Section 3 businesses. A ``Targeted Section 3 Worker'' is a 
subset of all Section 3 workers (see graphic), that HUD wishes to 
specifically track, reflecting both statutory and policy priorities. 
The Targeted Section 3 worker category also incorporates the statutory 
requirements pertaining to contracting opportunities for business 
concerns employing low- and very low-income persons.
[GRAPHIC] [TIFF OMITTED] TP04AP19.017

    Targeted Section 3 Workers for public housing financial assistance 
would be:
     Residents of public housing projects or Section 8-assisted 
housing; \4\
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    \4\ As further explained in this proposed rule, the term Section 
8-assisted housing refers to housing receiving project-based rental 
assistance or tenant-based assistance under Section 8 of the 1937 
Act.
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     Residents of other projects of the PHA that is expending 
assistance;
     Current YouthBuild participants; or
     Employees of a Section 3 business.
    Targeted Section 3 Workers for other HUD financial assistance used 
on a Section 3 project would be:
     Low- or very low-income workers residing within the 
service area or the neighborhood of the project (for purposes of this 
proposed rule, this would include low- or very low-income workers 
residing within a one-mile radius of the project site; or if fewer than 
5,000 people live within one mile of a work site, within a circle 
centered on the work site that encompass a population of 5,000 people);
     Current YouthBuild participants; or
     Employees of a Section 3 business concern.
    A long-standing criticism of local economic development policy is 
that spatially-targeted subsidies transfer jobs away from other areas 
without creating job opportunities for the neediest individuals in the 
targeted area. The proposed Section 3 regulation avoids this pitfall by 
encouraging the engagement of local firms and low-income workers 
through the definition of a targeted Section 3 worker.
Benchmarks
    This proposed rule would establish new benchmark measurements, 
which will also serve as safe harbors. The primary impact of the 
Section 3 regulation is not to create new jobs but to redirect the job 
opportunities that are generated by HUD financial assistance to Section 
3 workers and Targeted Section 3 workers, and the proposed benchmark 
would reflect and monitor grantees' abilities to do so. The new 
benchmarks will be based on ratios of Section 3 workers and Targeted 
Section 3 workers in comparison to all workers. These benchmarks would 
be set by notice and amended periodically to provide for updating of 
benchmarks where warranted. The benchmarks would align with the 
reporting data detailed above. As HUD gathers increasing data under the 
new rule, HUD can increase or decrease benchmark figures over time, or 
tailor different benchmarks for different geographies and different 
funding types. If a recipient certifies compliance with the statutory 
priorities and meets the outcome benchmarks, HUD would presume the 
recipient is in compliance with Section 3 requirements, absent evidence 
to the contrary. Otherwise, recipients will be required to submit 
qualitative reports on their efforts, as they are required to do under 
the current rule when they do not meet the safe harbor, and HUD may 
conduct monitoring to review the recipient's compliance. Elsewhere in 
this issue of the Federal Register, HUD has published a proposed 
notification for comment that would set initial benchmarks at the final 
rule.
Multiple Funding Sources
    HUD is seeking to streamline the administrative work for recipients 
that receive funds through more than one HUD program, and contractors 
that receive payment from funds under those programs. The rule provides 
for how to track funding and report benchmarks when there is a project 
that is funded by public housing financial assistance and also meets 
the criteria as a Section 3 project. Specifically, that the project 
must follow the public housing financial assistance requirements for 
the public housing financial assistance funds and may follow the 
requirements in subpart B or subpart C for the community development 
financial assistance funds. It would also provide for how to deal with 
reporting when a Section 3 project receives housing and community 
development assistance from two different HUD programs. Specifically, 
that HUD would designate reporting to one program office.

[[Page 13181]]

Integrate Section 3 Into Program Enforcement
    HUD program office staff are regularly in touch with HUD's funding 
recipients. Under the proposed rule's framework, HUD's program offices 
would incorporate Section 3 compliance and oversight into regular 
program oversight and make Section 3 a more integral part of the 
program's work. As a result, this proposed rule would eliminate the 
separate extensive complaint and compliance review procedures in the 
current rule. Relatedly, it would remove the delegation of authority in 
the current regulations, as Section 3 requirements, reporting, and 
compliance would be aligned with those of the applicable HUD program 
offices.

Costs and Benefits

    HUD has prepared a Regulatory Impact Assessment (RIA) that assesses 
the anticipated costs and benefits of the proposed rule. The purpose of 
Section 3 is to provide jobs, including apprenticeship opportunities, 
to public housing residents and other specific low- and very low-income 
residents of a local area, and contracting opportunities for businesses 
that substantially employ these persons. However, the Section 3 
requirement itself does not create additional jobs or contracts. 
Instead, Section 3 gives priority for local jobs and contracts created 
as a result of the expenditure of HUD financial assistance to Section 3 
residents and businesses residing and operating in the area in which 
the HUD financial assistance is expended. A reasonable estimate of the 
impact of this proposed rule would be a net transfer to Section 3 
workers of 3,000 to 14,000 employment opportunities, 2,000 to 4,000 of 
which would be to Targeted Section 3 workers. In addition, with respect 
to incomes for tenants of public housing, the Federal rental subsidies 
provided to those tenants could be reduced as a result of the creation 
of job opportunities resulting from the expenditure of Federal 
financial assistance subject to Section 3 requirements.
    If implemented as proposed, this proposed rule would result in a 
reduction in reporting and recordkeeping burden of 64,270 hours and 
approximately $1.2 million annually. This rule will not have any impact 
on the level of funding for covered HUD programs. Funding is determined 
independently by congressional appropriations, authorizing statutes and 
regulatory formulas that set the amounts of the Federal financial 
assistance provided by HUD grants. This proposed rule is not an 
economically significant rule as defined in Executive Order 12866 
(Regulatory Planning and Review).

I. Background

    Section 3 of the Housing and Urban Development Act of 1968 (Pub. L. 
90-448, approved August 1, 1968) (Section 3) was enacted for the 
purpose of bringing economic opportunities, generated by the 
expenditure of certain HUD financial assistance, to the greatest extent 
feasible, to low- and very low-income persons residing in communities 
where the financial assistance is expended. Section 3 recognizes that 
HUD funds are often one of the largest sources of Federal funds 
expended in low- and very low-income communities and, where such funds 
are spent on activities such as construction and rehabilitation of 
housing and other public facilities, the expenditure results in 
economic opportunities. By directing HUD-funded economic opportunities 
to residents and businesses in the community where the funds are 
expended, the expenditure can have the double benefit of creating new 
or rehabilitated housing and other facilities while providing 
opportunities for employment and training for the residents of these 
communities. Section 3 was amended by the Housing and Community 
Development Act of 1992 (Pub. L. 102-550, approved October 28, 1992), 
which required the Secretary of HUD to promulgate regulations to 
implement Section 3, codified at 12 U.S.C. 1701u. HUD's Section 3 
regulations were promulgated through an interim rule published on June 
30, 1994, at 59 FR 33880, and the regulations are codified in 24 CFR 
part 135.
    In the 24 years since HUD promulgated the current set of Section 3 
regulations, significant legislation has been enacted that affects HUD 
programs that are subject to the requirements of Section 3 and that are 
not adequately addressed in the current Section 3 regulations. This 
legislation includes, but is not limited to, the following: reforms 
made to HUD's Indian housing programs by the Native American Housing 
Assistance and Self-Determination Act of 1996 (NAHASDA) (Pub. L. 104-
330, approved October 26, 1996); public housing reforms made by the 
Quality Housing and Work Responsibility Act of 1998 (QHWRA) (Pub. L. 
105-276, approved October 21, 1998); reforms made to HUD's supportive 
housing programs by the Section 202 Supportive Housing for the Elderly 
Act of 2010 (Pub. L. 111-372, approved January 4, 2011); and the Frank 
Melville Supportive Housing Investment Act of 2010 (Pub. L. 111-347, 
approved January 4, 2011).
    In 2013, HUD's Office of the Inspector General conducted an audit 
to assess HUD's oversight of Section 3, in response to concerns about 
economic opportunities that were provided (or should have been 
provided) by the expenditure of HUD financial assistance under the 
American Reinvestment and Recovery Act (Recovery Act) (Pub. L. 111-5, 
approved February 17, 2009). The audit found that HUD was not fully 
enforcing the reporting requirements of Section 3 for recipients of 
Fiscal Year 2009 Recovery Act Public Housing Capital Funds from HUD.\5\ 
In response to the audit and the need to update the outdated 
regulations, HUD issued a proposed rule on March 27, 2015 entitled 
``Creating Economic Opportunities for Low- and Very Low-Income Persons 
and Eligible Businesses Through Strengthened `Section 3' Requirements'' 
which sought to strengthen HUD requirements. See 80 FR 16519. HUD 
received more than 300 comments on the proposed rule (including 
duplicate public comments). Comments came from a wide variety of 
entities, including PHAs, other housing providers, organizations 
representative of housing providers, governmental jurisdictions and 
agencies, tenant and other housing advocacy organizations, and 
individuals. All public comments can be viewed at http://www.regulations.gov/#!docketDetail;D=HUD-2015-0026.
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    \5\ See: http://www.hudoig.gov/reports-publications/audit-reports/hud-did-not-enforce-reporting-requirements-of-section-3-of.
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    While some commenters supported the rule, many commenters were 
concerned that the proposed rule would raise the bar for compliance and 
increase administrative requirements without increasing funding. Based 
on the multitude of comments, HUD sought additional feedback from the 
public by hosting a number of Section 3 listening sessions \6\ to 
highlight ``best practices'' and to discuss barriers to implementation 
across the country. The sessions provided valuable information on the 
challenges and barriers for implementation that HUD hopes to address in 
this new proposed rule.
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    \6\ See Listening Session Notes at https://www.hud.gov/program_offices/fair_housing_equal_opp/section_3_publications_and_regulations.
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II. This Proposed Rule

    HUD proposes to revise its Section 3 regulations to better achieve 
the statute's goals, to make reporting more meaningful and more aligned 
with statutory requirements, and to simplify

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compliance for recipients. This proposed rule does this by aligning 
reporting with desired outcomes and with data already collected by 
reporting entities; clarifying the applicability and scope of the rule; 
linking certain statutory prioritization categories to a new notice 
that sets forth benchmarks; streamlining the rule's reporting and 
oversight requirements; addressing complexities arising from the use of 
multiple funding sources; simplifying the requirements for Section 3 
contract language; and aligning Section 3 requirements more closely 
with specific HUD program requirements.
    This rule would remove existing Section 3 regulations in 24 CFR 
part 135 and create a new part 75, which would be organized into four 
subparts: Subpart A--General Provisions; Subpart B--Additional 
Provisions for Public Housing Financial Assistance; Subpart C--
Additional Provisions for Section 3 projects; and Subpart D--Provisions 
for Multiple funding sources, recordkeeping and compliance. Subparts A 
and D apply to all recipients, subrecipients, contractors, and 
subcontractors subject to Section 3 requirements. Subpart B provides 
requirements specific to PHAs and other recipients of public housing 
financial assistance. Subpart C mostly mirrors subpart B, but provides 
specific requirements for recipients using funds on a Section 3 
project. Part 75 would be codified in a section of HUD's CFR that 
establish requirements that generally apply to HUD's programs.
    Throughout this rule, the reader will find amendatory language 
titled ``Alternative 1'' and ``Alternative 2.'' As discussed above, HUD 
is providing the opportunity for PHAs and other recipients of public 
housing financial assistance to view the new rule and provide feedback 
on whether HUD should track labor hours, consistent with what HUD is 
proposing for Section 3 projects, or maintain the tracking of new 
hires. The language in ``Alternative 1'' is what HUD would adopt if the 
final rule tracks labor hours for all public housing financial 
assistance and the language in ``Alternative 2'' is what HUD would 
adopt if the final rule provides separate tracking and reporting of 
public housing financial assistance by new hires. At the final rule 
stage, HUD will decide on either ``Alternative 1'' or ``Alternative 
2,'' and maintain only one set of regulatory changes and the 
definitions that apply.
    HUD notes that nothing in this proposed rule would supersede the 
general requirement of 2 CFR 200.319(a) that all procurement 
transactions be conducted in a competitive manner. In addition, HUD 
notes that 2 CFR 200.319(b) permits geographical preferences where 
applicable Federal statutes expressly mandate or encourage geographic 
preference, such as Section 3.

Subpart A--General Provisions

    Subpart A--General Provisions contains four sections: The general 
purpose of Section 3 (Sec.  75.1); the applicability of Section 3 
requirements on HUD federal assistance (Sec.  75.3); new and updated 
definitions applicable to this part (Sec.  75.5); and the Section 3 
requirements applicable to HUD's notices of funding availability 
(NOFAs) (Sec.  75.7).
    Section 75.1 provides the framework for the regulation and sets 
forth the purpose of Section 3, which is to ensure that economic 
opportunities, most importantly employment, generated by certain HUD 
financial assistance for housing and community development programs 
shall be directed to low- and very low-income persons. Following the 
Section 3 statute, this section provides an emphasis on providing 
opportunities for those who are recipients of Federal financial 
assistance for housing or residents of the community in which the 
Federal financial assistance is spent.
    Section 75.3 defines the application of Section 3 consistent with 
the Section 3 statute. There are two categories:
    (1) Public housing financial assistance: This term covers the 
public housing program assistance which includes: (a) Development 
assistance provided pursuant to section 5 of the United States Housing 
Act of 1937; (b) operations and management assistance provided pursuant 
to section 9(e) of the 1937 Act (Operating Fund) and (c) development, 
modernization, and management assistance provided pursuant to section 
9(d) of the 1937 Act (Capital Fund). While the statute also includes a 
reference to modernization assistance pursuant to section 14 of the 
Act, which was repealed by the Quality Housing and Work Responsibility 
Act of 1998 (QHWARA) (Pub. L. 105-276), the former section 14 
modernization program was replaced along with the operating, 
maintenance, development and modernization programs that became the 
Operating Fund and Capital Fund programs with assistance provided 
pursuant to section 9. The Section 8 programs were never included in 
the Section 3 statute and will not be covered in this proposed rule 
despite being included in the current Section 3 rule.
    (2) Section 3 project: This term covers assistance provided by 
other HUD programs when used for housing rehabilitation, housing 
construction, and other public construction projects, as described in 
12 U.S.C. 1701u(c)(2). A Section 3 project will mean a housing 
rehabilitation, housing construction, and other public construction 
projects where the HUD assistance exceeds $200,000, and all projects 
that receive funding from HUD's Lead Hazard Control and Healthy Homes 
programs.
    The proposed rule's threshold applies on a project basis. HUD 
proposes using project funding level to define thresholds because the 
amount of funding spent on the project is directly related to the 
economic opportunities generated by the project.
    HUD arrived at the $200,000 threshold after analyzing data from 
relevant programs, including HUD's Community Development Block Grant 
(CDBG) and HOME Investment Partnerships (HOME) programs. HUD considered 
various thresholds in deciding to propose the $200,000 figure. HUD 
estimates that of $100,000 in construction spending, $64,000 generally 
goes to labor costs, and the median annual income for a construction 
job is $44,730. Thus, a project below $100,000 would not generate more 
than one salary. On the other hand, HUD data shows that a higher 
threshold, such as $400,000, could exempt a large portion of housing 
and community development projects from Section 3 funding. Fiscal year 
2015 CDBG data shows that a $400,000 threshold would have exempted 90 
percent of construction and rehabilitation activities, and over half of 
CDBG assistance. A $200,000 threshold would still cover almost three-
quarters of CDBG funding, while exempting the smallest three quarters 
of projects and eliminating administrative burdens from these small 
efforts that yield relatively few employment opportunities. For the 
HOME program, at least 90% of HOME funding to projects greater than 1 
unit would be covered by any threshold at $400,000 or below. It is 
HUD's view that $200,000 is a sufficiently high amount that, when 
expended on construction-related activities, a significant amount of 
those funds should be used to generate economic opportunities for low- 
and very low-income persons. An exception applies for lead hazard 
control and healthy homes mitigation activities, which on a per unit 
remediation basis would generally involve much less than $100,000 in 
HUD grant funds, and so applying a per project threshold could 
effectively exempt lead hazard control and healthy homes grants from 
Section 3. As a result, this rule proposes to apply Section 3 
requirements to all projects

[[Page 13183]]

that receive funds from HUD's Lead Hazard Control and Healthy Homes 
grant programs consistent with the current application of Section 3 to 
all grants above $100,000.
    Section 75.3 provides that requirements of this part apply to the 
entire Section 3 project, regardless of whether the project is fully or 
partially funded with HUD program assistance.
    This section also clarifies that Section 3 does not apply to 
material supply contracts. As discussed in this preamble, a material 
supply contract is defined as a contract for the delivery of 
commercially available materials and products. The proposed rule 
includes a set of examples to illustrate what is meant by commercially 
available materials for purchase, such as lumber, drywall, wiring, 
concrete, pipes, toilets, sinks, carpets, and office supplies. In most 
cases a material supply contract will include the delivery of the 
materials and in those cases the delivery is also not subject to 
Section 3 requirements. However, when a recipient enters into a 
separate delivery contract for an order of material supplies, that 
delivery contract would be subject to Section 3 requirements.
    The proposed rule also provides that contracts, subcontracts, 
grants, or subgrants subject to section 7(b) of the Indian Self-
Determination and Education Assistance Act (25 U.S.C. 5307(b)) or 
subject to tribal preference as authorized under 101(k) of the Native 
American Housing Assistance and Self-Determination Act (25 U.S.C. 
4111(k)) are not subject to the requirements in this part because they 
must provide preferences in employment, training, and business 
opportunities to Indians and Indian organizations. Lastly, Sec.  75.3 
indicates that HUD encourages recipients of HUD assistance not covered 
by Section 3 to support the objectives of Section 3.
    Section 75.5 provides the definitions used throughout the new part. 
The section proposes to use the general HUD definitions at 24 CFR part 
5 for HUD, Public Housing, and PHAs and defines Section 3 by reference 
to section 3 of the Housing and Urban Development Act of 1968, as 
amended (12 U.S.C. 1701u). The proposed rule also includes several 
definitions for clarity including: ``1937 Act;'' ``Public housing 
project;'' ``Low-income person;'' ``Qualified Census Tract;'' ``Section 
8-assisted housing;'' ``Very low-income person;'' and ``YouthBuild 
programs.''
    HUD proposes contract terms for determining coverage of the rule:
    Material supply contracts would be defined as a contract that is 
made for the purchase of products and materials. HUD provides this 
definition to clarify that such contracts are not covered by Section 3.
    Professional services would be defined as non-construction 
services, including, but not limited to, contracts for legal services, 
financial consulting, accounting services, environmental assessment, 
architectural services, and civil engineering services. This definition 
is informed by the current separation of Section 3 business concern 
ratios by building trade versus non-building trade. Professional 
services will be excluded from the benchmarking requirements, but HUD 
will allow voluntary reporting of these workers, as discussed below.
    HUD also provides definitions for purposes of the new Section 3 
reporting requirements:
    Contractor would be defined as an entity entering into a contract 
with a recipient to perform work in connection with the expenditure of 
public housing financial assistance or for work in connection with a 
Section 3 project, or a subrecipient for work in connection with a 
Section 3 project.
    Labor hours would be defined to mean the number of paid hours 
worked by persons on Section 3 projects or employed with funds that 
include public housing financial assistance. This includes the labor 
hours of any contractor, subcontractor, or employee of the public 
housing authority that is being paid in part by the public housing 
financial assistance. For example, the labor hours performed by an 
elevator maintenance contractor under a contract with the PHA would be 
included in the total labor hours performed by the PHA using public 
housing financial assistance.
    New hire would be defined as a full- or part-time employee for 
permanent, temporary, or seasonal employment opportunities that was not 
on the payroll of the recipient, or of a recipient's contractor or 
subcontractor or other entity receiving public housing financial 
assistance at the beginning of the award. The term also includes a new 
hire that was hired by a contractor or subcontractor on a per-project 
basis as a result of receiving public housing financial assistance. 
This definition is part of Alternative 2 for PHAs to consider in 
determining if reporting should be completed using labor hours or new 
hires. If Alternative 1, which uses labor hours for reporting, is 
chosen, this definition will not be included at the final rule.
    Public housing project is defined in 24 CFR 905.108.
    Recipient would be defined to mean any entity that receives 
directly from HUD Section 3 public housing financial assistance or 
other financial assistance that funds a Section 3 project, including, 
but not limited to: Any State, local government, instrumentality, PHA, 
Indian tribe, tribal organization, or other public agency, public or 
private nonprofit organization. This term excludes the ultimate 
beneficiary of Federal financial assistance under the HUD program to 
which Section 3 applies (for example an individual or family receiving 
a housing rehabilitation grant financed with HOME assistance) and does 
not include contractors and subcontractors. This term establishes the 
scope of entities that would be required to report to HUD under this 
proposed rule. It also defines the entities subject to the requirement 
to include contractual language requiring the application of Section 3 
(See Sec. Sec.  75.17 and 75.27.).
    Small PHA would be defined to mean a public housing authority with 
fewer than 250 public housing units. This definition allows for these 
smaller entities to follow a reduced reporting process under Sec.  
75.13. This definition is consistent with references to small PHAs in 
24 CFR parts 902, 903, 905, 970, and 985.
    Subcontractor would mean any entity that has a contract with a 
contractor to undertake a portion of the contractor's obligation to 
perform work in connection with the expenditure of public housing 
financial assistance or a Section 3 project.
    Subrecipient would be defined to have the meaning provided in the 
applicable program regulations, or in 2 CFR 200.93.
    Finally, this regulation would propose definitions for a Section 3 
business concern, Section 3 worker, and Targeted Section 3 worker for 
purpose of benchmarking:
    Section 3 business concern would be defined to mean a business that 
is at least 51 percent owned by low- or very low-income persons; over 
75 percent of the labor hours performed for the business are performed 
by low- or very low-income persons; or is at least 25 percent owned by 
current public housing residents or residents who currently live in 
Section 8-assisted housing. The Section 3 statute defines a business 
concern that provides economic opportunities to mean a business concern 
``that--(A) provides economic opportunities for a class of persons that 
has a majority controlling interest in the business; (B) employs a 
substantial number of such persons; or (C) meets such other criteria as 
the Secretary may establish.'' The proposed definition reflects the 
first two statutory

[[Page 13184]]

requirements and provides two additional types of business concerns 
that meet the statutory intent. HUD believes that the 75 percent figure 
is a reasonable measure for determining whether the business concern 
provides economic opportunities for a substantial number of low- and 
very low-income persons. Lastly, to further encourage businesses 
ownership by public housing residents or residents who live in Section 
8-assisted housing, this proposed rule would provide that a Section 3 
business concern could be one that is at least 25 percent owned by 
current public housing residents or residents who currently live in 
Section 8-assisted housing. HUD also notes that a prior arrest or 
conviction generally does not impact an individual's status as an owner 
of a Section 3 business and that meeting the definition of a Section 3 
business does not negate the requirement that the business meet the 
specifications of the particular contract (e.g., construction, 
supplies, etc.). However, the requirements for preventing crime in 
federally assisted housing (denying admission and terminating tenancy 
for criminal activity or alcohol abuse) in subpart I of 24 CFR part 5 
continue to apply to Section 3. Accordingly, subpart I will apply to 
applicants or tenants who would be under consideration as an owner of a 
Section 3 business.
    Section 3 worker would be defined to mean a worker whose income, 
before being hired to work on the project, is below the income limit 
established by HUD; a worker who lives in a qualified census tract; or 
a worker who is employed by a Section 3 business concern. The program 
statutes and regulations provide the basis for the income limit for 
determining eligibility for assisted housing programs, including the 
Public Housing, Section 8 project-based, Section 8 Housing Choice 
Voucher, Section 202 Housing for the Elderly, and Section 811 Housing 
for Persons with Disabilities programs. HUD annually establishes income 
limits based on Median Family Income estimates and Fair Market Rent 
area definitions for each metropolitan area, parts of some metropolitan 
areas, and each non-metropolitan county. The income limits are 
available at: https://www.huduser.gov/portal/datasets/il.html.
    HUD would define qualified census tract as any census tract (or 
equivalent geographic area defined by the Bureau of the Census) in 
which at least 50 percent of households have an income of less than 60 
percent of Area Median Gross Income (AMGI); or where the poverty rate 
is at least 25 percent and where the census tract is designated as a 
qualified census tract by HUD. Qualified census tract data can be found 
here: https://www.huduser.gov/portal/datasets/qct.html. The definition 
of Section 3 worker would provide that an individual's prior arrest or 
conviction shall not negatively impact that individual's status as a 
Section 3 worker and that meeting the definition of a Section 3 worker 
does not negate the requirement that the individual be qualified for 
the job. However, the requirements for preventing crime in federally 
assisted housing (denying admission and terminating tenancy for 
criminal activity or alcohol abuse) in subpart I of 24 CFR part 5 
continue to apply to individuals identified as Section 3 workers or as 
owners of a Section 3 business.
    Targeted Section 3 worker would be defined as provided in Sec.  
75.11 for the public housing financial assistance and as provided in 
Sec.  75.19 for a Section 3 project. For certain projects receiving 
funding from multiple sources, the definition is provided in Sec.  
75.29.
    Section 75.7 would establish requirements applicable to HUD's NOFAs 
for public housing financial assistance and Section 3 projects. HUD 
would require that all NOFAs that award funds covered by Section 3 will 
include notice that the assistance is subject to part 75. This section 
would also provide that HUD may include, where appropriate, points or 
bonus points for exceeding Section 3 requirements. This proposed rule 
would remove the requirements in the currently codified part 135 that 
require NOFA applicants to submit certifications that the applicant 
will comply with the Section 3 requirements, require a statement of 
activities intended by recipients of assistance covered by Section 3, 
and require that the NOFA give preference for Section 3 requirements. 
HUD's removal of these requirements is consistent with how HUD 
implements other applicable program requirements. Further, these 
additional burdens are unnecessary as recipients already agree to 
comply with all applicable program requirements, including Section 3 
requirements, when they submit a NOFA.

Subpart B--Additional Provisions for Public Housing Financial 
Assistance

    Subpart B--Additional Provisions for Public Housing Financial 
Assistance contains five sections, which set out the requirements for 
PHAs and other recipients of public housing financial assistance, as 
defined in Sec.  75.3. The subpart includes the following: Requirements 
(Sec.  75.9); Targeted Section 3 worker definition for public housing 
financial assistance (Sec.  75.11); Section 3 safe harbor (Sec.  
75.13); Reporting (Sec.  75.15); and Contract Provisions (Sec.  75.17).
    Section 75.9 would incorporate the statutory Section 3 requirements 
for prioritizing categories of Section 3 workers and businesses when 
using public housing financial assistance defined in Sec.  75.3(a)(1). 
The statutory prioritization requires that a PHA or other recipient of 
public housing financial assistance must make its best efforts, 
consistent with existing Federal, state, and local laws and 
regulations, to provide employment and training opportunities generated 
by the public housing financial assistance to Section 3 workers in the 
following priority order:
    (1) To residents of the public housing projects for which the 
public housing financial assistance is expended;
    (2) To residents of other public housing projects managed by the 
PHA that is expending assistance or to residents of other Section 8-
assisted housing managed by the PHA;
    (3) To participants in YouthBuild programs; and
    (4) To low- and very low-income persons residing within the 
metropolitan area (or nonmetropolitan county) in which the assistance 
is expended.
    The Section 3 statute also requires that a PHA or other recipient 
of public housing financial assistance must make its best efforts to 
award contracts and subcontracts to business concerns that provide 
economic opportunities to Section 3 workers in the following priority 
order:
    (1) To Section 3 business concerns that provide economic 
opportunities for residents of the public housing projects for which 
the assistance is provided;
    (2) To Section 3 business concerns that provide economic 
opportunities for residents of other public housing projects managed by 
the PHA that is providing the assistance or for residents of Section 8-
assisted housing managed by the PHA;
    (3) To YouthBuild programs; and
    (4) To Section 3 business concerns that provide economic 
opportunities for Section 3 workers residing within the metropolitan 
area (or nonmetropolitan county) in which the assistance is provided.
    Section 75.11 would establish the definition of a ``Targeted 
Section 3 worker'' for PHAs and other recipients of public housing 
financial assistance. This definition is used for reporting and 
tracking by HUD and to ensure that PHAs and other recipients use their 
best

