Lifting the Fog on Section 3

When it's more appealing to circumvent the law requiring that jobs in public housing construction go to qualified residents than to follow it, something needs to change.

Photo © Tyrone Turner

Alfred Marshall lives directly across the street from a section of his World War II–era brick New Orleans housing complex, B.W. Cooper, that is undergoing redevelopment.

Looking out his window in the morning, he could watch every part of the construction yard. He saw every new worker hired. No one looked familiar.

“Nobody from our community was working there,” said Marshall, who had some carpentry experience. He asked foreman on the site, who sent him to a nearby “hiring trailer,” but it was never open. The situation seemed all wrong, he said.

Two years later, Marshall is a near-expert on Section 3, a law that requires contractors funded by the U.S. Department of Housing and Urban Development to give preference to qualified residents when making new hires. And the Housing Authority of New Orleans (HANO) is one of a handful of housing agencies now prioritizing Section 3 requirements as a way to combat the extreme poverty and sporadic employment faced by many public-housing residents.

Section 3 was first created 45 years ago, as part of the Civil Rights Act of 1968, and has been strengthened since then. But it’s little known and scarcely enforced.

“I didn’t know nothing about the law,” Marshall said. “I was just trying to get local people on the yard.”

Other housing authorities are also motivated by opportunity more than the law. Trinh Nguyen, chief of staff at the Boston Housing Authority (BHA), remembers studying Section 3 policy and believing that it “could be a goldmine for our residents.”

Section 3 in Action

Section 3 has unique potential for low-income communities, because it creates employer demand for workers living in poverty, according to a 2009 analysis by Deborah Austin, head of the Community Development Project at the Lawyer’s Committee for Civil Rights Under Law in Washington, D.C. “Unlike other federal set-aside programs that focus on contracting opportunities for certain classes of small and minority-owned business entities, Section 3 operates in large part to create job opportunities at the individual level,” she says.

Three years ago, Nguyen designed an institutional framework for Section 3 timed to the launch of Building Pathways, a pre-apprenticeship program established in advance of a $63 million green retrofit on BHA properties. Her colleagues in Philadelphia and New Orleans are also making Section 3 jobs more accessible through pre-apprenticeship training programs.

Each agency has its own approach to the apprenticeships, trainings, and Section 3 job slots. And at this point, it’s difficult to draw conclusions about pre-apprenticeship programs across agencies, since they vary so widely: While participants are just getting underway in New Orleans, they have been successfully tracked for two years and carefully bird-dogged in Boston, whose program graduates complete intensive, seven-week classroom and hands-on trainings and are given free admission into apprenticeships and first-year apprenticeship job placement as carpenters, plumbers, electricians, and other trades through the Boston Building and Construction Trades Council. They now have about 600 people show up for informational meetings, even though the semi-yearly training cycles only include 15 trainees.

In Philadelphia, on the other hand, administrators scrapped their 14-year-old training program because it was producing few sustainable jobs: only 100 out of 828 program graduates were working, they found. So this summer, they canceled the long-running program and started a new self-administered program that focuses not only on Section 3 but on internal hiring, with the ultimate goal that residents make up 25 percent of the total agency workforce.

But despite their varied perspectives on job training and apprenticeships, agency administrators spoke in a chorus on one point: No Section 3 jobs program will work without stringent monitoring.

“It’s a lot of commitment to do contract compliance. But the agency has to make that commitment. Otherwise, people think Section 3 is a joke,” said Nguyen. To check certified payroll records regularly, BHA purchased a software program last year to assess compliance.

“We have been very stringent,” Nguyen said. “We know we have the upper hand: they’re not going to walk away from money.

Meaningful reporting is a top priority, HANO administrative receiver David Gilmore concurred. “You have to have a reporting system in which everyone is kept honest,” he said. If agencies don’t set tight parameters about reporting, they can get into what Gilmore calls “a slippery slope game.”

Disobeying the Spirit of the Law

As it turns out, slippery slopes are common within the Section 3 program, because the federal requirements leave much to interpretation. For instance, Section 3 law requires that low-income workers total 30 percent of new hires, but it doesn’t specify how many hours each new hire must work. So some contractors satisfy the requirements by “churning”—hiring a series of new workers for one day each, typically in a laborer position, which pays the lowest wages on most construction sites.

Also, the law requires only that contractors provide low-income residents with job training and employment “to the greatest extent feasible.” So, if contractors’ numbers are low, all they have to do is throw up their hands and say that they couldn’t find qualified low-income workers for open positions. Advocacy groups, including the National Housing Law Project and its Housing Justice Network, have long tried to change this part of the law. In New Orleans, at least, HANO’s bid documents no longer contain that phrase. “It is an escape hatch,” Gilmore said. “People will always find reasons that they couldn’t.”

Last year, to assist contractors having difficulty matching Section 3 job openings with low-income residents with the right skill sets, HUD’s Office of Fair Housing and Equal Opportunity launched a pilot Section 3 Business Registry Program in New Orleans, Miami, Detroit, Los Angeles, and Washington, D.C. to make connections between contractors and businesses who hire low-income residents. HUD spokeswoman Shantae Goodloe said that the department may expand the program nationally.

In Philadelphia, public-housing residents can go to 13 computer labs to upload resumes and look for jobs through the agency’s Resident Job Bank. If contractors can’t locate qualified PHA residents despite Section 3 obligations, they must contribute up to 3 percent of their contracts to a scholarship fund, run by a nonprofit called PhillySeeds. A few months ago, PhillySeeds, which is part of the Philadelphia Housing Authority, awarded $160,000 in scholarships from that pot of money, said the PHA’s CEO, Kelvin Jeremiah.

HANO also allows contractors to opt out of their Section 3 obligations by paying a portion of their contract back to HANO.

In addition to the law’s loopholes, Section 3 monitoring had been notoriously slack for years. Prior to 2006, HUD received only 4 percent of required Section 3 reports from state and local governments and housing authorities, according to Congressional testimony by John Trasviña, who served as HUD’s assistant secretary for its Office of Fair Housing and Equal Opportunity from 2009 until he stepped down in 2013. In 2009, Trasviña had co-signed a letter that ordered HUD grantees to file reports or risk losing their grants.

Two years later, almost 25 percent of agencies had filed reports, Trasviña testified to Congress. “However, in more than 80 percent of the reports submitted, the recipient failed to meet the minimum goals and did not include valid explanations for this failure,” he noted.

One of the long-term weaknesses of Section 3 comes less from the program’s structure than from the temporary nature of construction: no housing authority these days has a never-ending stable of construction jobs. And once the construction ends, many residents are back where they started, said Erik Solivan, Philadelphia Housing Authority’s executive vice president for community operations and resident development. “We’d see a temporary spike in Section 3 hiring,” he said, but then the apprentices were jobless. “They went with their union cards back to the union hall, where hiring is based on seniority and they were toward the bottom of the seniority list.”

But Gilmore, who has headed up housing authorities in several cities, sees union apprenticeships as providing “a job sponsor for the rest of your life” and is hopeful that the 30 youth currently participating in HANO’s pre-apprenticeship program for $8 an hour will find sustainable work through the two-year “Career Academy,” a full-service training, placement, and support program hub for young adults ages 18 to 30, implemented by Urban Strategies. HANO’s newest redevelopment, the Iberville complex, not far from the French Quarter in New Orleans, could provide many of the jobs. Without that extra support, Gilmore sees the potential for same pitfalls that Solivan described.

“While projects are active, residents receive some good training and some money,” Gilmore said. “But they don’t gain enough experience or training to keep jobs. So people end up going right back to where they were before, because they can’t get jobs.”

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