America’s homelessness policy is being rewritten in real time
HUD is shifting federal homelessness funding away from a Housing First default and toward transitional housing, treatment, recovery and self-sufficiency. A court fight, a newly closed grant deadline and an October 13 public-comment cutoff mean the reset is no longer theoretical for local providers.
The federal government is remaking the financial rules underneath America’s homelessness system. For more than a decade, the dominant federal approach has been Housing First: move people into permanent housing without requiring sobriety, treatment participation or proof that they are “housing ready,” then offer services designed to help them stay housed. The Trump administration says that approach became too close to a one-size-fits-all funding rule and did too little to promote recovery, employment and independence.
The Department of Housing and Urban Development is now using its annual Continuum of Care competition to put more weight on transitional housing, supportive services, substance-use treatment, recovery-oriented settings and accountability measures. That is a major change because Continuum of Care grants are a backbone of local homelessness systems, paying for permanent supportive housing, rapid rehousing, shelters, outreach, planning and services through thousands of projects nationwide.
The change is arriving while homelessness remains near historic highs. HUD’s 2025 point-in-time estimate counted 745,652 people experiencing homelessness on a single night, including 266,320 people outside shelters. The total was lower than the 2024 record but still far above levels a decade earlier. The point-in-time count is a snapshot rather than a count of everyone who experiences homelessness over a year, yet it remains the nation’s most visible benchmark for the scale and geography of the crisis.
How Washington moved from a Housing First preference to a broader, more conditional menu
Housing First became central to HUD’s homelessness funding priorities beginning in the early 2010s. The basic logic was that a person sleeping outside or cycling through shelters is in a poor position to stabilize health, manage medication, keep appointments or search for work. Permanent housing would therefore be the platform on which other services could work, rather than a reward for completing treatment first.
The current administration has rejected that ordering as a federal default. President Donald Trump’s July 24, 2025 executive order instructed HUD and other agencies to move away from support for Housing First policies that, in the administration’s view, do not sufficiently promote treatment, recovery, self-sufficiency and public safety. The order also directed agencies to favor jurisdictions that enforce laws against public drug use, camping and squatting and to expand tools such as mental-health and drug courts where legally available.
HUD increasingly prioritizes permanent housing and Housing First principles in the Continuum of Care competition, while transitional-housing capacity declines over time.
A White House executive order calls for ending federal support for Housing First policies that the administration says fail to promote treatment and accountability.
HUD launches a $4.04 billion fiscal 2026 Continuum of Care competition with substantially more room for new transitional-housing and supportive-service projects.
A district court sets the 2026 notice aside on procedural grounds; the First Circuit later stays that ruling while HUD appeals, allowing the competition to continue for now.
HUD publishes a separate Federal Register notice laying out research for additional incentives and opens a public-comment period through October 13.
The 2026 competition puts money behind a different theory of what “success” should mean
HUD’s fiscal 2026 Continuum of Care notice makes more than $4 billion available. The agency says the new structure is intended to increase competition, fund more new projects and restore options that were squeezed out under prior scoring systems. A central feature is roughly $1.3 billion set aside for new projects, with a priority on transitional housing and supportive-services-only programs. The department is also emphasizing treatment, employment, recovery and law-enforcement or first-responder coordination in parts of its broader policy framework.
The administration’s case is straightforward: homelessness rose while federal spending and permanent-housing capacity also rose, so simply expanding the same model cannot be treated as proof of success. In a September Federal Register notice, HUD argues that transitional housing can be particularly useful for some young people, families with children and survivors of domestic violence, and that robust services can address employment barriers, behavioral-health needs and substance-use disorders in ways a housing subsidy by itself cannot.
What the administration wants to reward
More transitional housing, structured recovery options, treatment linkages, case management, job preparation and a wider field of providers competing for grants. HUD says communities need a continuum rather than a federal preference that channels most new investment toward permanent housing.
What providers fear losing
Long-term rental support for people with severe disabilities, chronic illness or repeated homelessness who may never become fully independent within a two-year window. Providers also worry that redesigning projects to chase federal scoring can reduce local flexibility instead of expanding it.
A procedural ruling stopped the new grant rules once. An appeals court let them restart.
The 2026 competition has already been through one legal stop-and-start. On August 7, U.S. District Judge Mary McElroy in Rhode Island set aside the funding notice after concluding that HUD had not followed required notice-and-comment procedures before using research-based incentives to steer a large set-aside toward transitional housing and supportive-service-only projects. The ruling focused on procedure, not a final judicial verdict that Housing First or transitional housing is the better policy.
