Changes to Federal Homelessness Funding Could Undo Years of Progress in California

Author: Ryan Finnigan, Deputy Director of Research

California has been investing significantly in permanent housing for people exiting homelessness in recent years. The supply of permanent supportive housing (PSH)—an evidence-based housing model for people with disabilities—expanded by 73 percent across the state in 2014–2024. The number of people housed with time-limited rental subsidies, also called rapid rehousing (RRH), has grown more than six-fold. Hundreds of people across the state successfully leave homelessness every day, and this number has grown with time.^[1]

This progress is now at risk due to proposed federal changes in funding. The U.S. Department of Housing and Urban Development (HUD) is planning to limit funding for permanent housing solutions to just 30 percent in the Continuum of Care (CoC) Program, the main source of federal funding to end homelessness.

A statement from the State of California’s Business, Consumer Services, and Housing Agency emphasized that this change “stands in sharp contrast to California’s strategy, where 87 percent of CoC funds support permanent housing interventions—which has been proven to work and is creating positive impacts in communities throughout the state. This change could result in the loss of more than $250 to $300 million annually for permanent supportive housing and rapid rehousing in California and would destabilize projects that currently keep tens of thousands of people housed.”

The most recently available data from early 2024 show that about 32,000 people across the state lived in homes supported by the CoC Program, which amounts to one-third of the total 96,000 people housed through PSH or RRH. California has the largest number of people housed with CoC Program funding of the 50 states. The 32,000 people in the data is also an underestimate: the data can miss some local housing programs’ receipt of CoC Program funding, and many local housing programs serving survivors of domestic violence or youth are omitted for privacy.^[2]

Tens of thousands of Californians could fall back into homelessness without continued federal funding for PSH and RRH. Services and housing funded by the CoC Program prioritize those with the greatest need. At risk are local housing programs for people with disabilities, seniors, families with children, and youth exiting the foster care system. Most people served by these programs have extremely low incomes, and supportive services are important for PSH residents to stay stably housed. If the more-than 32,000 people in these programs suddenly lose support, they are at a high risk of falling back into shelters or onto the street. For comparison, the number of residents in CoC Program-funded housing is equivalent to 17 percent of the 2024 Point-in-Time Count of people experiencing homelessness.^[3]

The impacts would be felt in communities of all types, including cities, suburbs, and rural places (Figure 1). It is also important to recognize that the impacts are still meaningful in places with smaller percentages/lighter shades on the map, many of which have few alternative resources to replace lost CoC Program funding for permanent housing.

[Scroll over map above for data by CoC]

A sudden shift of CoC Program funds from permanent housing to other types of programs (e.g., transitional housing) could have ripple effects throughout the system. Like removing a leg from a stool, the loss of CoC Program funding can destabilize housing provider organizations: homelessness and housing organizations often combine funding from multiple sources, and organization staff serve people across multiple local programs. Many property owners will also lose tenants and rental revenues: nearly all RRH assistance provides rent for homes on the private market, as does roughly half of CoC-funded PSH.

HUD is also changing the kinds of local programs that will be more competitive for CoC Program funding, as well as adding new requirements for funded programs. Brett Andrews from All Home explained in a San Francisco Chronicle Op-Ed: “Funding criteria just turned on a dime… the new rules will prioritize programs that require services like substance abuse and mental health treatment as a condition to receive temporary housing, impose work requirements, or allow harsh encampment enforcement. These changes will discourage and defund proven best practices, and reward places and programs with more punitive, restrictive, and ineffective ones.” Some of HUD’s new priorities and requirements directly contradict those from the California State government, which also funds many organizations currently funded by the CoC Program.

Finally, the process and timeline for HUD’s recently issued Notice of Funding Opportunity (NOFO) for the CoC Program may be disruptive and taxing for local communities.^[4] A single collaborative application from each CoC is due to HUD on January 14, 2026, just two months from the NOFO’s release. In that time—which includes winter holidays—CoCs must update their internal processes in line with the new requirements, request funding proposals from local homelessness organizations, evaluate the applications, then write and submit the collaborative application to HUD. Larger communities are facing challenges coordinating between several entities, including local governments and a large number of nonprofit service providers. Meanwhile, smaller CoCs are facing challenges because they have relatively few staff to execute the application process. The NOFO application and award timeline will also create a lengthy resource gap for many local programs, because some current grants will expire starting in January and the current NOFO’s awards are not expected until May.

HUD’s new CoC Program NOFO places more than 32,000 Californians at risk of losing safe and stable housing. As Brett Andrews’s Op-Ed concludes, “Homelessness is absolutely solvable, but not if we defund our most effective solutions.”

 

Acknowledgments

We are grateful to the many national and local stakeholders who informed this analysis. Thanks also to Terner Center colleagues for their insights, including Colleen SchwartzCoffey for her thoughtful and dedicated support for all Terner Center products.

This research does not represent the institutional views of the University of California, Berkeley or of Terner Center’s funders. Funders do not determine research findings or recommendations in Terner Center’s research and policy reports.

 

Endnotes

^[1] According to data collected by California’s Interagency Council on Homelessness, local homelessness programs recorded about 190 people per day exiting homelessness in 2024, on average.

^[2] This analysis includes important revisions to our preliminary findings. A downloadable Data Appendix (pdf) describes the data sources and methods for this analysis.

^[3] The comparison between CoC Program-funded housing residents and PIT Counts is meant to provide a sense of scale. However, PSH and RRH residents are housed, and they are not included in PIT Counts.

^[4] Various national organizations are working to support local communities’ responses to the HUD’s new CoC Program NOFO, like a contingency planning toolkit by the National Alliance to End Homelessness.