Above photo: Activists participate in a protest outside U.S. Department of Housing and Urban Development on March 3, 2025, in Washington, D.C. Alex Wong / Getty Images.
‘It’s Been Absolute Chaos.’
Courts blocked HUD’s attempted overhaul of the Continuum of Care Program, the federal government’s biggest pool of funds for housing homeless people. But providers are still unsure when — or how — this funding will arrive.
The federal government’s largest pool of funds for housing homeless people continues to face uncertainty a year into the second Trump administration.
On Nov. 13, 2025, the U.S. Department of Housing and Urban Development (HUD) released a Notice of Funding Opportunity (NOFO) for its Continuum of Care (CoC) Program, allocating $3.9 billion of competitive federal grants to shelters, permanent supportive housing and other responses to homelessness.
At the same time, HUD said it would not renew two-year awards that were approved by Congress in 2024. The grant funds all have different start dates, but renewals were set to start in January, with funds disbursed throughout 2026.
The notice HUD issued instead, if left in place, would have forced shelters to discriminate against transgender people, encouraged criminalization and redirected funding from permanent supportive housing to temporary shelter systems.
HUD said in a press release that these changes would represent “the most significant policy reforms and changes in the program’s history.” The National Low Income Housing Coalition estimated that it would put 170,000 people at risk of homelessness.
In response, 20 states sued the government, alleging that it was illegal to alter the program so drastically without congressional authorization and that the last-minute changes would cause immediate harm by delaying funding.
HUD rescinded the funding notice, and a judge ruled that it would have to renew all current funding for another year. But HUD has not yet submitted a new funding notice, despite indicating that it would do so in December.
Raisa Rubin-Stankiewicz, a policy associate at New Jersey Coalition to End Homelessness, tells Next City/Shelterforce that for providers, “it’s been absolute chaos.” She says that some of the providers the coalition works with focus exclusively on permanent supportive housing and rely almost entirely on federal funding.
“The kind of cuts that you’re talking about to permanent supportive housing, there isn’t something there to fill that gap,” Rubin-Stankiewicz says. “And the people who are in permanent supportive housing, oftentimes those are the hardest people to rehouse.”
Inside HUD’s Notice of Funding Opportunity
HUD’s 2025 Notice of Funding Opportunity — since rescinded and shut down by a judge — was in the amount of $3.9 billion, significantly higher than the amount available last year. But this number was deceptive, according to Deborah Thrope, deputy director of the National Housing Law Project: HUD pulled some of its other funds for permanent housing, and instead pooled them into Continuum of Care funds that are now tailored to deprioritize permanent housing.
The new notice had deadlines in January and February, with funds to begin going out in March and April. Many providers said the rapid timeline would be implausible, especially since programs were being asked to drastically change their offerings within months.
“This administration basically waited until the last minute, changed it, and now they’re saying we’re going to get funding up and running in March, but that’s wholly unrealistic,” Thrope tells Next City/Shelterforce.
According to a summary from the National Alliance to End Homelessness, the $3.9 billion funding notice included $100 million originally designated for developing permanent supportive housing and $294 million of Section 231 funds, which provide mortgage loans for building and rehabilitating housing for seniors and/or people with disabilities
Entities applying for federal funds under the now-canceled notice could apportion only 30% of those funds toward permanent supportive housing. Any amount exceeding that 30% had to go toward transitional solutions, such as shelter. In its notice, HUD described this as restoring balance to its funding, stating that emergency shelter beds, transitional housing beds, and permanent supportive housing beds were funded about equally between 2007 and 2009.
HUD also said it could reject projects that have “racial preferences,” use “harm reduction,” or use a definition of sex “other than binary.”
Most concerning to many of the entities applying for grants is that HUD moved the majority of its grant funds to a more competitive classification, giving the agency more discretion over who receives funding. In the past, about 90% of funds, while technically competitive, were renewed as long as projects met all of HUD’s requirements.
To Thrope and others, the added discretion meant that the Trump administration could dangle funding to strong-arm counties and agencies into adopting its other agenda items, and potentially use it to punish jurisdictions with which the administration is in conflict.
“The administration can pick and choose winners and losers. It’s very alarming, because we know there are certain jurisdictions that are being a bit bullied by the administration right now,” Thrope says. “There’s a huge fear that some of the funds would be taken away from Continuum of Care [programs] in jurisdictions that allegedly don’t comply with the ideology of this administration.”
At a webinar held by Monarch Housing Associates for New Jersey housing providers on Dec. 17, 2025, Melissa Bellamy, who heads Middlesex County’s Division of Housing, Community Development, and Social Services, expressed alarm at the new requirements.
Bellamy said most providers already had the option to use transitional solutions like shelters, but they chose permanent housing instead because it’s more successful. Those who shifted to transitional services, she said, shifted back when they didn’t work.
Bellamy also said that the notice created requirements that agencies had no control over, like immigration enforcement and criminalization. In many cases, she added, new rules banning the language of diversity, equity and inclusion contradicted what was requested by Biden’s HUD only a year earlier.
