HUD’s Office of Recapitalization, which oversees the Rental Assistance Demonstration (RAD), posted a two-page document providing guidance to Section 3 for public housing agencies (PHAs) describing how the new Section 3 regulations (see Memo, 10/5/20) apply to RAD conversions of public housing to Project-Based Vouchers (PBVs) or Project-Based Rental Assistance (PBRA). HUD will provide an overview of the new final Section 3 rule and how it applies in RAD conversions on April 20, 2021 at 3:30 pm ET. Register here. HUD indicates that additional Section 3 guidance is forthcoming later this year.
Section 3 applies to public housing converting under RAD when rehabilitation or new construction exceeds $200,000. Specifically:
Rehabilitation or new construction work referred to in a PHA’s RAD Conversion Commitment is subject to the Section 3 requirements that apply to the “housing and community development assistance” component of the final Section 3 rule.
In response to an inquiry by NLIHC, HUD clarified in an email that Section 3 applies to the entire RAD scope of work. That is, under RAD, related non-housing work such as a parking lot, sidewalks, landscaping, etc., are considered a part of “housing construction” and is covered by Section 3.
(NLIHC NOTE: This means that after RAD Closing, which takes place before final conversion, any rehabilitation or new construction required by the conversion is subject to the Section 3 provisions for housing and community development activities – except that first priority for employment and other economic opportunities must be given to residents of public housing or Section 8-assisted housing. If funding comes from CDBG or HOME, then first priority is to low-income residents in the project’s neighborhood.)
Only pre-development work using pre-conversion public housing Operating Funds or Capital Funds before RAD conversion is subject to the Section 3 requirements that apply under the “public housing assistance” provisions of the new Section 3 rule.
NLIHC reminds readers that after conversion, Section 3 no longer applies to staff who had performed various tasks at the public housing development, such a central office employees, janitors, maintenance crew, painters, grounds crews, etc.
The guidance tells PHAs and their partners engaged in RAD conversions to ensure that they are documenting their Section 3 compliance efforts. It also states that RAD participants are not required to amend contracts executed before November 30, 2020, the effective date of the new regulations. PHAs and their partners engaged in RAD conversions closing on or after November 30, 2020, should review draft contracts to align with the new Section 3final rule.
The effective date for Section 3 reporting requirements begins for conversions occurring on or after July 1, 2021. RAD conversions with a deadline for work completion before November 30, 2020 must report their Section 3 outcomes as required by the old Section 3 regulations.
Section 3 reporting will continue to be done through the RAD Resource Desk, with each individual transaction submitting a Completion Certification with Section 3 outcome data at the completion of rehabilitation or construction.
The guidance was announced in an email to stakeholders on a RADblast listserv on March 30. The RADblast indicated that the document was on the RAD Resource Desk. However, at the time it was difficult to find. It was located in the “Document Library” in two places: in the “Planning the Conversion” section under the “Procurement and Wages” category, and in the “Post-Closing” section under the “Guidance” category. After NLIHC wrote to the RAD office, staff pledged to create a new subcategory so Section 3 guidance can be more visible.
The two-page Section 3 guidance document is at: https://bit.ly/3wiIwDi
Information about RAD is on page 4-39 of NLIHC’s 2020 Advocates’ Guide and on NLIHC’s public housing webpage.
NLIHC has a “Detailed Summary and Analysis of the Final Section 3 Regulations” and a “Brief Summary and Analysis of the Final Section 3 Regulations.” The former has regulation citations, quotes from the preamble to the final rule, as well as more detailed information. The latter is a more streamlined version.
HUD posted Section 3 FAQs on March 25, 2021, which are at: https://bit.ly/3tZ9nm2
NLIHC’s “Detailed Summary and Analysis of the Final Section 3 Regulations” is at: https://bit.ly/3m3t2OZ
NLIHC’s “Brief Summary and Analysis of the Final Section 3 Regulations” is at: https://bit.ly/31z2gEO
The Federal Register version of the final Section 3 rule is at: https://bit.ly/33e0Vos
An easier-to-read version of the final rule is at: https://bit.ly/30mPLf7