In early 2022, we outlined the requirements for businesses seeking and maintaining HUBZone (Historically Underutilized Business Zone) certification. Since then, the Small Business Administration (SBA) has introduced a number of key regulatory changes and policy updates that materially affect HUBZone participants. From revised maps to clarified compliance standards, these changes are reshaping how small businesses engage with the HUBZone program.
This article summarizes the most important updates since our prior articles in February and March of 2022, including changes that took effect as recently as January 2025. If you are a small business contractor operating in or near a HUBZone—or if you’re considering certification—now is the time to revisit your eligibility and compliance strategy.
Updated HUBZone Map: Check Your Location
On July 1, 2023, SBA released a major update to the official HUBZone map, incorporating new data from the 2020 Census. This update altered the eligibility of thousands of census tracts across the country. In the D.C. and Virginia region, that meant: Some previously qualifying D.C. census tracts, particularly in Wards 7 and 8, largely remained on the list, while others were redesignated with a limited grace period. Virginia saw expansion through the “Governor’s Designated Covered Areas” program, including newly added zones in Campbell County (such as Altavista).
If your firm’s principal office or employees rely on a HUBZone designation that existed before July 2023, verify those addresses again using SBA’s updated map tool. Redesignated areas remain valid through mid-2026.
New 90-Day Residency Requirement
Previously, employees had to live in a HUBZone for six months to count toward the critical 35% residency threshold. That requirement has been shortened to 90 days. This change provides greater flexibility in workforce planning and allows businesses to more quickly count newly hired HUBZone residents toward their eligibility.
Legacy Employees: A New Buffer for Staff Retention
SBA now allows HUBZone-certified businesses to retain credit for up to four “legacy employees”—individuals who lived in a HUBZone at the time of hire or initial certification, but who have since moved. At least one other employee must currently reside in a HUBZone for the legacy employees to be counted. This is a significant improvement for employers in high-mobility markets like Northern Virginia and D.C., where retaining experienced staff can be challenging.
Recertification is Now Every Three Years
The SBA has changed its recertification schedule from once a year to once every three years, reducing the administrative burden on compliant firms. However, eligibility must still be maintained at all times, and firms must update SBA within 30 days of any material change (e.g., mergers, acquisitions, or significant staffing changes).
Expanded Enforcement and Compliance Audits
The SBA is taking a stricter approach to compliance:
- Audits may now be conducted without advance notice. Firms must document that HUBZone employees are performing actual work—not just listed on payroll.
- Part-time employees must work at least 10 hours per week (or 40 hours per month) to be counted.
- If a firm falls below 35% HUBZone residency during contract performance, SBA now uses a 12-month grace period tied to each HUBZone contract award. However, if residency falls below 20%, the firm is expected to self-report and may face decertification or even debarment.
HUBZone Eligibility Must Be Current at Time of Offer
Perhaps the most impactful policy shift: to be eligible for a HUBZone contract, a firm must now meet all HUBZone requirements at the time it submits its offer—not just at the last recertification. This means firms must maintain continuous compliance with HUBZone standards, especially the 35% residency and principal office requirements, or risk losing out on set-aside opportunities.
Final Thoughts: Be Proactive, Not Reactive
The 2025 HUBZone updates provide greater clarity and flexibility in some areas—such as allowing legacy employees and lengthening recertification intervals—while simultaneously tightening oversight, audits, and eligibility timing.
As SBA’s enforcement posture strengthens, firms should treat HUBZone eligibility as an active compliance obligation, not a one-time certification milestone.
If you need assistance or have questions about whether your business continues to meet HUBZone criteria—or if you’re planning to pursue HUBZone certification in 2025, please contact Harrison Clinton at (703) 526-5587 or hclinton@beankinney.com.
This article is for informational purposes only and does not contain or convey legal advice. Consult a lawyer. Any views or opinions expressed herein are those of the authors and are not necessarily the views of any client.