“It’s disheartening to see what we’ve built up blown to pieces,” Bellamy said on the webinar. “You’ve taken away one of the biggest tools helping people exit the system.” She said providers were frantically seeking bridge funding, assuming that HUD funding would be delayed.
In a statement sent to legislators and shared with Next City/Shelterforce, New Jersey nonprofit housing provider HABcore estimated that, “based on historical timelines,” funding would likely not arrive before June 2026, months after the nonprofit’s current funding runs out on Jan. 31 of this year.
In his letter, Steve Heisman, HABcore’s executive director, estimated that had HUD’s November notice remained in place, his organization would have ended up with 9% of its previous funding levels.
Lawsuits and arguments
At the end of 2025, two lawsuits were filed challenging HUD’s 2025 NOFO. A lawsuit was filed in November by the attorneys general and governors of 20 states, including Arizona, California, New Jersey, New York and Vermont. According to the lawsuit, changes in HUD’s November notice of funding “threaten to cancel thousands of existing projects, require providers to fundamentally reshape their programs on an impossible timeline, and essentially guarantee that tens of thousands of formerly homeless individuals and families will be evicted back into homelessness.”
It alleges that HUD’s changes are “unlawful several times over” and that any substantial changes need to be approved by Congress. It also calls the move away from the Housing First model, or barrier-free permanent supportive housing, “arbitrary and capricious,” alleging, “Defendants have made no effort whatsoever to explain their utter abandonment of Housing First policies and sudden cap on permanent housing.”
The 20-state lawsuit calls on the judge to halt the new one-year notice and reinstate the two-year notice released by the Biden administration. It points out that the McKinney-Vento Act of 1987, which established HUD’s homeless funding, and the 2009 HEARTH Act, which amended it, specifically singles out permanent supportive housing as an evidence-based solution that should be incentivized by the CoC Program.
“This directly reflects a Housing First approach that is centered on permanent housing, including permanent supportive housing, without preconditions regarding employment, sobriety, or the like,” the lawsuit states.
A second lawsuit was filed on Dec. 1, 2025, by organizations including the National Alliance to End Homelessness and the National Low Income Housing Coalition; the cities of Boston, Tucson and San Francisco; and the county of Santa Clara. The suit alleged that, “The late-stage decision to rescind and replace the original two-year NOFO is unlawful, even without considering the unlawful terms of the new NOFO.”
According to the lawsuit, HUD missed a statutory deadline in June 2025 for announcing a new funding competition. The lawsuit argues that HUD’s funding changes would slash funding for permanent supportive housing by two-thirds and that “shifts funding to disruptive and punitive models that are contrary to well-established and proven strategies that reduce homelessness.”
In response to both lawsuits, which were consolidated into one trial in the Rhode Island District Court, HUD rescinded the one-year NOFO on the day of the trial. Lawyers argued that it was a clear attempt to cancel the proceedings.
On Dec. 10, 2025, Congresswoman Maxine Waters released a statement about the notice’s cancellation, saying, “While I am pleased that the Trump Administration was forced to back down this time, unfortunately, many local programs may now face an even longer gap in funding, which also puts lives at risk. These communities cannot wait. HUD must move quickly to renew existing grants under last year’s rules, so families do not lose the housing support they depend on.”
What’s next for homelessness funding
Rhode Island District Court Judge Mary McElroy was clear that the government’s rescission letter sent prior to the hearing would not cancel the ongoing trial.
On Dec. 19, 2025, Judge McElroy was skeptical of the arguments presented by HUD’s lawyer. When asked whether there was anything preventing HUD from simply renewing the two-year, Biden-era notice that it was no longer honoring, HUD attorney John Bailey replied, “No, Your Honor.”
Judge McElroy took issue with HUD’s rescission of the Nov. 14, 2025, notice of funding hours before it was set to defend it in court. HUD’s attorney said during the hearing that the government was “working diligently” to file a new NOFO and that it would be filed before the close of business on Dec. 19, 2025. As of Jan. 7, 2026, it has not done so.
HUD made no attempt to defend the provisions of the rescinded funding notice or its restriction of permanent supportive housing funds, instead arguing broadly that it did not have to consult Congress before making large changes to the program. Judge McElroy was not persuaded.
Zane Muller, an attorney representing the states suing HUD, said that programs were already turning away homeless people because of uncertainty in funding.
Judge McElroy was clear that the drastic changes the government attempted to implement under the last notice were illegal, ruling that HUD had to honor the terms of the 2024 NOFO and reinstate full funding for the next year. She gave HUD the opportunity to issue a new, lawful NOFO.
But many providers are now in a holding pattern, waiting for yet another new funding notice from the government.
For many providers, the only way to fund their programs without significant delay is to renew the grants for a second year using funds that were approved by Congress during the Biden administration.
“That would just be going off of what Congress had already said,” Rubin-Stankiewicz tells Next City/Shelterforce. “You have a two-year funding cycle for the NOFO. You can just renew the expiring grants.”
