Does Not Impact Public Housing Funding
In a notice published in the Federal Register on February 13, HUD announced updates to the project dollar thresholds that trigger applicability of Section 3. The 2020 Section 3 Final Rule requires HUD to update the thresholds “not less than once every 5 years based on a national construction cost inflation factor through Federal Register notice not subject to public comment.” Importantly, public housing funding does not have a dollar threshold, so any projects utilizing Section 9 funding (public housing operating and capital funds) continue to be subject to Section 3.
CPD Threshold Increased to $300,000, Lead Hazard Control and Healthy Homes Increased to $150,000.
The notice details the methodology HUD used to establish the construction cost inflation factor. Because the original thresholds were based on Bureau of Labor Statistics (BLS) data, HUD continued to use BLS as its primary data source and looked at the change between 2017 and 2023. The overall inflation factor for that five-year period was just under 50 percent. To keep the thresholds at even numbers, HUD rounded up. The existing threshold of $200,000 for projects using housing and community development funding, such as HOME, CDBG, and ESG, will increase to $300,000. The threshold for projects utilizing HUD Lead Hazard and Health Homes funding is currently $100,000 and will increase to $150,000.
These changes will be effective for new projects initiated after March 15, 2026. For information on other recent Section 3 updates, see “Section 3 Report Submission Requirements Reinstated” in the December 17, 2025, Advocate. PHADA will continue to provide updates on Section 3 via Breaking News, the Advocate, and social media.