[[Page 13185]]

efforts to provide employment opportunities to the categories of 
workers in certain priority categories established by the Section 3 
statute, as well as to all residents of public housing projects or 
Section 8-assisted housing, and to workers employed by Section 3 
business concerns. The definition of a ``Targeted Section 3 worker'' 
for subpart B has an Alternative 1 definition and Alternative 2 
definition to reflect the option of reporting labor hour or new hires.
    Alternative 1: Would provide that a Targeted Section 3 worker for 
subpart B is a worker employed by a Section 3 business concern, or a 
worker who currently is or who was when hired by the worker's current 
employer a resident in a public housing project or Section 8-assisted 
housing; a resident of other projects managed by the PHA that is 
expending assistance; or a current YouthBuild participant.
    Alternative 2: Would provide that a Targeted Section 3 worker for 
subpart B is a new hire employed by a Section 3 business concern, or a 
new hire employed by the worker's current employer who is also a 
resident in a public housing project or Section 8-assisted housing; a 
resident of other projects managed by the PHA that is expending 
assistance; or a current YouthBuild participant.
    In both alternatives, the definition focuses on certain targeted 
categories for public housing financial assistance. Additionally, the 
definition includes all employees of a Section 3 business concern to 
recognize the statutory requirement for recipients to make best efforts 
to award contracts to Section 3 business concerns. The definition also 
includes all residents of public housing projects, as well as residents 
receiving project-based or tenant-based Section 8 assistance, and 
YouthBuild participants combining these categories allows for a single, 
streamlined outcome metric (labor hours) that reflects both the 
employment and contracting components of the Section 3 statute, as well 
as HUD's desire to incentivize the employment of all residents who live 
in public housing or receive Section 8 assistance, and also in the 
YouthBuild program.
    The Targeted Section 3 worker concept is consistent with the goals 
of expanding employment opportunities for particular individuals that 
receive federal assistance for housing and of expanding subcontracting 
opportunities for businesses that are owned by or substantially employ 
such persons.
    The first alternative focuses on labor hours and includes current 
employees and those recently hired by the employer. HUD believes that 
counting labor hours for employees who are already employed and qualify 
as a Targeted Section 3 worker ensures that such workers have continued 
long-term employment. HUD has also heard from stakeholders that some 
employers may fire and re-hire people, hire people for very short-term 
jobs, and engage in other maneuvering to meet the Section 3 
requirements. HUD believes counting labor hours is consistent with the 
statute and mitigates contractors' ability to manipulate their Section 
3 outcomes.
    Section 75.13 would provide PHAs and other recipients a safe harbor 
provided they certify to following the prioritization in Sec.  75.9 and 
meet or exceed the Section 3 benchmarks that HUD will prescribe through 
notice. The safe harbor proposed by this rule, like the safe harbor 
provided by the currently codified rule, would allow for recipients 
that meet this standard to be free from additional Section 3 reporting. 
However, this proposed rule also provides that the safe harbor exists 
only to the extent that no evidence to the contrary is presented to 
HUD, and that meeting the safe harbor does not exempt PHAs and other 
recipients of public housing financial assistance from maintaining 
records of compliance for general program review. See Sec. Sec.  75.31 
and 75.33.
    This section would also set forth the process of establishing 
benchmarks. HUD proposes to establish Section 3 benchmarks for Section 
3 workers, Targeted Section 3 workers, or both through a document 
published in the Federal Register. The rule would provide that HUD may 
establish a single nationwide benchmark or may establish multiple 
benchmarks based on geography, the type of public housing financial 
assistance, or other variables. When establishing the Section 3 
benchmarks, HUD would consider the industry averages worked by specific 
categories of workers or in different localities or regions; data 
reported by PHAs or other recipients of public housing financial 
assistance pursuant to this section; and any other factors HUD deems 
important. In establishing the Section 3 benchmarks, HUD would exclude 
professional service contracts from the benchmark ratios. HUD plans to 
update the benchmarks through a document published in the Federal 
Register, subject to public comment, not less frequently than once 
every three years. Providing the benchmark through Federal Register 
notice would allow HUD to revise the benchmarks where warranted in 
response to the data HUD gathers and based on feedback HUD receives 
from recipients. Over time, the benchmarks can become more tailored and 
a more reliable indicator for when enforcement efforts should be 
undertaken, giving the safe harbors more value and creating a greater 
incentive for recipients, contractors, and subcontractors to exceed the 
safe harbors. Section 3 benchmarks will consist of the following 
ratios:
    Alternative 1: (1) The number of labor hours worked by Section 3 
workers divided by the total number of labor hours worked by all 
workers employed with public housing financial assistance in the PHA's 
fiscal year; (2) the number of labor hours worked by Targeted Section 3 
workers, as defined in Sec.  75.11(a) \7\ divided by the total number 
of labor hours worked by all workers employed with public housing 
financial assistance in the PHA's fiscal year; or (3) ratios for both 
(1) and (2).
---------------------------------------------------------------------------

    \7\ This refers to Sec.  75.11(a) Alternative 1.
---------------------------------------------------------------------------

    Alternative 2: (1) The number of new hires that are Section 3 
workers divided by the total number of new hires employed with public 
housing financial assistance in the PHA's fiscal year; or (2) the 
number of new hires that are Targeted Section 3 workers, as defined in 
Sec.  75.11(a),\8\ divided by the total number of new hires employed 
with public housing financial assistance in the PHA's fiscal year; or 
(3) ratios for both (1) and (2).
---------------------------------------------------------------------------

    \8\ This refers to Sec.  75.11(a) Alternative 2.
---------------------------------------------------------------------------

    Section 75.15 proposes the process for PHAs and other recipients of 
public housing financial assistance to report to HUD on the data for 
the benchmarks. Specifically, it requires that the following be 
reported:
    Alternative 1: The total number of total labor hours worked with 
the public housing financial assistance, labor hours worked by Section 
3 workers, and labor hours worked by Targeted Section 3 workers. 
However, the rule would provide a limited exception where PHAs and 
other recipients of public housing financial assistance could use the 
reporting of a good faith assessment of the labor hours of a full-time 
or part-time employee from contractors and subcontractors that have not 
been subject to requirements specifying time and attendance reporting, 
and do not have systems already in place to track labor hours. This 
small carve-out provides a limited exception for recipients to report 
on the labor hours from contractors and subcontractors that do not 
already track labor hours without necessitating any change in time and 
attendance or payroll systems for the reporting contractors and 
subcontractors. However, it is not a permanent exemption and if in the

[[Page 13186]]

future the contractor or subcontractor is required to track labor hours 
pursuant to some other authority, or begins to voluntarily track labor 
hours, the exception would no longer apply.
    Alternative 2: The total number of new hires with public housing 
financial assistance, total number of new hires that are Section 3 
workers, and total number of new hires that are Targeted Section 3 
workers.
    Both Alternative 1 and Alternative 2 would provide that reporting 
may, but is not required to, include professional service jobs. Given 
the challenges HUD has heard in hiring Section 3 workers and Targeted 
Section 3 workers in professional service jobs, HUD has decided not to 
include those jobs in its benchmark ratio and instead proposes to make 
the reporting of professional services jobs voluntary. Therefore, if a 
PHA, other recipient of public housing financial assistance, 
contractor, or subcontractor has professional service employees that 
are Section 3 workers and Targeted Section 3 workers, the PHA or other 
recipient of public housing financial assistance may report on those 
jobs and count them to increase their total numbers. By including labor 
hours for professional services work in the numerators of these 
calculations (i.e., labor hours for the Section 3 workers and Targeted 
Section 3 workers), but not in the denominators (i.e., all labor hours 
worked), HUD is also recognizing the value of this more challenging 
effort to create opportunities in the professional services context.
    Section 75.15 would provide that small PHAs will not be required to 
report the number of labor hours or new hires. Small PHAs would instead 
be required to report their qualitative efforts. PHAs and other 
recipients of public housing financial assistance that do not meet the 
Section 3 benchmarks described in Sec.  75.11 would also have to 
provide reports on their qualitative efforts. HUD is considering some 
of the following to signify qualitative efforts: Outreach efforts to 
generate job applicants who are Targeted Section 3 workers; direct on-
the-job training (including apprenticeships); indirect training such as 
arranging for, contracting for, or paying tuition for, off-site 
training technical assistance to help Section 3 workers; and outreach 
efforts to identify and secure bids from Section 3 business concerns. 
HUD plans to create a form for tracking and reporting qualitative 
efforts, to ease burden on recipients.
    All reporting either under the general reporting framework or the 
qualitative reporting requirement would be on an annual basis and 
reported to HUD in a manner consistent with reporting requirements for 
the applicable HUD program. HUD believes that requiring reporting 
annually, but consistent with timeframes that PHAs and other recipients 
of public housing financial assistance are already using to submit 
documents to HUD, will relieve existing burden. For example, when an 
annual plan is completed for a PHA the Section 3 reporting would be 
done at that time or when a recipient of public housing financial 
assistance must submit an annual report. HUD is also looking to include 
reporting into existing systems rather than requiring PHAs and other 
recipients to log into and report under a separate system, such as 
HUD's existing Section 3 Performance Evaluation and Registration System 
(SPEARS).
    Section 75.17 would establish requirements for PHAs and other 
recipients of public housing financial assistance to include language 
referencing Section 3 in contracts that are subject to Section 3. The 
proposed rule would provide that PHAs and other recipients of public 
housing financial assistance include contractual language applying 
Section 3 to any contractor. PHAs and other recipients of public 
housing financial assistance would also require that contractors 
include contractual language applying Section 3 to any subcontract. 
Lastly, the section would provide that regardless of whether Section 3 
language exists in a contract, PHAs and other recipients of public 
housing financial assistance must ensure the contractors and 
subcontractors are in compliance with Sec.  75.9. As distinguished from 
currently codified Sec.  135.38, this proposed rule would not codify 
the exact contractual language that PHAs and other recipients of public 
housing financial assistance must include and would no longer require 
the use of this contract provision below the initial subcontract level. 
HUD believes this will reduce regulatory burdens. This change does not, 
however, limit the requirement that public housing financial assistance 
is used consistent with the statutory requirements in Sec.  75.9.

Subpart C--Additional Provisions for Section 3 Projects

    Subpart C--Additional Provisions for Section 3 Projects sets out 
the requirements for recipients working on a Section 3 project, as 
defined in Sec.  75.3. The sections include: Requirements (Sec.  
75.19); Targeted Section 3 worker definition for Section 3 projects 
(Sec.  75.21); Section 3 safe harbor (Sec.  75.23); Reporting (Sec.  
75.25); and Contract Provisions (Sec.  75.27).
    Section 75.19 would incorporate the statutory Section 3 
requirements for prioritizing categories of Section 3 workers and 
businesses under other HUD funds that are used for Section 3 projects, 
as defined in Sec.  75.3(a)(2). The statutory prioritization ensures 
that employment and training opportunities arising in connection with 
Section 3 projects are provided, consistent with existing Federal, 
state and local laws and regulations, to Section 3 workers within the 
metropolitan area (or nonmetropolitan county) in which the project is 
located to the greatest extent feasible to these following groups:
    (1) Section 3 workers residing within the service area or the 
neighborhood of the project; and
    (2) To participants in YouthBuild programs.
    The Section 3 statute also requires that to the greatest extent 
feasible contracts and subcontracts awarded in connection with Section 
3 projects are provided to Section 3 business concerns that provide 
economic opportunities to Section 3 workers residing within the 
metropolitan area (or nonmetropolitan county) in which the project is 
located. Those efforts should be directed as follows:
    (1) Section 3 Business concerns that provide economic opportunities 
for Section 3 workers residing within the service area or the 
neighborhood of the project; and
    (2) YouthBuild programs.
    For the purposes of Section 3 only, HUD would define ``Service area 
or the neighborhood of the project'' to mean an area within 1 mile of 
the Section 3 project or, if fewer than 5,000 people live within one 
mile of a Section 3 project, within a circle centered on the Section 3 
project that is sufficient to encompass a population of 5,000 people 
according to the most recent U.S. Census. HUD notes above that 
consistent with existing Federal regulations, Federal procurement 
requirements at 2 CFR 200.319(a) must continue to be followed, as 
discussed above.
    Section 75.21 would define a ``Targeted Section 3 worker'' for 
Section 3 projects. This definition would be used for reporting and 
tracking by HUD so that recipients will focus on reaching the priority 
workers in the statute and workers employed by Section 3 business 
concerns. HUD would define a ``Targeted Section 3 worker'' for subpart 
C as a worker employed by a Section 3 business concern, or a worker who 
is or was when hired by the worker's current employer: (1) A Section 3 
worker living

