With homelessness rising, new federal rules could benefit states that take tougher approaches
- States Newsroom
- 8 hours ago
- 6 min read
The Trump administration’s funding priorities have drawn backlash from some states, providers
By Robbie Sequeira
Stateline
As the housing shortage pushes more Americans into homelessness for the first time, the Trump administration wants to focus federal housing aid on mental health treatment and enforcement against street homelessness, rather than on finding people permanent homes as quickly as possible.
The administration’s new plan to tie federal housing aid to work requirements and drug treatment could be a boon to states such as Alabama, Florida and Wyoming that already are pursuing that strategy. But for many other states — and nonprofit providers across the country — the rules represent a sudden pivot from past expectations. In California, the new federal funding priorities face a direct conflict with state law.
Under new rules announced last month, the U.S. Department of Housing and Urban Development will place new restrictions on $3 billion in homelessness aid, allowing no more than 30% of federal grants to be used for permanent housing. That approach, known as Housing First, prioritizes getting people into safe, stable housing ahead of other treatment and enforcement, and had been a key focus for the federal government’s Continuum of Care Program for homelessness.
Now, HUD’s new rules — a shift to Treatment First policies — could result in a major reprioritization of who gets funding and for what purpose. Backlash from many nonprofits and homelessness service providers across the country has been swift, and 20 states and Washington, D.C., have filed suit to stop the rules, arguing they violate federal law. Several cities and counties across the country also have joined a lawsuit against the department.
While service providers point to success stories from permanent supportive housing, the Trump administration points to rising homelessness — and a perception of violent crime — as a reason to shift funding away from the long-standing approach.
But Martha Are, CEO of the Homeless Services Network of Central Florida, said the Trump administration is putting the onus on nonprofits and service providers to fix a homelessness crisis that is propelled by a lack of housing that people can afford.
“If homelessness numbers go up, some assume the homeless-response system doesn’t work. But the real driver is the housing market, not the interventions,” Are said. “HUD is penalizing communities for following the rules they set in previous years. I’ve never seen them say, ‘You complied with our guidance, and now you lose points for it.’”
Easy transition for some states
An analysis of publicly available federal data by the National Alliance to End Homelessness found that 88% of federal Continuum of Care dollars flow to permanent supportive housing and rapid rehousing, the models with the strongest evidence of reducing chronic homelessness. The new HUD rules would force cuts large enough to cause roughly 170,000 people to lose that housing, according to the advocacy group’s projections.
But a handful of Continuum of Care programs already devote far less to permanent housing. According to the National Alliance to End Homelessness, that includes that includes certain county or state programs in Alabama, Arkansas, Florida, Georgia, Tennessee, West Virginia and Wyoming.
These programs operate closer to HUD’s new funding requirements and are unlikely to face major disruption. Some even may become more competitive for federal funding, especially in states where policymakers have already adopted enforcement-heavy approaches to homelessness.
Such states — including Florida, Georgia, Missouri, Tennessee and Texas — may be better positioned under HUD’s new grant-funding criteria, which prioritize jurisdictions that criminalize public camping, expand law enforcement involvement or restrict low-barrier shelters, which may have more flexible policies than traditional shelters.
Since the U.S. Supreme Court’s City of Grants Pass v. Johnson ruling in June 2024 allowing localities to ban outdoor camping even if there is no homeless shelter space available, roughly 150 cities in 32 states have passed or strengthened such ordinances.
The annual point-in-time count of people sleeping outside reported that homelessness reached an all-time high in 2024, the most recent data available from HUD. The count, taken during the last 10 days of January 2024, found that 771,480 people were experiencing homelessness, an 18% increase over the previous year and the largest one-year jump in the history of the count.
HUD told Stateline the administration is shifting its approach to emphasize “long-term self-sufficiency and recovery” rather than the number of housing units funded or filled.
The agency rejected advocates’ claims that the new rules will increase homelessness, arguing instead that “failed” Housing First policies have contributed to rising numbers. HUD said it hopes communities will convert many permanent supportive housing programs into transitional housing with stronger requirements around addiction and mental-health services.
