Federal Funding Shake-Up: How HUD’s New Policies Could Impact Homelessness Programs

A significant policy shift by the United States Department of Housing and Urban Development (HUD) is poised to reshape the landscape of homelessness services across the nation, particularly in Ohio. Advocacy groups are raising alarms, warning that abrupt changes in federal funding priorities could leave thousands of vulnerable individuals without stable shelter, potentially reversing years of progress in combating homelessness.

A Looming Crisis: Ohioans at Risk

The core of the controversy stems from HUD’s decision to substantially redirect funding away from long-standing permanent housing programs for unsheltered people. Instead, the department is prioritizing transitional housing initiatives. For Ohio, this pivot could be catastrophic, with estimates suggesting a potential loss of over $105 million in funding for permanent supportive housing. The Dayton region alone could see more than $8 million in cuts, jeopardizing over 1,000 permanent housing beds.

According to an analysis by the National Alliance to End Homelessness, local agencies, which previously competed for a small fraction of available funds, will now face a much larger and more intense competition for a diminished pool of permanent housing resources. This increased competition, coupled with reduced overall allocations for permanent solutions, creates a precarious future for many.

Understanding HUD’s Strategic Re-evaluation

Officials from the United States Department of Housing and Urban Development (HUD) defend these changes as a necessary move to enhance accountability and efficacy within programs that they claim have, in some instances, been ineffective at truly ending homelessness. Their new strategy emphasizes promoting self-sufficiency among vulnerable Americans, a goal they believe is better served by transitional housing and robust supportive services.

HUD Secretary Scott Turner, in announcing the fiscal year 2025 Continuum of Care program’s Notice of Funding Opportunity, stated that the department would allocate significantly more funding to transitional housing projects. He argued these are more effective in the long-term for fostering self-sufficiency and recovery. A statement from HUD further elaborated, claiming that historically, nine out of ten dollars from the program went to “housing first” initiatives that, in effect, became “endless government handouts” without addressing the root causes of homelessness, such as substance use and mental illness. Ending government dependency, they assert, is a critical objective of these reforms. The Trump administration has hailed these as the most significant policy reforms in the program’s history, affecting approximately $3.9 billion in distributed funds.

The Continuum of Care Program Under Scrutiny

The Continuum of Care (CoC) program is the single largest federal initiative providing funding and resources to communities nationwide to combat homelessness. Jessica Jenkins, Director of Montgomery County Human Services Planning & Development, underscores the CoC program’s vital role, noting that its FY2024 funding competition provided over $16 million and other supports for 26 projects across Montgomery County, overseen by nine nonprofits and government organizations. She warns that HUD’s substantial shift in funding criteria could directly impact more than half of current housing projects supported by CoC dollars.

A key change in the new Notice of Funding Opportunity is that local agencies will now have to compete nationally and locally for 70% of available funding. This is a dramatic increase from the approximately 10% they competed for in the last fiscal year. Furthermore, the federal notice restricts permanent housing beds to only about 30% of available project funding. The majority of federal funding is now slated for repurposing to support shorter-term transitional housing, often with conditional work or treatment requirements, a shift highlighted by the National Association of Counties.

Voices from the Front Lines: Concerns and Consequences

The profound implications of these changes are not lost on those working directly with the homeless population. Jessica Jenkins expressed deep concern, stating that this significant shift “jeopardizes millions of dollars for funding and projects.” She added, “The changes could mean that formerly homeless households who have now found housing stability will be at risk again. The changes also endanger projects that help currently homeless households resolve their housing crisis through housing and supportive services.”

Amy Riegel, Executive Director of the Coalition on Homelessness and Housing in Ohio, echoed these fears, emphasizing that the programs targeted by HUD are precisely those that integrate unsheltered individuals into homes while providing crucial treatment support for mental health and addiction issues. “Defunding these programs will force many of them to shut down, leaving their residents with few options but to return to the streets,” Riegel warned. Ohio, with about 69% of its permanent housing beds funded by the Continuum of Care program, is particularly vulnerable, a reliance surpassed only by Louisiana (75%). The Dayton region specifically sees 80% of its permanent supportive housing beds and 62% of its rapid recovery beds funded through CoC.

Defining Housing Solutions: Permanent vs. Transitional

To fully grasp the impact of HUD’s re-prioritization, it’s essential to understand the different types of housing solutions:

• Permanent Supportive Housing: This is long-term, community-based housing that includes comprehensive supportive services for homeless individuals, particularly those with disabilities or chronic conditions. It’s designed for stability.
• Rapid Rehousing: Provides short-term, tenant-based rental assistance and services, aiming to quickly move people from homelessness into permanent housing.
• Transitional Housing: Serves as an intermediate step towards permanent housing. It typically has time limits and often includes mandatory supportive services, with the goal of preparing individuals for independent living.

HUD’s current policy direction heavily favors the latter, moving away from the long-term stability offered by permanent supportive housing.

Legal and Legislative Pushback

The controversial nature of HUD’s policy shift has already ignited legal challenges. In a significant move, 19 attorneys general and two governors from across the nation have sued the Trump administration, alleging that these new policies are illegal and overstep Congress’s constitutional authority to control spending. Separately, U.S. Rep. Mike Turner (R-Dayton) and 21 other lawmakers sent a letter to HUD in late October, urging the agency to renew the Continuum of Care grants for an additional year to prevent immediate service disruptions. While acknowledging support for modernizing the program and improving performance metrics, the lawmakers emphasized that substantial changes to competitive processes and funding priorities must be implemented cautiously to avoid harming vital programs serving vulnerable community members.

As the debate continues, the future of federal support for homelessness initiatives, and the lives of thousands relying on them, hangs in the balance. The full scope of the United States Department of Housing and Urban Development’s new direction and its ultimate impact will undoubtedly unfold in the coming months.