[[Page 13187]]

within the service area or the neighborhood of the project, as this 
term is described in Sec.  75.5; or (2) a current YouthBuild 
participant. As with the definition of ``Targeted Section 3 worker'' 
for PHAs and other recipients of public housing financial assistance, 
this definition would include current YouthBuild participants. 
Additionally, all employees of Section 3 business concerns would be 
considered Targeted Section 3 workers to recognize the statutory 
requirements to award contracts to Section 3 business concerns, to the 
greatest extent feasible, while providing for a single, streamlined 
outcome metric (labor hours) that reflects both the employment and 
contracting components of the Section 3 statute.
    HUD believes counting individuals who live within one mile of the 
worksite or within a circle centered around the worksite that 
encompasses 5,000 people provides a definitive means of determining who 
counts as a Targeted Section 3 worker within the service area or the 
neighborhood of the project. HUD proposes to use this 5,000-person 
figure because HUD examined current CPD projects and determined that 
most (77%) had a population of 5,000 people within one mile of the 
project site, and the median project had 4,627 potential Targeted 
Section 3 workers. Further, an individual could live across the street 
from a project and be differently affected by development activities, 
and still not be considered to be living in the same ``neighborhood'' 
as a project because of how the jurisdiction's neighborhood boundaries 
are drawn. HUD plans to create and provide at the issuance of a final 
rule a web tool for recipients, subrecipients, contractors, and 
subcontractors that will help in determining the geographic area that 
encompasses Targeted Section 3 workers under this definition. The 
discussion in subpart B of this preamble pertaining to the YouthBuild 
program and participants applies for subpart C as well.
    Section 75.23 would provide a recipient undertaking a Section 3 
project a safe harbor provided the recipient certifies to following the 
prioritization in Sec.  75.19 and meets or exceeds the Section 3 
benchmarks that HUD will prescribe through notice. The safe harbor 
proposed by this rule, like the safe harbor provided by the currently 
codified rule, would allow for recipients that meet this standard to be 
free from additional Section 3 reporting. However, this proposed rule 
provides that the safe harbor exists only to the extent that no 
evidence to the contrary is presented to HUD, and that meeting the safe 
harbor does not exempt recipients from maintaining records of 
compliance for general program review. See Sec. Sec.  75.31 and 75.33.
    This section would also establish the process of establishing 
benchmarks, consistent with subpart B. Similar to the process for 
establishing the benchmarks for public housing financial assistance 
under subpart B, HUD proposes to establish Section 3 benchmarks for 
Section 3 workers, Targeted Section 3 workers, or both through a 
document published in the Federal Register.
    Section 75.25 would provide the reporting requirements for Section 
3 projects by recipients to HUD for the benchmarks. Specifically, Sec.  
75.25 would require that the total number of total labor hours, labor 
hours worked by Section 3 workers, and labor hours worked by Targeted 
Section 3 workers on a Section 3 project be reported to HUD. However, 
the rule would provide a limited exception for recipients, and for 
subrecipients, contractors, and subcontractors that report up to 
recipients, that are not subject to requirements specifying time and 
attendance reporting. The rule does not require any change in the time 
and attendance, or payroll systems used by recipients, subrecipients, 
contractors, or subcontractors. Where labor hours of a full-time or 
part-time employee are not already tracked, this proposed rule would 
allow the recipient to report labor hours of those employees based on a 
good faith assessment. This small carve-out would apply in a limited 
situation and was created not to increase burden on recipients, 
subrecipients, contractors, and subcontractors that are not tracking 
labor hours. However, if in the future the recipient, subrecipient, 
contractor, or subcontractor is required to track labor hours, or does 
so voluntarily, the exception would no longer apply. This section also, 
consistent with Sec.  75.15 in subpart B, would provide that Section 3 
project recipients may, but are not required to, report professional 
service jobs. Therefore, if a Section 3 project has labor hours for 
professional service employees that are Section 3 workers and Targeted 
Section 3 workers, the recipient may, but is not required to, report on 
those jobs and count them to increase their total numbers. By including 
labor hours for professional services work in the numerators of these 
calculations (i.e., labor hours for the Section 3 workers and Targeted 
Section 3 workers), but not in the denominators (i.e., all labor hours 
worked), HUD is also recognizing the value of this more challenging 
effort to create opportunities in the professional services context.
    Section 75.25 would also provide that a recipient that does not 
meet the Section 3 benchmarks described in Sec.  75.21 would be 
required to report on its qualitative efforts. HUD is considering some 
of the following to signify qualitative efforts: Outreach efforts to 
generate job applicants who are Targeted Section 3 workers; direct on-
the job training (including apprenticeships); indirect training such as 
arranging for, contracting for, or paying tuition for, off-site 
training technical assistance to help Section 3 workers; and outreach 
efforts to identify and secure bids from Section 3 business concerns. 
HUD plans to provide a form for ease in reporting qualitative 
reporting. All reporting either under the general reporting framework 
or the qualitative reporting requirement must be submitted annually to 
HUD in a manner consistent with reporting requirements for the 
applicable HUD program. As discussed in this preamble, HUD believes 
that requiring reporting consistent with existing reports will decrease 
administrative burden on recipients, and HUD will continue to look for 
ways to streamline reporting in other ways, such as using existing 
program-specific reporting systems. The proposed rule further allows 
projects to be reported on a project-by-project basis, with each annual 
report reflecting projects completed within the reporting year.
    Section 75.27 would establish contract requirements for Section 3 
project recipients. Specifically, the proposed rule would require that 
a recipient of a Section 3 project include language applying Section 3 
to any subrecipient agreement, program regulatory agreement, or 
contract for a Section 3 project. The proposed rule would also require 
that recipients of Section 3 projects ensure that subrecipients, 
contractors, and subcontractors meet the requirements in Sec.  75.19. 
As noted in this preamble, HUD is not codifying the language that 
recipients and contractors working on Section 3 projects are required 
to include in subrecipient agreements and subcontracts and is limiting 
the requirement to include language only to the contract level. HUD 
believes these changes will reduce the burden on the regulated entity, 
but HUD notes that it does not change the requirement that Section 3 
project hiring must be consistent with the statutory requirements in 
Sec.  75.19.

[[Page 13188]]

Subpart D--Provisions for Multiple Funding Sources, Recordkeeping, and 
Compliance

    Subpart D sets out the requirements for recipients of multiple 
types of HUD financial assistance subject to Section 3. The sections 
include compliance requirement for recipients when in receipt of 
multiple funding sources (Sec.  75.29); recordkeeping requirements 
(Sec.  75.31); and compliance requirements (Sec.  75.33).
    Section 75.29 would provide requirements for recipients to follow 
when in receipt of multiple funding sources. Section 75.29(a) would 
provide that if a housing rehabilitation, housing construction, or 
other public construction project is subject to Section 3 requirements 
pursuant to both Sec.  75.3, paragraphs (a)(1) and (2), the recipient 
must follow subpart B of this proposed rule for the public housing 
financial assistance funds and may follow either subpart B or subpart C 
for the housing and community development financial assistance funds. 
For example, when a PHA receives public housing financial assistance 
and a community development block grant for a project to build a 
playground, the PHA can follow either option in paragraph (a) for the 
community development block grant funds to comply with Section 3 
requirements. For the funding under Sec.  75.3(a)(2), a Targeted 
Section 3 worker is any worker who meets the definition of a Targeted 
Section 3 worker in either subpart B or subpart C of this part. As with 
other sections in the rule, Sec.  75.29 provides two different 
alternatives depending on whether PHAs will be required in a final rule 
to report using labor hours or new hires. If the final rule provides 
for the use of new hires for public housing financial assistance, when 
multiple funding sources are used PHAs would be required to report both 
labor hours and new hires.
    The section also proposes in paragraph (b) that if a housing 
rehabilitation, housing construction, or other public construction 
project is subject to Section 3 pursuant to multiple housing and 
community development financial assistance programs, the recipient or 
recipients must follow subpart C of this part and report to one HUD 
program office, as prescribed by HUD. This section will make the 
application of Section 3 requirements easier for recipients that work 
with multiple funding sources and ease reporting burden. For example, 
when CDBG funds and a Lead Hazard Control grant are combined, the 
recipients would follow the paragraph (b) requirements to comply with 
Section 3 requirements. In this case, HUD would designate reporting to 
only one program office.
    Section 75.31 would require that HUD be provided access to records, 
reports, and other documents or items that are maintained to 
demonstrate compliance with the requirements of this part, or that are 
maintained in accordance with the regulations governing the specific 
HUD program. This section also provides directions on what 
documentation must be maintained for Section 3 workers and Targeted 
Section 3 workers. For a Section 3 worker, the recipient would be 
required to maintain certification, or ensure that a subrecipient, 
contractor, or subcontractor that employs the worker maintains 
certification that the worker either meets the income limit established 
by HUD, the worker participates in a means-tested program such as 
public housing or Section-8 assisted housing, that the worker's 
residency is in a qualified census tract or that the worker is employed 
by a Section 3 business.
    For a Targeted Section 3 worker, the recipient subject to subpart B 
must maintain certification, or ensure that a contractor or 
subcontractor that employs the worker maintains certification that the 
worker resides in public housing or Section-8 assisted housing or the 
worker is employed by a Section 3 business. A third option under 
Alternative 1 and 2 is a certification that the employee is a 
YouthBuild participant.
    For a Targeted Section 3 worker, the recipient subject to subpart C 
would be required to maintain a certification, or ensure that a 
subrecipient, contractor, or subcontractor that employs the worker 
maintains certification that the worker's residence is within 1 mile of 
the work site or, if fewer than 5,000 people live within 1 mile of a 
work site, within a circle centered on the work site that is sufficient 
to encompass a population of 5,000 people according to the most recent 
U.S. Census; that the worker is employed by a Section 3 business; or 
that the worker is a YouthBuild participant. This section also requires 
that documentation is maintained for the time period required for 
record retentions in accordance with applicable program regulations, or 
in the absence of applicable program regulations, 2 CFR part 200.
    Section 75.33 proposes the compliance requirements for recipients. 
It would require that records demonstrating compliance be maintained 
and provides that HUD would conduct compliance and enforcement actions 
in conjunction with normal program oversight. It also notes that 
complaints alleging failure of compliance with part 75 may be reported 
to the HUD program office responsible for the public housing financial 
assistance or Section 3 project. HUD believes that the Section 3 
requirements should be handled consistent with other program 
requirements that a recipient is subject to when accepting HUD funds. 
As result, this proposed rule provides that while HUD would monitor 
compliance with the requirements, the applicable HUD program office 
would determine appropriate methods by which to oversee Section 3 
compliance. HUD would be able to impose appropriate remedies and 
sanctions in accordance with the laws and regulations for the program 
under which the violation was found. HUD would continue to compile the 
information in a report on all expenditures subject to Section 3 for 
release to the public, and HUD believes providing for a program-
specific implementation, while maintaining consistent review processes 
across programs, will ease burden on the entities subject to the 
Section 3 requirements.

III. Specific Questions for Comment

    While HUD welcomes comments on all aspects of this proposed rule, 
HUD specifically requests comments on the following:
    1. HUD seeks comments on the use of the statutory terms ``best 
efforts'' and ``greatest extent feasible'' in this proposed rule. 
Specifically, HUD seeks comments on whether this proposed rule should 
define these terms, whether the two terms should be considered 
interchangeable, whether only one term should be used, how the proposed 
rule should apply these terms relative to HUD's efforts to increase 
employment and training opportunities for low- and very low-income 
persons, and how recipients can most effectively/efficiently 
demonstrate they have satisfied these definitions in reporting to HUD. 
In accordance with the Section 3 statute, both HUD's existing Section 3 
rule and this proposed rule do not provide an absolute mandate that 
employers hire Section 3 workers or that HUD funding recipients provide 
contracting opportunities to Section 3 businesses. Such a mandate would 
be infeasible, as there could be situations where no Section 3 workers 
or businesses are available or are qualified. However, HUD emphasizes 
its intention that the terms ``best efforts'' and ``greatest extent 
feasible'' should be read as very narrow qualifiers and seeks comment 
on how to best convey that.

[[Page 13189]]

    As background, HUD's existing Section 3 rule provides that 
employment and other economic opportunities generated by certain HUD 
financial assistance must be directed to low and very low-income 
persons to the greatest extent feasible. The term ``best efforts'' is 
not used in the existing rule. This proposed rule contains requirements 
that more closely track the language of the Section 3 statute. Under 
this proposed rule, PHAs and other recipients receiving public housing 
financial assistance and their contractors and subcontractors must make 
their ``best efforts'' to provide employment and training opportunities 
generated by the public housing financial assistance to Section 3 
workers in the statutorily-mandated order of priority, and must make 
their ``best efforts'' to award contracts and subcontracts to business 
concerns that provide economic opportunities to Section 3 workers in 
the statutorily-mandated order of priority. Also, following the Section 
3 statute, this proposed rule would provide that: To the ``greatest 
extent feasible,'' recipients of funds in other HUD programs that 
provide housing and community development assistance must ensure that 
employment and training opportunities arising in connection with 
Section 3 projects are provided to Section 3 workers within the 
metropolitan area (or nonmetropolitan county) in which the project is 
located, and where feasible, priority should be given to specific 
categories of Section 3 workers; and contracts for work awarded in 
connection with Section 3 projects should be provided to Section 3 
business concerns that provide economic opportunities to Section 3 
workers residing within the metropolitan area (or nonmetropolitan 
county) in which the project is located, to the ``greatest extent 
feasible.''
    2. HUD specifically requests comments on the proposal to move to 
labor hours or retain new hires for public housing financial assistance 
reporting and tracking. As discussed above, HUD believes that tracking 
labor hours consistent with existing tracking for prevailing wage 
requirements would reduce burden on recipients. HUD also believes that 
tracking labor hours will better allow HUD to determine if long-term 
employment opportunities are being generated. Unlike a labor hours 
measure, the new hire measure does not consider the share of actual 
work done by low- and very low-income workers, and new Section 3 hires 
may not be given the opportunity to work a substantial number of hours. 
By using a new hire measure, the Section 3 obligation is fulfilled by 
hiring Section 3 workers for jobs of any duration, rather than 
prioritizing opportunities for sustained employment. Additionally, 
using a new hire measure explicitly values entry rather than retention 
of workers, and thus provides an incentive for high turnover. While HUD 
believes that using labor hours for all financial assistance subject to 
Section 3 requirements will reduce burden, HUD has heard from some PHAs 
that they may prefer to maintain the use of new hires. HUD requests 
those PHAs provide feedback on why maintaining the new hire framework 
is a benefit. HUD seeks comments from PHAs on alternative 2 regulatory 
language that would retain the new hire framework for tracking public 
housing financial assistance, but with the same benchmarking 
requirements that are in this proposed rule. HUD also seeks comments on 
how retaining new hires for public housing financial assistance while 
using labor hours for Section 3 projects will work for recipients, 
contractors, and subcontractors, especially for those who work with 
multiple funding sources.
    3. As discussed in this preamble, this proposed rule would set the 
threshold for applicability of Section 3 requirements for Section 3 
projects to when the amount of the assistance to the project exceeds 
$200,000. HUD also provides that all projects that receive funding from 
HUD's Lead Hazard Control and Healthy Homes programs are covered, and 
notes that Section 8 programs were not included in the Section 3 
statute and are not covered in this rule. HUD seeks comment on whether 
an alternate threshold would be more appropriate or equally effective 
to the proposed $200,000 per project threshold. HUD also seeks comment 
on the inclusion of all projects under the HUD's Lead Hazard Control 
and Healthy Homes programs and exclusion of Section 8 programs.
    In addition to seeking comments on an appropriate per project 
threshold, HUD seeks comments on whether the threshold for Section 3 
projects should be established by project, total funding received by 
the recipient, or whether the threshold should be based on total funds 
expended by a recipient. Establishing a project threshold has 
advantages in that it ties Section 3 obligations to the specific 
projects that are generating economic opportunities. However, HUD 
understands that there may be disadvantages to using a threshold based 
on project size. The term ``project'' is defined differently by 
different HUD programs, which could make a uniform application of this 
rule difficult. Also, recipients might be able to change the scope of 
what would be considered a ``project'' to avoid compliance with Section 
3.
    If HUD were to use a threshold based on total funding a recipient 
receives, rather than a per-project threshold, HUD seeks comment on 
whether the $200,000 threshold included in this proposed rule should be 
maintained, or whether the rule should adopt a different threshold. 
Using the $200,000 threshold as proposed in this rule, HUD estimates 
that less than 4 percent of grantees receiving funds from HUD's Office 
of Community Planning and Development Program will be exempt from 
Section 3, and less than 0.1 percent of total awards will be exempt. 
Applying a larger recipient threshold, such as $400,000, would increase 
the number of recipients exempted from Section 3 requirements to 20 
percent and only increase the amount of funding exempt from Section 3 
coverage to 1.5 percent. This would significantly reduce compliance 
burden from the current rule for smaller grantees without significantly 
reducing the funds subject to Section 3.
    4. HUD seeks comment on HUD's proposal to include hours worked by 
Section 3 business employees in the Targeted Section 3 Worker 
definitions as a way to report all Section 3 activities in a single 
metric rather than reporting on Section 3 business concern 
participation separately through the existing aggregate dollars spent 
calculation. HUD also seeks comment on whether the changes to the 
Section 3 business concern definition are appropriate to the proposed 
new framework, especially the change that to qualify as a Section 3 
business over 75 percent of the labor hours performed for the business 
must be performed by low- or very low-income persons versus the current 
requirement that 30 percent of permanent, full-time employee, include 
persons who are currently Section 3 residents, or within 3 years of the 
date of first employment with the business concern were Section 3 
residents.
    5. As explained by this preamble, this proposed rule would provide 
that small PHAs would not be required to report labor hour or new hire 
figures to HUD. HUD seeks comment on whether small PHAs should be 
required to report as other PHAs are if they put out a bid for a single 
procurement that exceeds the project threshold discussed in the above 
paragraph.
    6. HUD seeks comments on whether Section 3 requirements, as it 
applies to Section 3 projects, should apply to all subcontractors, and 
whether at a certain level HUD should consider reducing the