Skepticism about Housing First
The impact of these cuts won’t be evenly distributed.
Some areas with the deepest investments in the Housing First approach — including Cleveland, Ohio; Los Angeles; and New York City — stand to lose thousands of units that currently serve older adults, those leaving domestic violence situations, people with disabilities, veterans and families.
Those in favor of HUD’s funding shift argue that long-standing as it may be, Housing First has failed to reduce homelessness.
HUD’s annual counts show national homelessness rising for most of the past decade, and the nonpartisan Congressional Research Service notes that while Housing First stabilizes individuals, it has not reduced the number of people experiencing homelessness.
A 2021 Harvard University study found that while most people in permanent supportive housing remained housed in the first year, retention dropped sharply over time — with only about 12% still housed after 10 years.
Conservative think tanks such as the Cicero Institute, American Enterprise Institute and the Manhattan Institute suggest that Housing First undervalues mental health and substance use treatment. They point to Oregon’s homelessness struggles after drug decriminalization as evidence that voluntary services alone cannot stabilize the most vulnerable residents.
They further argue that permanent housing grants crowd out shelter, detox and transitional programs, and that many nonprofits defending the model are financially invested in maintaining the status quo.
At a moment when tight housing markets are pushing record numbers of people into first-time homelessness, local providers, who stand to lose grants, warn that HUD’s policy reversal will function more like a mass eviction than a funding shift — sending tens of thousands of people back into shelters, onto waiting lists, or directly onto the streets.
Losing trust in the system
In Orlando, Florida, many residents are experiencing homelessness for the first time. Shelters are full and a recent law in Florida allows police to arrest people for sleeping outdoors.
Are, of the Homeless Services Network of Central Florida, said the proposed HUD changes would eliminate more than 500 permanent housing subsidies that her organization offers in the Orlando area alone.
For providers, these subsidies cover the rent for units where people already live. If HUD defunds them, tenants would lose support, landlords would stop receiving payments and people would be evicted unless local governments backfill the funds, she said. And most local governments can’t afford to, she added.
Central Florida has built a system that uses data to focus on high-need individuals and keep them housed — in long-term rental units paired with voluntary support services — at a lower cost than mandated hospitalizations or treatment, Are said. HUD’s abrupt policy reversal would unravel years of progress and leave communities with “no place to put people.”
“Our permanent supportive housing costs about one-twentieth of what inpatient institutional programs cost in this region, and the outcomes are far better,” she said.
Nashville, Tennessee, had expected stable homelessness funding until HUD overhauled the rules “out of [the] blue” and at a time when it would be hard for providers to plan for sudden changes, said Wally Dietz, legal director for the Metropolitan Government of Nashville and Davidson County.
When Congress approved a two-year cycle for fiscal years 2024 and 2025, localities were told they wouldn’t have to reapply for money, he said. That changed this fall.
“Nashville was given 60 days, spanning Thanksgiving and Christmas, to rewrite and resubmit its entire homelessness funding application, which is something the city typically prepares for a full year,” Dietz said.
If the changes to Nashville’s funding go through, not only will people lose their housing, he said, but a 20-year infrastructure will crumble and the164 landlords who partnered with the city will lose faith once rent aid stops flowing.
“Once evicted, people will not reengage with the system, and trust will be impossible to rebuild,” Dietz said.
Nashville is among a handful of localities, including Boston, San Francisco and Tucson, Arizona, that filed a joint lawsuit Monday to block the rule changes, accusing HUD of bypassing Congress. The suit, whose plaintiffs also include the National Alliance to End Homelessness and the National Low Income Housing Coalition, was filed in U.S. District Court in Rhode Island.
“If the administration wants to overhaul homelessness policy, it has to go through Congress,” Dietz said. “That gives cities time to prepare, to testify, to budget. But we didn’t get that chance.”
• Stateline reporter Robbie Sequeira can be reached at rsequeira@stateline.org. Stateline is part of States Newsroom, the nation’s largest state-focused nonprofit news organization.
