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FAQs - Section 3 Preference

Q. How can a prospective Section 3 resident or business certify that they meet the eligibility requirements?
The individual or business must contact the agency or developer that they are seeking employment or contracting opportunities from (i.e., the PHA, city, or local government). They should identify themselves as a Section 3 resident or business and provide whatever documentation that the recipient agency requires under their certification procedures.

Q. Who is responsible for certifying that residents and businesses meet the regulatory definitions under Section 3?
The regulation allows recipient agencies to use their discretion for developing specific procedures to meet the requirements of Section 3. This includes establishing their own standards/processes for verifying eligibility of Section 3 residents and businesses (or not). Each recipient is also free to accept or reject the standards/process used by other recipients or pay for the services of a third party vendor to determine eligibility. While HUD does not endorse the services of private, third party vendors, recipient agencies may employ such services at their discretion.

Q. What are examples of acceptable evidence to determine eligibility as a Section 3 resident?
HUD does not prescribe that any specific forms of evidence to establish Section 3 eligibility. Sample certification documents can be found at on HUD's website. Acceptable documentation includes, but is not limited to the following:

  • Proof of residency in a public housing development;
  • Evidence of participation in a HUD Youth build program operated in the metropolitan area (or non-metropolitan county) where the Section 3 covered assistance is spent;
  • Evidence that the individual resides in the Section 3 area and is a low or very low-income person, as determined by local HUD income limits;

Q. What are examples of acceptable evidence for determining eligibility as a Section 3 business?
HUD does not prescribe that any specific forms of evidence be required to establish Section 3 eligibility. Sample certification documents can be found on the Section 3 website. The business seeking the preference must be able to demonstrate that they meet one of the following criteria:

  • 51 percent or more owned by Section 3 residents; or
  • Has permanent, full time employees at least 30 percent of whom are currently Section 3 residents, or within three years of the date of first employment with the business concern were Section 3 residents; or
  • Has a commitment to sub-contract in excess of 25 percent of the total dollar award of all sub-contracts to be awarded to such businesses described above.

Q. Are all public and Indian housing residents considered Section 3 residents regardless of their income?
Yes. Public and Indian housing residents need only show proof of residency in public housing within the metropolitan area (or non-metropolitan county). Other residents of the Section 3 area may need to show proof of residency in the metropolitan area (or non-metropolitan county) and meet the HUD income requirements.

Q. Can recipient agencies allow residents or businesses to "self-certify" that they meet the Section 3 eligibility requirements?
As previously mentioned, the regulation allows recipient agencies to use their own discretion to develop specific procedures for meeting the requirements of Section 3. Many recipient agencies choose to allow prospective Section 3 residents or businesses to self-certify their eligibility. The Department recommends that any self- certification should include a statement of penalty for falsifying information.

Q. Are Section 3 business concerns only certified to receive preference in the community in which they are located?
No. While certification is locality specific, recipient agencies can count a Section 3 business that is located outside of its immediate jurisdiction towards their efforts to meet the minimum numerical goals. However, recipient agencies should not provide preference to a Section 3 that is not located in their jurisdiction if a local Section 3 business has also submitted a qualified bid for a contract and can complete the work to be done. Refer to the order of priority preference for Section 3 contract opportunities at 24 CFR Part 135.36.

Q. Does preference to a Section 3 business mean that the business should be selected if it meets the technical requirements of the bid, regardless of bid price?
No. As provided in 24 CFR 85.36(b) (8), contract awards shall only be made to responsible contractors possessing the ability to perform under the terms and conditions of the proposed contract. In order to meet the requirements of Section 3 and Federal Procurement laws, recipient agencies must develop procedures that are consistent with all applicable regulations.

Q. Can contracting with MBE/WBE businesses count towards Section 3 contracting goals?
Section 3 is race and gender neutral. Only MBEs/WBEs that meet the eligibility criteria set forth in the regulation can they be counted towards the minimum goals for Section 3 contracting opportunities.

Q. Does a business have to be incorporated to be considered a Section 3 eligible business?
A Section 3 business concern can be any type of business, such as a sole proprietorship, partnership or a corporation, properly licensed and meeting all legal requirements to perform the contract under consideration.