[[Page 13190]]

reporting or compliance burden for subcontractors.
    7. HUD requests comment on whether its initial and future 
benchmarks should include benchmarks for both the number of labor hours 
worked by Section 3 workers divided by the total number of labor hours 
for all workers and the number of labor hours worked by Targeted 
Section 3 workers divided by the total number of labor hours for all 
workers. Alternatively, HUD seeks comment on limiting the benchmark to 
include Targeted Section 3 workers only.
    8. For Section 3 projects, the statute requires that ``where 
feasible, priority should be given to low- and very low-income persons 
residing within the service area of the project or the neighborhood in 
which the project is located.'' The statute does not define 
``neighborhood'' or ``service area'' for purposes of how recipients 
determine where they should focus their prioritization. The lack of 
definitions complicates compliance for contractors, subcontractors, and 
grantees receiving multiple types of HUD financial assistance. HUD 
proposes to provide a definition for recipients to use when 
prioritizing and reporting workers for Section 3 projects. The 
definition differs from existing regulatory definitions and local or 
state definitions, and HUD specifically requests comment on whether the 
definition works for recipients or if a different definition for 
``neighborhood'' or ``service area'' is needed for purposes of Section 
3. HUD also asks whether the 1 mile and 5,000 population radius is an 
appropriate geographic size of a `neighborhood' or `service area'.
    9. HUD provides that a Targeted Section 3 worker includes current 
YouthBuild participants and asks whether that definition should be 
expanded to include previous YouthBuild workers that are under 24 years 
of age or those who are still eligible to participate in YouthBuild, 
but may have graduated out of the program.

IV. Findings and Certifications

Regulatory Review--Executive Orders 12866 and 13563

    Under Executive Order 12866 (Regulatory Planning and Review), a 
determination must be made whether a regulatory action is significant 
and, therefore, subject to review by the Office of Management and 
Budget (OMB) in accordance with the requirements of the order. 
Executive Order 13563 (Improving Regulations and Regulatory Review) 
directs executive agencies to analyze regulations that are ``outmoded, 
ineffective, insufficient, or excessively burdensome, and to modify, 
streamline, expand, or repeal them in accordance with what has been 
learned.'' Executive Order 13563 also directs that, where relevant, 
feasible, and consistent with regulatory objectives, and to the extent 
permitted by law, agencies are to identify and consider regulatory 
approaches that reduce burdens and maintain flexibility and freedom of 
choice for the public.
    This rule was determined to be a ``significant regulatory action'' 
as defined in Section 3(f) of the order (although not an economically 
significant regulatory action under the order). Consistent with 
Executive Order 13563, this rule creates new part 75 regulations that 
would replace the part 135 regulations, with the intention to make 
compliance with Section 3 more effective and less burdensome, and 
therefore, help to contribute to job creation for low- and very low-
income persons. As noted earlier in this preamble, HUD has prepared an 
initial Regulatory Impact Analysis (RIA) that addresses the costs and 
benefits of the proposed rule. HUD's RIA is part of the docket file for 
this rule.
    The docket file is available for public inspection in the 
Regulations Division, Office of the General Counsel, Room 10276, 451 
7th Street SW, Washington, DC 20410-0500. Due to security measures at 
the HUD Headquarters building, please schedule an appointment to review 
the docket file by calling the Regulations Division at 202-402-3055 
(this is not a toll-free number). Individuals with speech or hearing 
impairments may access this number via TTY by calling the Federal Relay 
Service at toll-free 800-877-8339.

Environmental Impact

    The proposed rule does not direct, provide for assistance or loan 
and mortgage insurance for, or otherwise govern or regulate, real 
property acquisition, disposition, leasing, rehabilitation, alteration, 
demolition, or new construction, or establish, revise, or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this 
proposed rule is categorically excluded from environmental review under 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) 
(UMRA) establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and on the private sector. This proposed rule does not 
impose a Federal mandate on any state, local, or tribal government, or 
on the private sector, within the meaning of UMRA.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) generally 
requires an agency to conduct a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements, unless the 
agency certifies that the rule will not have a significant economic 
impact on a substantial number of small entities. As has been discussed 
in this preamble, this rule proposes to update HUD's Section 3 
regulations and replace them with a new 24 CFR part 75, for which the 
objective is to increase employment opportunities for low- and very 
low-income persons and businesses that are owned by or employ such 
persons. These entities generally are small and therefore strengthening 
the requirements of Section 3 should benefit small businesses that are 
Section 3 businesses. This rule also considers the burden on small 
PHAs, defined in this proposed rule as a public housing authority that 
manages or operates fewer than 250 public housing units, and reduces 
the burden on them through a new streamlined reporting process that 
would not require them to report labor hours or new hires. There are 
approximately 2,950 PHAs, of which approximately 2,250 are small.
    As more fully discussed in the accompanying RIA, the number of 
economic opportunities generated for Section 3 residents and businesses 
will not increase to the degree that this rule would have a significant 
economic impact on a substantial number of small entities. In addition, 
for those small entities that must comply with this proposed rule, the 
changes made by this proposed rule are designed to reduce burden on 
them, as well as all recipients. The current recordkeeping and 
reporting requirements for Section 3 is 90,180 hours with a cost of 
$1,817,000. HUD estimated that this new rule will reduce the number of 
hours by 68 percent to 25,910 hours. The biggest reduction will be for 
small PHAs that will no longer need to do quantitative analysis with a 
total estimated time saving of 12,375 hours with a cost of $281,036, or 
approximately $125 for small PHAs. HUD also anticipates an across the 
board savings in recordkeeping given the time savings resulting from 
less time reporting new hires as a separate metric.

[[Page 13191]]

For these reasons, HUD has determined that this rule would not have a 
significant economic impact on a substantial number of small entities. 
Notwithstanding HUD's determination that this rule will not have a 
significant effect on a substantial number of small entities, HUD 
specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either: (1) Imposes substantial direct compliance costs on State and 
local governments and is not required by statute, or (2) preempts State 
law, unless the agency meets the consultation and funding requirements 
of Section 6 of the Executive Order. This proposed rule does not have 
federalism implications and does not impose substantial direct 
compliance costs on State and local governments nor preempt state law 
within the meaning of the Executive Order.

Paperwork Reduction Act

    Currently, 24 CFR part 135 requires that all recipients track and 
report Section 3 information to HUD, includes prescriptive contractual 
language, requires compliance by contractors of the Section 3 
requirements, contains reporting and recordkeeping requirements, and 
provides for the filing of Section 3 complaints. Section 3 Performance 
Evaluation and Registration System (SPEARS) is the main site in which 
HUD captures the number of Section 3 residents hired and the amount of 
contracts awarded to Section 3 businesses. The existing information 
collection requirement for these requirements has been approved by the 
Office of Management and Budget (OMB) under the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501-3520) and assigned OMB control number 2529-
0043.
    The proposed rule would change the existing reporting requirement 
to decrease qualitatively those who need to report, excluding small 
PHAs and recipients of Section 3 projects under the $200,000 threshold, 
and require reporting only once a year by recipients of completed 
projects. HUD provides in Sec. Sec.  75.15 and 75.25 that recipients 
would be required to submit reports to HUD annually either in a 
qualitative form or quantitative form. HUD includes all the large PHAs 
in the Sec.  75.15(a) reporting number for reporting on the Section 3 
benchmarks and estimates 2 hours to track and report annually given the 
amount of funds handled by these PHAs. HUD also estimates that a PHA 
will employ approximately seven contractors or subcontractors each 
fiscal year that would need to track and report up to the PHA, each at 
one-half an hour for reporting time. Lastly, HUD estimates that 5 
percent of the 700 large PHAs may fail the Section 3 benchmarks and 
would need to report on their qualitative efforts along with the 2,250 
small PHAs and estimates that such reporting would take one-half an 
hour.
    As for Sec.  75.25(a), HUD estimates that 66 percent of most 
program recipients would complete projects in a fiscal year that need 
to be reported except that for the HOME program, HUD estimates that 90 
percent of HOME recipients would complete projects in a fiscal year, at 
an estimate of 3,600 recipients. Given these projects are more diverse 
in size, HUD estimates that the average time to report on the Section 3 
benchmarks for recipients would be 1 hour. HUD also estimates that a 
Section 3 project will engage approximately five contractors or 
subcontractors each fiscal year that would also need to track and 
report up to the Section 3 project recipient, each at one-half an hour 
for reporting time. Lastly, HUD estimates that 5 percent of the 3,600 
recipients may fail the Section 3 benchmarks and would need to report 
on their qualitative efforts and estimates that such reporting would 
take one-half an hour.
    HUD also notes that the rule no longer requires the inclusion of 
prescriptive contractual language. See Sec. Sec.  75.17 and 75.27. HUD 
believes that this change will result in a de minimis upfront burden 
related to updating contracts, if recipients, subrecipients and 
contractors chose to do so, but that removing the requirement will 
actually reduce burden on recipients, subrecipients, and contractors on 
a sustained basis by giving them flexibility to use alternative or 
existing contractual language. HUD also provides for recordkeeping 
requirements at Sec.  75.31 and believes that the maintaining of 
records by recipients will take a recipient approximately 2 hours. 
However, HUD notes that some programs, such as HOME, already have 
recordkeeping requirements that are part of existing approved 
Information Collection Requests and, thus, excludes those programs from 
the burden matrix. Lastly, HUD maintains the option for individuals to 
file complaints and retains the frequency number that was in the 
existing Section 3 reporting burden.
    In accordance with the Paperwork Reduction Act, an agency may not 
conduct or sponsor, and a person is not required to respond to, a 
collection of information, unless the collection displays a currently 
valid OMB control number. The current recordkeeping requirements for 
Section 3 is 90,180 hours with a cost of $1,817,000. HUD estimates that 
this new rule will reduce the number of hours by 68 percent to 25,910 
hours for a total cost savings of approximately $1.2 million. The 
overall reporting and recordkeeping burden is estimated as follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           Frequency of
                 Information collection                      Number of     response per     Burden hour    Annual burden    Hourly cost     Annual cost
                                                            respondents        annum       per response        hours       per response
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   75.15(a) Labor Hour or New Hire Reporting for PHA             700               1               2           1,400          $22.71      $31,794.00
Sec.   75.15(a) Labor Hour or New Hire Reporting for               4,900               1             0.5           2,450           22.71       55,639.50
 Contractors or Subcontractors of PHAs..................
Sec.   75.15(b)-(d) Qualitative Reporting for PHAs......           2,300               1             0.5           1,150           22.71       26,116.50
Sec.   75.25(a) Labor Hour Reporting for Section 3                 3,600               1               1           3,600           22.71       81,756.00
 Projects...............................................
Sec.   75.25(a) Labor Hour Reporting for Contractors and          10,800               1             0.5           5,400           22.71      122,634.00
 Subcontractors on Section 3 Projects...................
Sec.   75.25(b) Qualitative Reporting for Section 3                  180               1             0.5              90           22.71        2,043.90
 Projects...............................................

[[Page 13192]]

 
Sec.   75.31 Recordkeeping..............................           5,900               1               2          11,800           22.71      267,978.00
Sec.   75.33 Complaints.................................              20               1               1              20           10.00          200.00
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................  ..............  ..............  ..............       25,910.00  ..............      588,161.90
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments 
from members of the public and affected agencies concerning the 
information collection requirements in the proposed rule regarding:
    (1) Whether the proposed collection of information is necessary for 
the proper performance of the functions of the agency, including 
whether the information will have practical utility;
    (2) The accuracy of the agency's estimate of the burden of the 
proposed collection of information;
    (3) Whether the proposed collection of information enhances the 
quality, utility, and clarity of the information to be collected; and
    (4) Whether the proposed information collection minimizes the 
burden of the collection of information on those who are to respond; 
including through the use of appropriate automated collection 
techniques or other forms of information technology (e.g., permitting 
electronic submission of responses).
    Interested persons are invited to submit comments regarding the 
information collection requirements in this rule. The proposed 
information collection requirements in this rule have been submitted to 
OMB for review under section 3507(d) of the Paperwork Reduction Act. 
Under the provisions of 5 CFR part 1320, OMB is required to make a 
decision concerning this collection of information between 30 and 60 
days after the publication date. Therefore, a comment on the 
information collection requirements is best assured of having its full 
effect if OMB receives the comment within 30 days of the publication. 
This time frame does not affect the deadline for comments to the agency 
on the proposed rule, however. Comments must refer to the proposed rule 
by name and docket number (FR-6085) and must be sent to:

HUD Desk Officer, Office of Management and Budget, New Executive Office 
Building, Washington, DC 20503, Fax number: 202- 395-6947, and
Colette Pollard, HUD Reports Liaison Officer, Department of Housing and 
Urban Development, 451 7th Street SW, Room 2204, Washington, DC 20410

    Interested persons may submit comments regarding the information 
collection requirements electronically through the Federal eRulemaking 
Portal at http://www.regulations.gov. HUD strongly encourages 
commenters to submit comments electronically. Electronic submission of 
comments allows the commenter maximum time to prepare and submit a 
comment, ensures timely receipt by HUD, and enables HUD to make them 
immediately available to the public. Comments submitted electronically 
through the http://www.regulations.gov website can be viewed by other 
commenters and interested members of the public. Commenters should 
follow the instructions provided on that site to submit comments 
electronically.