HUD appealed. On September 16, the U.S. Court of Appeals for the First Circuit granted a stay pending appeal, which allowed HUD to resume the competition while the litigation continues. HUD reopened applications and set a September 30 general deadline. The agency’s current competition page says the notice remains in force, with a special October 14 deadline for the Los Angeles Continuum of Care area because of separate litigation and administrative issues there.
District court vacates the 2026 funding notice as procedurally defective under the Administrative Procedure Act.
First Circuit stays that ruling while HUD appeals, letting the competition proceed in the meantime.
The merits of the broader policy fight remain contested, and future grant conditions can still be shaped by litigation, Congress and later HUD rulemaking.
Housing First has strong evidence on housing stability. Its critics are asking a different set of outcome questions.
The most durable finding in the Housing First literature is that people who receive permanent housing without treatment preconditions are more likely to remain housed than people routed through traditional treatment-first systems. A Community Guide systematic review published in 2020 examined 26 studies from the United States and Canada and concluded that permanent supportive housing using Housing First reduced homelessness and improved housing stability compared with treatment-first or usual-care approaches.
A separate systematic review and meta-analysis of randomized trials found a similar pattern: large gains in housing stability and reductions in emergency-department visits and hospitalizations, but less certain effects on short-term mental health, quality of life and substance use. That distinction is important. Housing First was designed first to end the condition of homelessness, not to guarantee abstinence, employment or rapid recovery from serious illness. Evidence that it keeps people housed does not automatically settle whether every program provides enough clinical care, whether services should always be voluntary, or whether the same intervention is best for every subgroup.
What the research base supports — and where it is thinner
Housing stability improves when permanent housing is offered without requiring a person to complete treatment first.
Short-term mental-health and substance-use outcomes are less consistent across studies; stable housing does not by itself function as clinical treatment.
How much structure, service participation or time limitation should government require when different people have very different disabilities, risks and goals?
Rising homelessness does not by itself prove that Housing First caused the rise
HUD points to a sharp increase in homelessness since 2013 even as Continuum of Care spending and permanent-housing capacity grew. Those trends are real, but a national time series cannot isolate the effect of one program philosophy. Over the same period, many metropolitan areas saw severe housing shortages, rising rents, pandemic-era disruptions, migration shifts, an opioid and fentanyl crisis, and widening gaps between low wages or fixed incomes and market rents. A system can place large numbers of people into housing and still see total homelessness rise if new people become homeless faster than programs can move others out.
The reverse caution also applies to Housing First advocates. Strong evidence that permanent housing improves housing stability should not be stretched into a claim that every supportive-housing program is adequately staffed, clinically effective or safe. HUD’s Federal Register notice cites concerns about overdose deaths inside some supportive-housing settings and highlights research on sober housing, case management and employment support. Those are legitimate implementation questions even if they do not negate the housing-stability evidence.
Providers are redesigning projects before Washington has finished the argument
The biggest immediate effect of the federal shift may be organizational rather than ideological. Local nonprofits, counties and Continuums of Care must decide what to submit for federal funding before courts, Congress and future rulemaking have settled the long-term architecture. That pushes providers to make irreversible real-estate and staffing decisions under rules that are still moving.
Associated Press reporting published in early October found that the uncertainty is already changing plans. In Corbin, Kentucky, a permanent supportive housing project developed over roughly 18 months was abandoned. In Louisville, several nonprofits were considering converting permanent supportive apartments into transitional units to remain competitive for federal money. St. John Center, for example, was weighing a conversion of 120 community apartments while preserving its 80-unit Sheehan Landing complex as permanent supportive housing.
Elsewhere, the pressure looks different. Santa Cruz County, California, is dealing with the wind-down of pandemic-era emergency housing vouchers at the same time long-term supportive-housing funding is less certain. In Denver, leaders at The Delores Project expect fewer openings because current residents may have fewer voucher options to move into ordinary community housing. These are not abstract scoring changes; they affect how quickly a bed or apartment turns over and which person gets the next available slot.
A planned permanent project stops
A long-planned supportive-housing concept that included services and educational access was dropped as the federal funding environment changed.
Permanent units may become temporary
Providers are examining whether some apartments should be converted to transitional housing to fit new federal priorities.
Voucher exits tighten the pipeline
As emergency vouchers wind down, people losing those vouchers are prioritized for scarce housing, reducing openings for people currently on the street.
Fewer move-outs mean fewer move-ins
When residents cannot move on to other subsidized homes, permanent supportive housing becomes less available to new applicants.
