‘It’s Devastating’: More Than $100M for Housing Homeless at Risk Under New HUD Policy

The Bay Area could lose more $100 million in federal funding that helps house people exiting homelessness, according to the policy and advocacy organization, All Home. Homeless service providers are wrestling with what the loss could mean for ongoing efforts to get people off the street and keep them housed.

“This policy is short-sighted,” said Vivian Wan, CEO of Abode Services, a nonprofit housing provider in the Bay Area. “It’s not going to drive the economy. It’s not going to be more cost-effective. It is certainly not going to end homelessness.”

New guidelines issued by the U.S. Department of Housing and Urban Development last week earmark 70% of a major federal homelessness funding program for competitive grants, up from 10% in prior years. Of the total funding, only 30% can be used for permanent supportive housing, down from roughly 90% in previous years.

In a statement issued last week, HUD Secretary Scott Turner said the changes were implemented to redirect the majority of the funding from permanent to transitional housing and to prioritize supportive services, such as substance abuse treatment and mental healthcare. The agency said it represented “the most significant policy reforms and changes in the program’s history.”

“We are stopping the Biden-era slush fund that fueled the homelessness crisis, shut out faith-based providers simply because of their values, and incentivized never-ending government dependency,” Turner said.

Homelessness policy analysts, service providers and advocates say the new funding guidelines may be especially problematic for the Bay Area because the competitive grants deprioritize funding for agencies that recognize transgender people, use harm reduction practices, and follow Housing First principles.

Ryan Finnigan, deputy director of research for the Terner Center for Housing Innovation at UC Berkeley, said that puts HUD’s new guidelines in “direct contradiction to many of the things that the state of California requires.”

In 2023, Bay Area agencies received nearly $190 million in funding from the federal government for permanent supportive housing, according to All Home, and the agency estimates about $103 million of that is now at risk.

Some counties have local tax measures to help pay for housing and services for people experiencing homelessness, such as Proposition C in San Francisco and Measure W in Alameda County. But Finnigan said smaller counties that rely more heavily on federal funding will have a harder time making up the expected shortfall.

“The hit is harder to weather for the small counties who don’t have as much [local funding] to fall back on,” Finnigan said. “And for the larger counties, that’s not necessarily so simple to understand what might happen and whether or how they can respond. But, they do at least have other resources to try to shuffle around.”

Susannah Parsons, director of policy and legislation for All Home, said that in the past, HUD typically continued funding for housing that had already been built. But with the new guidelines specifying that only 30% of the funding can go to permanent housing, it’s unclear how providers will make up the shortfall. The Terner Center estimates that about 6,800 people exiting homelessness in the Bay Area’s nine counties live in housing funded by the federal government.

“These are folks who are formerly homeless. Most of that — all of them — are elderly and disabled,” Parsons said, adding that because of the changing guidelines, “We’re anticipating significant disruptions in the system, and local jurisdictions right now are having conversations about where to look for immediate funding support to cover those gaps.”

But Paul Webster, a senior fellow with the conservative think-tank the Cicero Institute, said agencies can maintain their funding if they cease harm reduction practices and adopt the policies outlined by the federal government.

“It’s really up to the providers,” Webster said. “If you look at just the last 15 years of how effective this current approach has been, if I was a provider, I would be thanking HUD for encouraging me to … actually start funding things that work to get people better and get them out of homelessness.”

At last count, there were 187,000 people experiencing homelessness in California. Webster pointed to a 2024 report from the State Auditor that found the state was not doing enough to track outcomes, despite $24 billion allocated for homelessness between 2019 and 2023. He lauded HUD’s new funding guidelines as “desperately needed.”

“This latest funding round is to improve the health and long-term economic dependence for people who are homeless,” Webster said. “And that’s a contrast to the past, whose goal was to increase housing stability. So instead of housing stability, [HUD’s] goal is to improve health and, essentially, self-sufficiency.”

Abode Service’s Wan said she thinks it is unlikely the new funding priorities will prompt her organization to change its approach to addressing homelessness, even though she realizes that puts future funding at risk.

“It’s devastating,” she said. “From an organizational standpoint, we feel strongly that we need to stand behind our values. And it’s scary because that might put us at risk.”

In a statement on Friday, Tara Gallegos, a spokesperson for Gov. Gavin Newsom’s Office, said President Donald Trump was punishing Americans with “failed economic policies” and said the approach would only worsen homelessness.

In 2024, homelessness in California increased 3%, a smaller rise compared to the 18% increase nationwide. And unsheltered homelessness grew less than 1%, compared to a national increase of 7%.

“Trump’s plans will only exacerbate the problems created by his administration’s failures, putting formerly homeless people who have found stable housing back out on the streets,” Gallegos wrote. “California will continue to advance strategies that work to address the NATIONWIDE homelessness crisis, and support our communities in ways that we know are effective.”

Asked whether Newsom would prioritize funding for homeless service providers who find themselves losing federal funding, Gallegos said, “We aren’t able to provide information about any potential internal budget discussions.”

But it remains unclear how the new funding priorities will play out. Finnigan said there are still many unanswered questions about how HUD will rank applications and how well local agencies will be able to shift funding to make up for any shortfall. Applications for funding are not due until Jan. 14, and then it could take several months to actually issue awards.

In the meantime, existing contracts could expire before new awards are granted.

“Amid all of that, you’ve got really hardworking but also really capacity-strapped [local governments] and service providers holding their breath and trying to turn on a dime and figure out how they’re going to adapt to this really shifting landscape,” Finnigan said. “It’s all hard in how much is shifting, but it’s also hard in how much uncertainty there is that they’re trying to weather.”