List of Subjects

24 CFR Part 5

    Administrative practice and procedure, Aged, Claims, Crime, 
Government contracts, Grant programs-housing and community development, 
Individuals with disabilities, Intergovernmental relations, Loan 
programs-housing and community development, Low- and moderate-income 
housing, Mortgage insurance, Penalties, Pets, Public housing, Rent 
subsidies, Reporting and recordkeeping requirements, Social security, 
Unemployment compensation, Wages.

24 CFR Part 14

    Claims, Equal access to justice, Lawyers, Reporting and 
recordkeeping requirements.

24 CFR Part 75

    Administrative practice and procedure, Community development, 
Government contracts, Grant programs--housing and community 
development, Housing, Loan programs--housing and community development, 
Reporting and recordkeeping requirements, Small businesses.

24 CFR Part 91

    Aged, Grant programs-housing and community development, Homeless, 
Individuals with disabilities, Low- and moderate-income housing, 
Reporting and recordkeeping requirements.

24 CFR Part 92

    Administrative practice and procedure, Low- and moderate-income 
housing, Manufactured homes, Rent subsidies, Reporting and 
recordkeeping requirements.

24 CFR Part 93

    Administrative practice and procedure, Grant programs-housing and 
community development, Low- and moderate-income housing, Manufactured 
homes, Rent subsidies, Reporting and recordkeeping requirements.

24 CFR Part 135

    Administrative practice and procedure, Community development, Equal 
employment opportunity, Government contracts, Grant programs--housing 
and community development, Housing, Loan programs--housing and 
community development, Reporting and recordkeeping requirements, Small 
businesses.

24 CFR Part 266

    Intergovernmental relations, Low- and moderate-income housing, 
Mortgage insurance, Reporting and recordkeeping requirements.

24 CFR Part 570

    Administrative practice and procedure, American Samoa, Community 
development block grants, Grant programs--education, Grant programs-
housing and community development, Guam, Indians, Loan programs--
housing and community development, Low- and moderate-income housing, 
Northern Mariana Islands, Pacific Islands Trust Territory, Puerto Rico, 
Reporting and recordkeeping requirements, Student aid, Virgin Islands.

24 CFR Part 576

    Community facilities, Grant programs--housing and community 
development, Grant programs--social programs, Homeless, Reporting and 
recordkeeping requirements.

24 CFR Part 578

    Community development, Community facilities, Grant programs--

[[Page 13193]]

housing and community development, Grant programs--social programs, 
Homeless, Reporting and recordkeeping requirements.

24 CFR Part 905

    Grant programs--housing and community development, Public housing, 
Reporting and recordkeeping requirements.

24 CFR Part 964

    Grant programs--housing and community development, Public housing, 
Reporting and recordkeeping requirements.

24 CFR Part 983

    Grant programs--housing and community development, Low- and 
moderate-income housing, Rent subsidies, Reporting and recordkeeping 
requirements.

24 CFR Part 1000

    Aged, Community development block grants, Grant programs--housing 
and community development, Grant programs--Indians, Indians, 
Individuals with disabilities, Public housing, Reporting and 
recordkeeping requirements.

    Accordingly, for the reasons described in the preamble, HUD 
proposes to amend 24 CFR parts 5, 14, 75, 91, 92, 93, 135, 266, 570, 
576, 578, 905, 964, 983, and 1000 as follows:

PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS

0
1. The authority for part 5 is revised to read as follows:

    Authority:  12 U.S.C. 1701u and 1701x; 42 U.S.C. 1437a, 1437c, 
1437d, 1437f, 1437n, 3535(d); Sec. 327, Pub. L. 109-115, 119 Stat. 
2936; Sec. 607, Pub. L. 109-115, 119 Stat. 3051 (42 U.S.C. 14043e et 
seq.); E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258; and E.O. 
13559, 75 FR 71319, 3 CFR 2010 Comp., p. 273.


Sec.  5.105   [Amended]

0
2. Amend Sec.  5.105(a) by removing ``; section 3 of the Housing and 
Urban Development Act of 1968 (12 U.S.C. 1701u) and implementing 
regulations at 24 CFR part 135.''

PART 14--IMPLEMENTATION OF THE EQUAL ACCESS TO JUSTICE ACT IN 
ADMINISTRATIVE PROCEEDINGS

0
3. The authority for part 14 continues to read as follows:

    Authority:  5 U.S.C. 504(c)(1); 42 U.S.C. 3535(d).


Sec.  14.115   [Amended]

0
4. Amend Sec.  14.115 by removing and reserving paragraph (a)(5).
0
5. Add part 75 to read as follows:

PART 75--ECONOMIC OPPORTUNITIES FOR LOW- AND VERY LOW-INCOME 
PERSONS

Sec.
Subpart A--General Provisions
75.1 Purpose.
75.3 Applicability.
75.5 Definitions.
75.7 Requirements applicable to HUD NOFAs for Section 3 covered 
programs.
Subpart B--Additional Provisions for Public Housing Financial 
Assistance
75.9 Requirements.
75.11 Targeted Section 3 worker for public housing financial 
assistance.
75.13 Section 3 safe harbor.
75.15 Reporting.
75.17 Contract provisions.
Subpart C--Additional Provisions for Housing and Community Development 
Financial Assistance
75.19 Requirements.
75.21 Targeted Section 3 worker for housing and community 
development financial assistance.
75.23 Section 3 safe harbor.
75.25 Reporting.
75.27 Contract provisions.
Subpart D--Provisions for Multiple Funding Sources, Recordkeeping, and 
Compliance
75.29 Multiple funding sources.
75.31 Recordkeeping.
75.33 Compliance.

     Authority:  12 U.S.C. 1701u; 42 U.S.C. 3535(d).

Subpart A--General Provisions


Sec.  75.1   Purpose.

    This part establishes the requirements to be followed to ensure the 
objectives of Section 3 of the Housing and Urban Development Act of 
1968 (12 U.S.C. 1701u) (Section 3) are met. The purpose of Section 3 is 
to ensure that economic opportunities, most importantly employment, 
generated by certain HUD financial assistance shall be directed to low- 
and very low-income persons, particularly those who are recipients of 
government assistance for housing or residents of the community in 
which the Federal assistance is spent.


Sec.  75.3  Applicability of Section 3.

    (a) General applicability. Section 3 applies to public housing 
financial assistance and Section 3 projects, as follows:
    (1) Public housing financial assistance. Public housing financial 
assistance means:
    (i) Development assistance provided pursuant to section 5 of the 
United States Housing Act of 1937 (the 1937 Act);
    (ii) Operations and management assistance provided pursuant to 
section 9(e) of the 1937 Act; and
    (iii) Development, modernization, and management assistance 
provided pursuant to section 9(d) of the 1937 Act.
    (2) Section 3 projects. (i) Section 3 projects means housing 
rehabilitation, housing construction, and other public construction 
projects assisted under HUD programs that provide housing and community 
development financial assistance when the amount of assistance to the 
project exceeds a threshold of $200,000. This threshold does not apply 
where the assistance is from the Lead Hazard Control and Healthy Homes 
programs, as authorized by section 501 of the Housing and Urban 
Development Act of 1970 (12 U.S.C. 1701z-1), the Lead-Based Paint 
Poisoning Prevention Act (42 U.S.C 4801 et seq.); and the Residential 
Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851 et seq.) 
The project is the site or sites together with any building(s) and 
improvements located on the site(s) that are under common ownership, 
management, and financing.
    (ii) HUD may adjust the threshold provided in paragraph (a)(2)(i) 
of this section not less than every 5 years based on a national 
construction cost inflation factor, and new thresholds will be 
published in the Federal Register, subject to public comment.
    (iii) The requirements in this part apply to an entire Section 3 
project, regardless of whether the project is fully or partially 
assisted under HUD programs that provide housing and community 
development financial assistance.
    (b) Contracts for materials. Section 3 requirements do not apply to 
material supply contracts.
    (c) Indian and Tribal preferences. Contracts, subcontracts, grants, 
or subgrants subject to section 7(b) of the Indian Self-Determination 
and Education Assistance Act (25 U.S.C. 5307(b)) or subject to tribal 
preference requirements as authorized under 101(k) of the Native 
American Housing Assistance and Self-Determination Act (25 U.S.C. 
4111(k)) must provide preferences in employment, training, and business 
opportunities to Indians and Indian organizations, and are therefore 
not subject to the requirements of this part.
    (d) Other HUD assistance and other Federal assistance. Recipients 
that are not subject to Section 3 are encouraged to consider ways to 
support the purpose of Section 3.

[[Page 13194]]

Sec.  75.5   Definitions.

    The terms HUD, Public housing, and Public Housing Agency (PHA) are 
defined in 24 CFR part 5. The following definitions also apply to this 
part:
    1937 Act means the United States Housing Act of 1937, 42 U.S.C. 
1437 et seq.
    Contractor means any entity entering into a contract with:
    (1) A recipient to perform work in connection with the expenditure 
of public housing financial assistance or for work in connection with a 
Section 3 project; or
    (2) A subrecipient for work in connection with a Section 3 project.
    Labor hours means the number of paid hours worked by persons on a 
Section 3 project or employed with funds that include public housing 
financial assistance.
    Low-income person means a person as defined in section 3(b)(2) of 
the 1937 Act.
    Material supply contracts means contracts for the purchase of 
products and materials, including, but not limited to, lumber, drywall, 
wiring, concrete, pipes, toilets, sinks, carpets, and office supplies.

Alternative 2--Definition of New Hire

    New hire means a full- or part-time employee for permanent, 
temporary, or seasonal employment opportunities who:
    (1) Was not on the payroll of the PHA, or the PHA's contractor or 
subcontractor, or other recipient receiving public housing financial 
assistance funds at the beginning of the award of public housing 
financial assistance; or
    (2) Was hired by contractors or subcontractors on a per-project 
basis as a result of receiving public housing financial assistance.
    Professional services means non-construction services, including, 
but not limited to, contracts for legal services, financial consulting, 
accounting services, environmental assessment, architectural services, 
and civil engineering services.
    Public housing financial assistance means assistance as defined in 
Sec.  75.3(a)(1).
    Public housing project is defined in 24 CFR 905.108.
    Qualified census tract means any census tract (or equivalent 
geographic area defined by the Bureau of the Census) in which at least 
50 percent of households have an income of less than 60 percent of Area 
Median Gross Income (AMGI); or where the poverty rate is at least 25 
percent and where the census tract is designated as a qualified census 
tract by HUD.
    Recipient means any entity that receives directly from HUD public 
housing financial assistance or housing and community development 
assistance that funds Section 3 projects, including, but not limited 
to, any State, local government, instrumentality, PHA, Indian tribe, 
tribal organization, or other public agency, public or private 
nonprofit organization.
    Section 3 means section 3 of the Housing and Urban Development Act 
of 1968, as amended (12 U.S.C. 1701u).
    Section 3 business concern means:
    (1) A business concern that meets one of the following criteria:
    (i) It is at least 51 percent owned by low- or very low-income 
persons;
    (ii) Over 75 percent of the labor hours performed for the business 
are performed by low- or very low-income persons; or
    (iii) It is a business at least 25 percent owned by current public 
housing residents or residents who currently live in Section 8-assisted 
housing.
    (2) The status of a Section 3 business concern shall not be 
negatively affected by a prior arrest or conviction of its owner(s) or 
employees.
    (3) Nothing in this part shall be construed to require the 
contracting or subcontracting of a Section 3 business concern. Section 
3 business concerns are not exempt from meeting the specifications of 
the contract.
    Section 3 project means a project defined in Sec.  75.3(a)(2).
    Section 3 worker means:
    (1) Any worker who fits one of the following categories:
    (i) The worker's income is below the income limit established by 
HUD.
    (ii) The worker lives in a qualified census tract.
    (iii) The worker is employed by a Section 3 business concern.
    (2) The status of a Section 3 worker shall not be negatively 
affected by a prior arrest or conviction.
    (3) Nothing in this part shall be construed to require the 
employment of someone who meets this definition of a Section 3 worker. 
Section 3 workers are not exempt from meeting the qualifications of the 
position to be filled.
    Section 8-assisted housing refers to housing receiving project-
based rental assistance or tenant-based assistance under section 8 of 
the 1937 Act.
    Service area or the neighborhood of the project means an area 
within one mile of the Section 3 project or, if fewer than 5,000 people 
live within one mile of a Section 3 project, within a circle centered 
on the Section 3 project that is sufficient to encompass a population 
of 5,000 people according to the most recent U.S. Census.
    Small PHA means a public housing authority that manages or operates 
fewer than 250 public housing units.
    Subcontractor means any entity that has a contract with a 
contractor to undertake a portion of the contractor's obligation to 
perform work in connection with the expenditure of public housing 
financial assistance or for a Section 3 project.
    Subrecipient has the meaning provided in the applicable program 
regulations, or in 2 CFR 200.93.
    Targeted Section 3 worker has the meanings provided in Sec.  75.11, 
Sec.  75.21, or Sec.  75.29, and does not exclude an individual that 
has a prior arrest or conviction.
    Very low-income person means the definition for this term set forth 
in Section 3(b)(2) of the 1937 Act.
    YouthBuild programs refers to YouthBuild programs receiving 
assistance under the Workforce Innovation and Opportunity Act (29 
U.S.C. 3226).


Sec.  75.7  Requirements applicable to HUD NOFAs for Section 3 covered 
programs.

    All notices of funding availability (NOFAs) issued by HUD that 
announce the availability of funding covered by Sec.  75.3 will include 
notice that this part is applicable to the funding and may include, as 
appropriate for the specific NOFA, points or bonus points for Section 3 
plans.

Subpart B--Additional Provisions for Public Housing Financial 
Assistance


Sec.  75.9  Requirements.

    (a) Employment and training. (1) Consistent with existing Federal, 
state, and local laws and regulations, PHAs or other recipients 
receiving public housing financial assistance, and their contractors 
and subcontractors, must make their best efforts to provide employment 
and training opportunities generated by the public housing financial 
assistance to Section 3 workers.
    (2) PHAs or other recipients, and their contractors and 
subcontractors, must make their best efforts described in paragraph 
(a)(1) of this section to Section 3 workers in the following order of 
priority:
    (i) To residents of the public housing projects for which the 
public housing financial assistance is expended;
    (ii) To residents of other public housing projects managed by the 
PHA that is expending the assistance or to residents of Section 8-
assisted housing managed by the PHA;

[[Page 13195]]

    (iii) To participants in YouthBuild programs; and
    (iv) To low- and very low-income persons residing within the 
metropolitan area (or nonmetropolitan county) in which the assistance 
is expended.
    (b) Contracting. (1) Consistent with existing Federal, state, and 
local laws and regulations, PHAs and other recipients of public housing 
financial assistance, and their contractors and subcontractors, must 
make their best efforts to award contracts and subcontracts to business 
concerns that provide economic opportunities to Section 3 workers.
    (2) PHAs and other recipients, and their contractors and 
subcontractors, must direct the efforts described in paragraph (b)(1) 
of this section in the following order of priority:
    (i) To Section 3 business concerns that provide economic 
opportunities for residents of the public housing projects for which 
the assistance is provided;
    (ii) To Section 3 business concerns that provide economic 
opportunities for residents of other public housing projects managed by 
the PHA that is providing the assistance or for residents of Section 8-
assisted housing managed by the PHA;
    (iii) To YouthBuild programs; and
    (iv) To Section 3 business concerns that provide economic 
opportunities to Section 3 workers residing within the metropolitan 
area (or nonmetropolitan county) in which the assistance is provided.


Sec.  75.11  Targeted Section 3 worker for public housing financial 
assistance.

Alternative 1--Paragraph (a)

    (a) Targeted Section 3 worker. A Targeted Section 3 worker for 
public housing financial assistance means:
    (1) A worker employed by a Section 3 business concern; or
    (2) A worker who currently is or who was when hired by the worker's 
current employer:
    (i) A resident in a public housing project or Section 8-assisted 
housing;
    (ii) A resident of other projects managed by the PHA that is 
expending assistance; or
    (iii) A current YouthBuild participant.

Alternative 2--Paragraph (a)

    (a) Targeted Section 3 worker. A Targeted Section 3 worker for 
public housing financial assistance means:
    (1) A new hire employed by a Section 3 business concern; or
    (2) A new hire employed by the worker's current employer, who is 
also one of the following:
    (i) A resident in a public housing project or Section 8-assisted 
housing;
    (ii) A resident of other projects managed by the PHA that is 
expending assistance; or
    (iii) A current YouthBuild.
    (b) [Reserved]


Sec.  75.13   Section 3 safe harbor.

    (a) General. PHAs and other recipients will be considered to have 
complied with requirements in this part, in the absence of evidence to 
the contrary if they:
    (1) Certify that they have followed the prioritization of effort in 
Sec.  75.9; and
    (2) Meet or exceed the applicable Section 3 benchmarks as described 
in paragraph (b) of this section.
    (b) Establishing benchmarks. (1) HUD will establish Section 3 
benchmarks for Section 3 workers or Targeted Section 3 workers or both 
through a document published in the Federal Register. HUD may establish 
a single nationwide benchmark for Section 3 workers and a single 
nationwide benchmark for Targeted Section 3 workers, or may establish 
multiple benchmarks based on geography, the type of public housing 
financial assistance, or other variables. HUD will update the 
benchmarks through a document published in the Federal Register, 
subject to public comment, not less frequently than once every 3 years.
    (2) In establishing the Section 3 benchmarks, HUD may consider the 
industry averages worked by specific categories of workers or in 
different localities or regions; prior reports pursuant to this 
section; and any other factors HUD deems important. In establishing the 
Section 3 benchmarks, HUD will exclude professional services.

Alternative 1--Paragraph (b)(3)

    (3) Section 3 benchmarks will consist of the following two ratios:
    (i) The number of labor hours worked by Section 3 workers divided 
by the total number of labor hours worked by all workers funded by 
public housing financial assistance in the PHA's or other recipient's 
fiscal year.
    (ii) The number of labor hours worked by Targeted Section 3 
workers, as defined in Sec.  75.11(a), divided by the total number of 
labor hours worked by all workers funded by public housing financial 
assistance in the PHA's or other recipient's fiscal year.

Alternative 2--Paragraph (b)(3)

    (3) Section 3 benchmarks will consist of the following two ratios:
    (i) The number of new hires that are Section 3 workers divided by 
the total number of new hires funded by public housing financial 
assistance in the PHA's or other recipient's fiscal year.
    (ii) The number of new hires that are Targeted Section 3 workers, 
as defined in Sec.  75.11(a), divided by the total number of new hires 
funded by public housing financial assistance in the PHA's or other 
recipient's fiscal year.


Sec.  75.15  Reporting.

Alternative 1--Paragraph (a)

    (a) Reporting of labor hours. (1) For public housing financial 
assistance, PHAs and other recipients must report in a manner 
prescribed by HUD:
    (i) The total number of labor hours worked;
    (ii) The total number of labor hours worked by Section 3 workers; 
and
    (iii) The total number of labor hours worked by Targeted Section 3 
workers.
    (2) The labor hours reported under paragraph (a)(1) of this section 
must include the total number of labor hours worked with public housing 
financial assistance for the PHA's or other recipient's fiscal year, 
including labor hours worked by any contractors and subcontractors that 
the PHA or other recipient is required, or elects pursuant to paragraph 
(a)(3) of this section, to report.
    (3) PHAs and other recipients reporting under this section, as well 
as contractors and subcontractors who report to PHAs and recipients, 
may report labor hours by Section 3 workers, under paragraph (a)(1)(ii) 
of this section, and labor hours by Targeted Section 3 workers, under 
paragraph (a)(1)(iii) of this section, from professional services 
without including labor hours from professional services in the total 
number of labor hours worked under paragraph (a)(1)(i) of this section. 
If a contract covers both professional services and other work and the 
PHA, other recipient, contractor, or subcontractor chooses not to 
report labor hours from professional services, the labor hours under 
the contract that are not from professional services must still be 
reported.
    (4) PHAs and other recipients may report on the labor hours of a 
contractor or subcontractor based on the contractor or subcontractor's 
good faith assessment of the labor hours of a full-time or part-time 
employee if the contractor or subcontractor is not subject to other 
requirements specifying time and attendance reporting, or does not 
otherwise track labor hours.

Alternative 2--Paragraph (a)

    (a) Reporting of new hires. (1) For public housing financial 
assistance, PHAs and other recipients must report in a form prescribed 
by HUD:

[[Page 13196]]

    (i) The total number of new hires;
    (ii) The total number of new hires that are Section 3 workers; and
    (iii) The total number of new hires that are Targeted Section 3 
workers.
    (2) The new hires reported, under paragraph (a)(1)(i) of this 
section, must include the total number of new hires funded by public 
housing financial assistance for the PHA's or other recipient's fiscal 
year, including new hires funded by any contractors and subcontractors 
that the PHA or other recipient is required, or elects pursuant to 
paragraph (a)(3) of this section, to report.
    (3) PHAs and other recipients reporting under this section, as well 
as contractors and subcontractors who report to PHAs and recipients, 
may report new hires of Section 3 workers, under paragraph (a)(1)(ii) 
of this section, and new hires of Targeted Section 3 workers, under 
paragraph (a)(1)(iii) of this section, performing professional services 
without including hires in professional services in the total number of 
new hires under paragraph (a)(1)(i) of this section. If a contract 
covers both professional services and other work and the PHA, 
recipient, contractor, or subcontractor chooses not to report new hires 
performing professional services, the new hires under the contract that 
are not performing professional services must still be reported.
    (b) Additional reporting if Section 3 benchmarks are not met. If 
the PHA's or other recipient's reporting under paragraph (a) of this 
section indicates that the PHA or other recipient has not met the 
Section 3 benchmarks described in Sec.  75.11, the PHA or other 
recipient will be required to report in a form prescribed by HUD on the 
qualitative nature of its activities or those of its contractors and 
subcontractors.
    (c) Reporting frequency. Unless otherwise provided, PHAs or other 
recipients will report annually to HUD under paragraph (a) of this 
section, and where required under paragraph (b) of this section, in a 
manner consistent with reporting requirements for the applicable HUD 
program.
    (d) Reporting by Small PHAs. Small PHAs will not be required to 
report under paragraph (a) of this section. Small PHAs are required to 
report on their qualitative efforts, as described in paragraph (b) of 
this section, in a manner consistent with reporting requirements for 
the applicable HUD program.


Sec.  75.17  Contract provisions.

    (a) PHAs or other recipients must include language in any agreement 
or contract to apply Section 3 to contractors.
    (b) PHAs or other recipients must require contractors to include 
language in any contract or agreement to apply Section 3 to 
subcontractors.
    (c) PHAs or other recipients must require all contractors and 
subcontractors to meet the requirements of Sec.  75.9, regardless of 
whether Section 3 language is included in contracts.

Subpart C--Additional Provisions for Housing and Community 
Development Financial Assistance


Sec.  75.19  Requirements.

    (a) Employment and training. (1) To the greatest extent feasible, 
and consistent with existing Federal, state, and local laws and 
regulations, recipients covered by this subpart shall ensure that 
employment and training opportunities arising in connection with 
Section 3 projects are provided to Section 3 workers within the 
metropolitan area (or nonmetropolitan county) in which the project is 
located.
    (2) Where feasible, recipients should provide opportunities and 
training described in paragraph (a)(1) of this section to:
    (i) Section 3 workers residing within the service area or the 
neighborhood of the project; and
    (ii) Participants in YouthBuild programs.
    (b) Contracting. (1) To the greatest extent feasible, and 
consistent with existing Federal, state, and local laws and regulations 
recipients covered by this subpart shall ensure contracts for work 
awarded in connection with Section 3 projects are provided to Section 3 
businesses concerns that provide economic opportunities to Section 3 
workers residing within the metropolitan area (or nonmetropolitan 
county) in which the project is located.
    (2) Where feasible, recipients should direct the efforts described 
in paragraph (b)(1) of this section to:
    (i) Section 3 business concerns that provide economic opportunities 
to Section 3 workers residing within the service area or the 
neighborhood of the project; and
    (ii) YouthBuild programs.


Sec.  75.21  Targeted Section 3 worker for housing and community 
development financial assistance.

    (a) For purposes of this subpart, a Targeted Section 3 worker is:
    (1) A worker employed by a Section 3 business concern; or
    (2) A worker who is or was when hired by the worker's current 
employer:
    (i) Living within the service area or the neighborhood of the 
project, as defined in Sec.  75.5; or
    (ii) A current YouthBuild participant.
    (b) [Reserved]


Sec.  75.23  Section 3 safe harbor.

    (a) General. Recipients will be considered to have complied with 
requirements in this part, in the absence of evidence to the contrary 
if they:
    (1) Certify that they have followed the prioritization of effort in 
Sec.  75.19; and
    (2) Meet or exceed the applicable Section 3 benchmark as described 
in paragraph (b) of this section.
    (b) Establishing benchmarks. (1) HUD will establish Section 3 
benchmarks for Section 3 workers or Targeted Section 3 workers or both 
through a document published in the Federal Register. HUD may establish 
a single nationwide benchmark for Section 3 workers and a single 
nationwide benchmark for Targeted Section 3 workers, or may establish 
multiple benchmarks based on geography, the nature of the Section 3 
project, or other variables. HUD will update the benchmarks through a 
document published in the Federal Register, subject to public comment, 
not less frequently than once every 3years.
    (2) In establishing the Section 3 benchmarks, HUD may consider the 
industry averages for labor hours worked by specific categories of 
workers or in different localities or regions; averages for labor hours 
worked by Section 3 workers and Targeted Section 3 workers as reported 
by recipients pursuant to this section; and any other factors HUD deems 
important. In establishing the Section 3 benchmarks, HUD will exclude 
labor hours associated with professional services from the total labor 
hours, the labor hours worked by Section 3 workers, and the labor hours 
worked by Targeted Section 3 workers.
    (3) Section 3 benchmarks will consist of the following two ratios:
    (i) The number of labor hours worked by Section 3 workers divided 
by the total number of labor hours worked by all workers on a Section 3 
project.
    (ii) The number of labor hours worked by Targeted Section 3 workers 
divided by the total number of labor hours worked by all workers on a 
Section 3 project.


Sec.  75.25   Reporting.

    (a) Reporting of labor hours. (1) For Section 3 projects, 
recipients must report in a manner prescribed by HUD:
    (i) The total number of labor hours worked;
    (ii) The total number of labor hours worked by Section 3 workers; 
and

[[Page 13197]]

    (iii) The total number of labor hours worked by Targeted Section 3 
workers.
    (2) The labor hours reported under paragraph (a)(1) of this section 
must include the total number of labor hours worked on a Section 3 
project, including labor hours worked under any subrecipients, 
contractors, and subcontractors that the recipient is required, or 
elects pursuant to paragraph (a)(3) of this section, to report.
    (3) Recipients reporting under this section, as well as contractors 
and subcontractors who report to PHAs and recipients, may report labor 
hours by Section 3 workers, under paragraph (a)(1)(ii) of this section, 
and labor hours by Targeted Section 3 workers, under paragraph 
(a)(1)(iii) of this section, from professional services without 
including labor hours from professional services in the total number of 
labor hours worked under paragraph (a)(1)(i) of this section. If a 
contract covers both professional services and other work and the 
recipient or contractor or subcontractor chooses not to report labor 
hours from professional services, the labor hours under the contract 
that are not from professional services must still be reported.
    (4) Recipients may report on the labor hours of a contractor or 
subcontractor based on the contractor or subcontractor's good faith 
assessment of the labor hours of a full-time or part-time employee if 
the contractor or subcontractor is not subject to other requirements 
specifying time and attendance reporting, or does not otherwise track 
labor hours.
    (b) Additional reporting if Section 3 benchmarks are not met. If 
the recipient's reporting under paragraph (a) of this section indicates 
that the recipient has not met the Section 3 benchmarks described in 
Sec.  75.23, the recipient must report in a form prescribed by HUD on 
the qualitative nature of the activities the recipient or its 
contractors and subcontractors pursued in order to comply with this 
part.
    (c) Reporting frequency. Unless otherwise provided, recipients must 
report annually to HUD under paragraph (a) of this section, and, where 
required, under paragraph (b) of this section, on all projects 
completed within the reporting year in a manner consistent with 
reporting requirements for the applicable HUD program.


