Section 3
Understanding HUD’s Section 3 Requirements
Section 3 is a federal requirement administered by the U.S. Department of Housing and Urban Development (HUD) that helps ensure economic opportunities generated by certain HUD-funded projects benefit low- and very low-income individuals and the businesses that serve them.
The guidance summarized on this page is based on HUD’s official FAQ document:
“Frequently Asked Questions for Section 3” published by HUD’s Office of Field Policy and Management.
Section 3 was established under the Housing and Urban Development Act of 1968 and is designed to connect HUD-funded housing and community development investments with employment, training, and contracting opportunities for residents.
What Is Section 3?
Section 3 is a federal requirement that applies to certain projects funded through HUD housing and community development programs. The rule requires recipients of HUD funding—such as public housing authorities, local governments, and developers—to make their best efforts to provide economic opportunities to low-income individuals and businesses in the community.
In practice, this means that when HUD funds are used for housing rehabilitation, new construction, or other development activities, priority should be given to hiring qualified low-income workers and contracting with businesses that employ or are owned by low-income individuals.
The goal is not only to improve housing but also to strengthen economic opportunity for the residents living in the communities where HUD investments are made.
Key Section 3 Definitions
How Income Is Determined
Eligibility for Section 3 opportunities is based on HUD’s income limits, which are updated annually and vary by geographic area and household size.
Generally, individuals qualify if their income falls within HUD’s definitions of low-income or very-low-income households. These thresholds are based on median income levels in a given metropolitan area or county and are used across many federal housing programs.
What Is a Section 3 Project?
A Section 3 project is a project that receives certain types of HUD financial assistance and meets the applicable funding thresholds that trigger Section 3 requirements.
Examples may include:
- Public housing modernization or rehabilitation
- Affordable housing construction or redevelopment
- Community development infrastructure projects
- Housing authority capital improvement projects
When these projects exceed HUD’s funding thresholds, the organizations receiving the funds must comply with Section 3 requirements and demonstrate that they are making best efforts to create economic opportunities for eligible workers and businesses.
Who Must Comply with Section 3?
Section 3 requirements apply to a range of organizations involved in HUD-funded activities, including:
- Public Housing Authorities (PHAs)
- Local governments receiving HUD funds
- Developers working on HUD-assisted housing projects
- Contractors and subcontractors working on covered projects
These entities are considered Section 3 funding recipients and are responsible for ensuring compliance with the rule.
What “Best Efforts” Means
HUD requires recipients to make “best efforts” or efforts “to the greatest extent feasible” to provide training, employment, and contracting opportunities to eligible individuals and businesses.
This means organizations should take reasonable and proactive steps such as:
- Advertising job opportunities to local residents
- Providing outreach to Section 3 businesses
- Offering training or apprenticeship opportunities
- Including Section 3 language in project solicitations and contracts
The goal is to ensure that local residents—particularly those with lower incomes—have meaningful access to economic opportunities created through federally funded development.
Section 3 Reporting Requirements
Organizations receiving HUD funding must track and report their progress toward Section 3 goals.
These reports typically include:
- The number of Section 3 workers hired
- The number of targeted Section 3 workers employed
- The number of contracts awarded to Section 3 businesses
- Documentation of outreach efforts and compliance activities
Reporting allows HUD to measure whether projects are successfully expanding economic opportunities for the communities they are designed to serve.
Why Section 3 Matters
Section 3 is designed to ensure that federal housing investments deliver broader community benefits. By linking housing development with job creation and local contracting opportunities, the program helps promote economic mobility for residents living in communities that receive HUD assistance.
Programs like Section 3 complement HUD’s broader housing initiatives, including the Housing Choice Voucher Program, which helps more than two million families access safe and affordable housing across the United States.
Together, these programs support HUD’s mission to strengthen communities by expanding access to both housing and economic opportunity.
Zachary Stover
Training/Section 3 Coordinator
Learn More
For additional guidance and the full list of questions addressed by HUD, please review the official document: