More than half of the 2026 funding for the program will be shifted from permanent housing to transitional housing with work and service requirements.
The Department of Housing and Urban Development released policy changes Thursday night that will significantly cut funding for a permanent housing program for people experiencing homelessness.
More than half of the 2026 funding for HUD’s Continuum of Care program, which partners with local organizations to connect people experiencing homelessness to housing and resources, will be cut for permanent housing assistance and moved to transitional housing assistance with some work or service requirements. The policy change was first reported by POLITICO.
The funding cuts could put 170,000 people at risk of experiencing homelessness, according to internal HUD documentation previously obtained by POLITICO.
HUD has framed the change as a redirection of funding and “long overdue reform” to prioritize wrap-around services, such as mental health and substance abuse treatment, paired with temporary housing for up to two years. The policy change would move away from the current prioritization of permanent housing, which places formerly homeless individuals in community-based housing without a designated length of stay and is the vast majority of housing provided under the previous funding.
HUD said in a press release Thursday that the program change “restores accountability to homelessness programs and promotes self-sufficiency among vulnerable Americans. It redirects the majority of funding to transitional housing and supportive services, ending the status quo that perpetuated homelessness through a self-sustaining slush fund.”
The application for the next grant cycle, which is expected to open in the coming weeks, will close on Jan. 14, two weeks before Congress will be required to determine funding levels for HUD, including the CoC program, according to the notice of funding opportunity.
Project grants will have already expired before the award cycle closes and additional funding is granted. This means that some permanent housing will be left with no funding and tenants could be displaced during the coldest months of the year, said a HUD employee granted anonymity to discuss sensitive matters. The anticipated award day is May 1, which leaves projects without funding for much of the first half of 2026.
Approximately one-third of all current program awards expire between January and June 2026, meaning those projects will run out of funds before the next awards are granted, according to the National Alliance to End Homelessness.
There are concerns that the nine weeks the notice of funding opportunity will be open for is barely enough time for projects to apply for funding with the policy changes, according to the HUD employee.
“It’s terrible policy and really irresponsible administration of the program,” said Ann Oliva, CEO of the National Alliance to End Homelessness who formerly worked for HUD for more than a decade. “Putting out a grant opportunity with a tight turnaround and massive changes, knowing that you can’t get awards out until at least mid year just is is deeply irresponsible. They are setting communities up for failure.”
Roughly 7,000 awards are expected to be issued totaling about $3.9 billion, according to the notice of funding opportunity. The amount represents a slight increase from the previous year’s funding and the guidance recommends that organizations prioritize projects that provide “treatment and services people need to recover and regain self-sufficiency.” The additional funding also reflects an increase in fair market rent prices established by HUD. There will be a 30 percent funding cap on all permanent housing projects, so they will now receive a maximum of about $1.2 billion of the program’s total funding.
About 87 percent of all CoC program funds ending in 2026 under the previous tranche of funding were slated to support permanent housing in some capacity, according to internal HUD documents.
The policy change is part of HUD’s contribution to President Donald Trump’s executive order “Ending Crime and Disorder on America’s Streets” which requires HUD to “increase accountability” in grants awarded for assistance and transitional living programs. The goal is to end previous “‘housing first’ policies that deprioritize accountability and fail to promote treatment, recovery, and self-sufficiency.” HUD is partnering with the White House Faith Office and the Department of Health and Human Services on the executive order requirements.
Additionally, 42 members of the Senate Democratic caucus sent a letter to HUD Secretary Scott Turner on Thursday urging the agency to “immediately reconsider” the policy changes to the CoC program, requesting he “expeditiously” carry out the previously planned and Congressionally authorized two-year notice of funding opportunity.
“This appears to be in contravention of the McKinney-Vento Homeless Assistance Act, undermines local decision-making authority, and ignores decades of research that has proven that permanent supportive housing and rapid rehousing are less costly and more likely to be successful in providing long-term stability than other strategies, particularly for chronically homeless people and families,” said the letter, obtained by POLITICO, which was led by Sens. Patty Murray (D-Wash.), Elizabeth Warren (D-Mass.), Kirsten Gillibrand (D-N.Y.) and Tina Smith (D-Minn.).
In response to the letter a HUD spokesperson said: “Senate Democrats are doing the bidding of the homeless industrial complex. Their letter makes it clear they are in favor of warehousing people with no treatment for root causes of homelessness – including drug addiction and mental illness.”
More than 20 House Republicans, led by Long Island Reps. Andrew Garbarino (R-N.Y.) and Nick LaLota (R-N.Y.), sent a letter to Turner in October, pushing the Trump administration to renew grants for the program, warning that the substantive policy changes “should be implemented carefully to avoid destabilizing programs that serve individuals with severe disabilities related to mental illness, chronic health conditions, or substance use disorders, as well as seniors with disabilities.”