Sec.  75.27  Contract provisions.

    (a) Recipients must include language applying Section 3 
requirements in any subrecipient agreement or contract for a Section 3 
project.
    (b) Recipients of Section 3 projects must require subrecipients, 
contractors, and subcontractors to meet the requirements of Sec.  
75.19, regardless of whether Section 3 language is included in 
recipient or subrecipient agreements, program regulatory agreements, or 
contracts.

Subpart D--Provisions for Multiple Funding Sources, Recordkeeping, 
and Compliance


Sec.  75.29   Multiple funding sources.

    (a) If a housing rehabilitation, housing construction or other 
public construction project is subject to Section 3 pursuant to Sec.  
75.3(a)(1) and (2), the recipient must follow subpart B of this part 
for the public housing financial assistance and may follow either 
subpart B or C of this part for the housing and community development 
financial assistance. For this project, the following applies:
    (1) For housing and community development financial assistance, a 
Targeted Section 3 worker is any worker who meets the definition of a 
Targeted Section 3 worker in either subpart B or C of this part; and

Alternative 1--Paragraph (a)(2)

    (2) The recipients of both sources of funding shall report on the 
housing rehabilitation, housing construction, or other public 
construction project as a whole and shall identify the multiple 
associated recipients. PHAs and other recipients must report the 
following information:
    (i) The total number of labor hours worked on the project;
    (ii) The total number of labor hours worked by Section 3 workers on 
the project; and
    (iii) The total number of labor hours worked by Targeted Section 3 
workers on the project.

Alternative 2--Paragraph (a)(2)

    (2) The recipients of both sources of funding shall report on the 
housing rehabilitation, housing construction, or other public 
construction project as a whole and shall identify the multiple 
associated recipients.
    (i) PHAs and other recipients must report the following 
information:
    (A) The total number of labor hours worked on the project;
    (B) The total number of labor hours worked by Section 3 workers on 
the project; and
    (C) The total number of labor hours worked by Targeted Section 3 
workers, as defined in either subpart B or C of this part, on the 
project.
    (ii) The PHA must also report the following information:
    (A) The total number of new hires on the project;
    (B) The total number of Section 3 workers that are new hires on the 
project; and
    (C) The total number of Targeted Section 3 workers, as defined in 
either subpart B or C of this part, that are new hires on the project.
    (b) If a housing rehabilitation, housing construction, or other 
public construction project is subject to Section 3 because the project 
is assisted with funding from multiple programs that exceed the 
threshold in Sec.  75.3(a)(2), the recipient or recipients must follow 
subpart C of this part, and must report to the applicable HUD program 
office, as prescribed by HUD.


Sec.  75.31   Recordkeeping.

    (a) HUD shall have access to all records, reports, and other 
documents or items of the recipient that are maintained to demonstrate 
compliance with the requirements of this part, or that are maintained 
in accordance with the regulations governing the specific HUD program 
by which the Section 3 project is governed, or the public housing 
financial assistance is provided or otherwise made available to the 
recipient, contractor, or subcontractor.
    (b) Recipients must maintain documentation, or ensure that a 
subrecipient, contractor, or subcontractor that employs the worker 
maintains certification, to ensure that workers meet the definition of 
a Section 3 worker or Targeted Section 3 worker, as follows:
    (1) For a worker to qualify as a Section 3 worker, one of the 
following must be maintained:
    (i) A worker's self-certification that their income is below the 
income limit from the prior calendar year;
    (ii) A worker's self-certification of participation in a means-
tested program such as public housing or Section 8-assisted housing;
    (iii) Certification from a PHA, or the owner or property manager of 
project-based Section 8-assisted housing, or the administrator of 
tenant-based Section 8-assisted housing that the worker is a 
participant in one of their programs;
    (iv) An employer's certification that the worker's income from that 
employer is below the income limit when based on an employer's 
calculation of what the worker's wage rate would translate to if 
annualized on a full-time basis;
    (v) An employer's confirmation that a worker's residency is in a 
qualified census tract; or
    (vi) An employer's certification that the worker is employed by a 
Section 3 business.

[[Page 13198]]

    (2) For a worker to qualify as a Targeted Section 3 worker, one of 
the following must be maintained:
    (i) For a worker to qualify as a Targeted Section 3 worker under 
subpart B of this part:
    (A) A worker's self-certification of participation in public 
housing or Section 8-assisted housing programs;
    (B) Certification from a PHA, or the owner or property manager of 
project-based Section 8-assisted housing, or the administrator of 
tenant-based Section 8-assisted housing that the worker is a 
participant in one of their programs;
    (C) An employer's certification that the worker is employed by a 
Section 3 business concern; or
Alternative 1--Paragraph (b)(2)(i)(D)
    (D) A worker's certification that the worker is a YouthBuild 
participant.
Alternative 2--Paragraph (b)(2)(i)(D)
    (D) An employer's certification that the worker is a YouthBuild 
participant.
    (ii) For a worker to qualify as a Targeted Section 3 worker under 
subpart C of this part:
    (A) An employer's confirmation that a worker's residence is within 
1 mile of the work site or, if fewer than 5,000 people live within 1 
mile of a work site, within a circle centered on the work site that is 
sufficient to encompass a population of 5,000 people according to the 
most recent U.S. Census;
    (B) An employer's certification that the worker is employed by a 
Section 3 business concern; or
    (C) A worker's self-certification that the worker is a YouthBuild 
participant.
    (c) The documentation described in paragraph (b) of this section 
must be maintained for the time period required for record retentions 
in accordance with applicable program regulations or, in the absence of 
applicable program regulations, 2 CFR part 200.


Sec.  75.33  Compliance.

    (a) Records of compliance. Each recipient shall maintain adequate 
records demonstrating compliance with this part.
    (b) Complaints. Complaints alleging failure of compliance with this 
part may be reported to the HUD program office responsible for the 
public housing financial assistance or the Section 3 project.
    (c) Monitoring. HUD will monitor compliance with the requirements 
of this part. The applicable HUD program office will determine 
appropriate methods by which to oversee Section 3 compliance. HUD may 
impose appropriate remedies and sanctions in accordance with the laws 
and regulations for the program under which the violation was found.

PART 91--CONSOLIDATED SUBMISSIONS FOR COMMUNITY PLANNING AND 
DEVELOPMENT PROGRAMS

0
6. The authority citation for part 91 continues to read as follows:

    Authority: 42 U.S.C. 3535(d), 3601-3619, 5301-5315, 11331-11388, 
12701-12711, 12741-12756, and 12901-12912.


Sec.  91.215   [Amended]

0
7. Amend Sec.  91.215(j) by removing ``24 CFR part 135'' and adding in 
its place ``24 CFR part 75''.


Sec.  91.225   [Amended]

0
8. Amend Sec.  91.225(a)(7) by removing ``24 CFR part 135'' and adding 
in its place ``24 CFR part 75''.


Sec.  91.325   [Amended]

0
9. Amend Sec.  91.325(a)(7) by removing ``24 CFR part 135'' and adding 
in its place ``24 CFR part 75''.


Sec.  91.425   [Amended]

0
10. Amend Sec.  91.425(a)(1)(vii) by removing ``24 CFR part 135'' and 
adding in its place ``24 CFR part 75''.

PART 92--HOME INVESTMENT PARTNERSHIPS PROGRAM

0
11. The authority citation for part 92 continues to read as follows:

    Authority: 42 U.S.C. 3535(d), 12 U.S.C. 1701x and 4568.

0
12. Amend Sec.  92.508 as follows:
0
a. Remove paragraph (a)(7)(i)(B);
0
b. Redesignate paragraph (a)(7)(i)(C) as paragraph (a)(7)(i)(B); and
0
c. Add paragraph (a)(7)(xi).
    The addition reads as follows:


Sec.  92.508  Recordkeeping.

* * * * *
    (a) * * *
    (7) * * *
    (xi) Documentation of actions undertaken to meet the requirements 
of 24 CFR part 75 which implements section 3 of the Housing Development 
Act of 1968, as amended (12 U.S.C. 1701u).
* * * * *

PART 93--HOUSING TRUST FUND

0
13. The authority citation for part 93 continues to read as follows:

    Authority: 42 U.S.C. 3535(d), 12 U.S.C. 4568.

0
14. Amend Sec.  93.407 as follows:
0
a. Redesignate paragraphs (a)(5)(ii) through (ix) as paragraphs 
(a)(5)(iii) through (x);
0
b. Remove paragraph (a)(5)(i)(B);
0
c. Redesignate paragraph (a)(5)(i)(A) as paragraph (a)(5)(ii);
0
d. In newly redesignated paragraph (a)(5)(iv), remove ``24 part 35'' 
and add in its place ``24 CFR part 35''; and
0
e. Add paragraph (a)(5)(xi).
    The addition reads as follows:


Sec.  93.407   Recordkeeping.

* * * * *
    (a) * * *
    (5) * * *
    (xi) Documentation of actions undertaken to meet the requirements 
of 24 CFR part 75, which implements section 3 of the Housing and Urban 
Development Act of 1968, as amended (12 U.S.C. 1701u).
* * * * *

CHAPTER I--OFFICE OF ASSISTANT SECRETARY FOR EQUAL OPPORTUNITY, 
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT [AMENDED]

0
15. Under the authority of 42 U.S.C. 3535(d), in chapter I, remove the 
headings for subchapters A and B.

PART 135 [REMOVED]

0
16. Remove part 135.

PART 266--HOUSING FINANCE AGENCY RISK-SHARING PROGRAM FOR INSURED 
AFFORDABLE MULTIFAMILY PROJECT LOANS

0
17. The authority citation for part 266 continues to read as follows:

    Authority:  12 U.S.C. 1707; 42 U.S.C. 3535(d).


Sec.  266.220   [Amended]

0
18. Amend Sec.  266.220(c) by removing ``; section 3 of the Housing and 
Urban Development Act of 1968 (12 U.S.C. 1701u), as implemented by 24 
CFR part 135''.

PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS

0
19. The authority citation for part 570 continues to read as follows:

    Authority:  12 U.S.C. 1701x, 1701 x-1; 42 U.S.C. 3535(d) and 
5301-5320.


Sec.  570.487   [Amended]

0
20. Amend Sec.  570.487(d) by removing ``24 CFR part 135'' and adding 
in its place ``24 CFR part 75''.


Sec.  570.607  [Amended]

0
21. Amend Sec.  570.607(b) by removing ``24 CFR part 135'' and adding 
in its place ``24 CFR part 75''.

PART 576--EMERGENCY SOLUTIONS GRANTS PROGRAM

0
22. The authority citation for part 576 continues to read as follows:


[[Page 13199]]


     Authority: 12 U.S.C. 1701x, 1701 x-1; 42 U.S.C. 11371 et seq., 
42 U.S.C. 3535(d).


Sec.  576.407  [Amended]

0
23. Amend Sec.  576.407(a) by removing ``24 CFR part 135'' and adding 
in its place ``24 CFR part 75''.

PART 578--CONTINUUM OF CARE PROGRAM

0
24. The authority citation for part 578 continues to read as follows:

    Authority: 12 U.S.C. 1701x, 1701 x-1; 42 U.S.C. 11381 et seq., 
42 U.S.C. 3535(d).


Sec.  578.99   [Amended]

0
25. Amend Sec.  578.99 by removing ``federal'' in the section heading 
and adding in its place ``Federal'' and removing ``24 CFR part 135'' in 
paragraph (i) and adding in its place ``24 CFR part 75''.

PART 905--THE PUBLIC HOUSING CAPITAL FUND PROGRAM

0
26. The authority citation for part 905 continues to read as follows:

    Authority: 42 U.S.C. 1437g, 42 U.S.C. 1437z-2, 42 U.S.C. 1437z-
7, and 3535(d).


Sec.  905.308   [Amended]

0
27. Amend Sec.  905.308(b)(10) by removing ``24 CFR part 135'' and 
adding in its place ``24 CFR part 75''.

PART 964--TENANT PARTICIPATION AND TENANT OPPORTUNITIES IN PUBLIC 
HOUSING

0
28. The authority citation for part 964 continues to read as follows:

    Authority: 42 U.S.C. 1437d, 1437g, 1437r, 3535(d).


Sec.  964.320   [Amended]

0
29. Amend Sec.  964.320 by removing ``24 CFR part 135'' and adding in 
its place ``24 CFR part 75''and removing ``24 CFR 135.7'' and adding in 
its place ``24 CFR 75.3''.

PART 983--PROJECT-BASED VOUCHER (PBV) PROGRAM

0
30. The authority citation for part 983 continues to read as follows:

    Authority: 42 U.S.C. 1437f and 3535(d).


Sec.  983.4   [Amended]

0
31. Amend Sec.  983.4 by removing the definition of ``Section 3--
Training, employment and contracting opportunities in development''.


Sec.  983.154   [Amended]

0
32. Amend Sec.  983.154 by removing and reserving paragraph (c).

PART 1000--NATIVE AMERICAN HOUSING ACTIVITIES

0
32. The authority citation for part 1000 continues to read as follows:

    Authority:  25 U.S.C. 4101 et seq.; 42 U.S.C. 3535(d).

0
33. Revise Sec.  1000.42 to read as follows:


Sec.  1000.42  Are the requirements of Section 3 of the Housing and 
Urban Development Act of 1968 applicable?

    No. Recipients shall comply with Indian preference requirements of 
section 7(b) of the Indian Self-Determination and Education Assistance 
Act (25 U.S.C. 5307(b)), or employment and contract preference laws 
adopted by the recipient's tribe in accordance with section 101(k) of 
NAHASDA.

    Dated: March 29, 2019.
Matthew F. Hunter,
Assistant Deputy Secretary for Field Policy and Management.
[FR Doc. 2019-06495 Filed 4-3-19; 8:45 am]
 BILLING CODE 4210-67-P