Section 3’s Business Enterprises, Minority’s Business Enterprises & Women’s Business Enterprises
SECTION 3 INFORMATION
- What is Section 3? Section 3 is a provision of the Housing and Urban Development Act of 1968. The purpose of Section 3 is to ensure that preference for employment, training and contracting opportunities generated from the expenditure of certain HUD funds is directed to local low- and very low-income persons, particularly those who receive federal housing assistance, and businesses that are owned by or substantially employ such persons.
- What does the term “Section 3 resident” mean? A “section 3 resident” is: 1) a public housing resident; or 2) a low- or very low-income person residing in the metropolitan area or Non-Metropolitan County where the Section 3 covered assistance is expended.
- What does the term “Section 3 Business” mean? Section 3 businesses are those that can provide evidence of meeting one of the following three criteria: a) 51% or more owned by Section 3 residents; or b) At least 30% of its full time employees include persons that are currently Section 3 residents, or were Section 3 residents within three years of the date of first hire*; or c) Provides evidence, as required, of a commitment to subcontract in excess of 25% of the dollar award of all subcontracts to businesses that meet the qualifications of a) or b) above.
- How are the terms “low-income” and very low-income determined? These limits are typically established at 80 percent and 50 percent of the median income for each locality by household size or the number of people residing in one house. For 2020, the Income Limit https://www.huduser.gov/portal/datasets/il/il2020/2020summary.odn
- Does being a Section 3 Business mean that a firm is automatically entitled to HUD-funded contracts? No. Section 3 businesses may need to demonstrate to the satisfaction of the recipient agency they are a responsible Contractor with the ability to perform successfully under the terms and conditions of prospective contracts. The Section 3 regulation at 24 CFR Part 135.36 provides preference to Section 3 businesses but does not guarantee the award of contracts.
For more information on the requirements of Section 3, please visit www.hud.gov/Section3
MINORITY/WOMEN’S BUSINESS ENTERPRISE INFORMATION
- What is a Minority Business Enterprise (MBE)? Minority business enterprise ( MBE ) is an American designation for businesses which are at least 51% owned, operated, and controlled on a daily basis by one or more (in combination) American citizens of an ethnic minority.
- What is a Women’s Business Enterprise (MBE)? A woman-owned business (WBE) company must be 51% owned, operated, and controlled on a daily basis by women who are U.S. citizens.
- Does being a MBE or WBE Business mean that a firm is automatically entitled to HUD-funded contracts? These businesses will need to demonstrate to the satisfaction of the recipient agency they are a responsible Contractor with the ability to perform successfully under the terms and conditions of prospective contracts. The MBE/WBE at 24 CFR Part 85.36 Contracting with Minority and Women’s Business Enterprises states that: The grantee and sub-grantee will take all necessary affirmative steps to assure that minority firms or women business enterprises are used whenever possible.
For more information on the requirements of MBE/WBE, please visit
Frequently Asked Questions for Section 3