The administration is also proposing to replace Continuum of Care itself
The 2026 grant competition changes the rules inside the existing Continuum of Care program. The fiscal 2027 budget proposal goes further. HUD’s congressional justification proposes no new Continuum of Care appropriation and instead asks Congress for $4.024 billion for an expanded Emergency Solutions Grants structure that would send money directly to states and local governments through a formula and prioritize emergency, short-term and medium-term assistance, including transitional housing.
That proposal is not law. Congress writes appropriations, and lawmakers can retain, modify or reject the administration’s requested restructuring. The distinction matters because many permanent supportive housing projects rely on renewals that were built around the expectation of recurring federal rental assistance. Moving from competitive project renewals to a broader state-and-local formula would redistribute both money and decision-making authority.
Amount requested in the administration’s fiscal 2027 budget for an expanded Emergency Solutions Grants model.
A proposal, not a settled future
For fiscal 2026, Continuum of Care still exists and the competition is moving forward under the appellate stay. For fiscal 2027, the administration is asking Congress to change the architecture. Providers therefore face two overlapping uncertainties: how the current competition will be judged and whether the program funding them will look the same next year.
Four checkpoints will show whether this becomes a durable national reset
Public comments close on HUD’s research notice. The final record will matter for future incentives and for the legal defensibility of later funding rules.
The First Circuit still must address the underlying challenge to the 2026 grant notice. A stay lets the program operate temporarily; it is not a final merits decision.
Grant selections will reveal how strongly the new scoring system shifts money toward transitional housing and services, and which existing permanent projects lose ground.
Congress will decide whether to fund Continuum of Care again, replace it with the administration’s expanded Emergency Solutions Grants proposal, or produce a hybrid.
Can the system add treatment without making a home contingent on recovery?
The strongest version of the administration’s argument is that federal homelessness policy should measure more than whether a person has a lease. The strongest version of the Housing First argument is that treatment, employment and stability are harder to achieve while a person is sleeping outside, and that taking housing away when recovery falters can restart the very crisis the program is meant to solve.
Those positions do not have to produce a binary system. Transitional housing may fit a young adult leaving foster care, a family recovering from a short-term shock or a survivor who needs a structured bridge to safety. Permanent supportive housing may remain the realistic destination for someone with a profound disability or years of chronic homelessness. Recovery housing may help a person who actively wants a sober environment. The unresolved question is whether federal scoring will preserve that range or replace one dominant model with another.
The stakes are visible in every local waiting list. A funding rule becomes a building that opens or does not open, an apartment that is permanent or time-limited, a case manager who is hired or cut, and a person who receives an offer this month or keeps waiting outside. That is why the current fight over homelessness policy is not just a debate about ideology in Washington. It is a contest over the practical sequence of housing, care and accountability — and over what the country is willing to promise to people whose lives do not fit neatly into a two-year plan.
Quick answers
Is Housing First the same as giving someone an apartment and nothing else?
No. The model is built around permanent housing plus access to supportive services. The defining feature is that treatment, sobriety or service participation is generally not a precondition for receiving or keeping the housing.
Has the federal government ended permanent supportive housing?
No. Permanent supportive housing remains part of the current system, and fiscal 2026 Continuum of Care funds are still being competed. The policy direction is shifting toward more competition and more transitional and service-focused projects, while the fiscal 2027 budget proposes a larger structural change that Congress has not enacted.
Did a court rule that HUD’s new approach is illegal?
A district court set aside the 2026 grant notice on procedural grounds. The First Circuit later stayed that ruling while HUD appeals, allowing the competition to proceed for now. The broader legal dispute remains active.
Did homelessness fall in 2025?
HUD’s one-night point-in-time estimate fell about 3 percent from the 2024 record to 745,652 people in January 2025. The level remained historically high, and the count does not represent everyone who experienced homelessness during the full year.
Sources and further reading
- U.S. Department of Housing and Urban Development — 2025 Annual Homelessness Assessment Report release
- HUD — Fiscal 2026 Continuum of Care Program Competition
- HUD — June 1, 2026 homelessness assistance overhaul announcement
- The White House — Executive Order 14321, “Ending Crime and Disorder on America’s Streets”
- U.S. Court of Appeals for the First Circuit — September 16, 2026 stay order
- Federal Register — September 11, 2026 HUD research and incentives notice
- HUD — Fiscal 2027 Congressional Justifications
- Associated Press — reporting on local impacts of the federal Housing First shift
- Community Guide systematic review — permanent supportive housing with Housing First
- Journal of Epidemiology & Community Health — systematic review and meta-analysis of Housing First randomized trials
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