Recent updates on regulatory-related matters (as of January 10, 2020):

Environmental Review Recommendations to HUD
In spring 2019, COSCDA formed a working group to examine ways to improve HUD’s environmental review process.  The group suggested several recommendations to update administrative procedures.  Comments were developed and sent to HUD in June 2019.  COSCDA’s letter is available here.  Issues highlighted include state participation in HEROS, and application of USDA and EPA reviews and categorical exclusions to HUD-funded projects.

COSCDA has since connected with CPD Office of Environment and Energy to further explore key issues.  The working group reconvened before the end of the year to compile additional information.  On a related note, COSCDA will host an environmental review session at the Program Managers Conference in February.  The session will be an opportunity to directly engage with HUD staff on review policies and current issues experienced in program administration.

Proposed Update to Section 3 Rule
On April 4, HUD published a proposed update to the Section 3 Rule aimed at improving economic outcomes of low- and very low-income persons.  HUD makes several recommendations to enhance Sec. 3 requirements including counting hours instead of new hires towards meeting Sec. 3 goals, introducing a new order of priority categories for Sec. 3 hires and businesses, proposing a new subcategory of Sec. 3 worker, and updating standards for compliance.

COSCDA submitted comments regarding the proposed update on May 30.  A working group consisting of COSCDA members contributed input to form the response to HUD.  The Section 3 letter is available here.

HUD is expected to release its final Section 3 Rule in spring 2020.

Below is a summary of the proposed update:
Under the 1994 interim rule, Public Housing Authorities (PHAs) and jurisdictions must ensure 30% of new hires be Sec. 3 residents.  To better meet the stated goal of employing Sec. 3 residents, HUD has revised the goal from new hires to total labor hours.  In stating its rationale for the change, HUD recognizes labor hours as a better representation of employment and continued support to employment opportunities for Sec. 3 residents than new hires.  Currently, new hires can be added in temporary positions only to be laid off later.  New hires can also be counted on a part-time basis which does not provide reliable employment opportunities as do jobs with hours closer to full-time status.

HUD also introduces a new order of priorities for Sec. 3 hires and businesses.  PHAs would prioritize the hiring of Sec. 3 workers in the following order:

  1. Residents of the project(s) funded with public housing money
  2. Residents of a PHA’s other public housing projects, or residents assisted with Section 8 project-based rental assistance or vouchers
  3. YouthBuild participants
  4. People in the metro area with incomes less than 80% of the area median income (AMI)

The proposed update by HUD also adds that jurisdictions “where feasible” should provide employment opportunities to Sec. 3 workers who live in a project’s “service area” and YouthBuild participants.

Additionally, a Sec. 3 worker is defined under the rule change through one of the following standards: a) worker’s income is less than the income limit set by HUD for the programs prompting Sec. 3, b) worker lives in a qualified census tract (census tract with a poverty rate of at least 25% or at least 50% of households having incomes less than 60% of AMI), or c) worker is employed by a Sec. 3 business.  The proposed update also creates the Targeted Sec. 3 Worker, a subcategory of Sec. 3 Worker.  For CDBG, HOME, and related programs, a Targeted Sec. 3 Worker is considered an employee of a Sec. 3 business or a person with an income less than 80% AMI living in service area or neighborhood of the HUD-funded project.  A YouthBuild participant also qualifies as a Targeted Sec. 3 Worker here as well.

Under the proposed rule updates, HUD would consider PHAs and jurisdictions meeting the requirements of the Sec. 3 statute if aforementioned employee priorities are met as well as following the Sec. 3 benchmarks.  The introduced benchmarks are 25% of the total number of hours worked by Sec. 3 workers, divided by the total number of hours worked by all employees; and 5% of the total number of hours worked by all Targeted Sec. 3 workers, divided by the total number of hours worked by all employees.

HUD and Opportunity Zones
On April 17, HUD issued a notice seeking input on the agency’s involvement in supporting Opportunity Zones.  The request for comments follows HUD Secretary Ben Carson’s appointment to chair the White House Opportunity and Revitalization Council.  The council will examine how current federal policies and regulations, or reforms therein, can facilitate further investments into distressed and underperforming areas.  Select areas have been designated as “Opportunity Zones” using a process where states identified eligible census tracts to receive investments through special tax-incentive channels known as Opportunity Funds.

Following this notice, David Woll – Acting Assistant Secretary for Community Planning and Development – released a letter asking for feedback on HUD’s potential actions and tools to facilitate development in underperforming areas.  The letter is available here.  Specifically, CPD seeks comments on the following: 1) how HUD can currently reduce administrative costs and burdens that discourage public and private investment in distressed areas, and 2) how HUD can utilize tools to make stakeholders better aware of federal programs and incentivizes available to projects in distressed areas.

COSCDA replied to the notice for comments on May 17.  As outlined in the letter here, COSCDA recommends alignment of environmental reviews across HUD programs and recognition of environmental reviews from other federal agencies.  To enhance federal assistance, COSCDA suggests utilizing existing resources across federal government, advancing peer-to-peer training, and upgrading technology including data collection systems.