(Editor’s Note: This is not a political post, nor does Homeward Bound Villages take a political position of any kind. This article is about funding for Housing First Programs, which we do support.)
Over the past quarter, we’ve discussed that, in most cases, homelessness comes down to an unrelenting math problem, not a moral failing. In July, we did a deep dive into the cost of living for Hoosiers and nationally, showing the link between stagnant wages and rising costs. We discussed ALICE (asset-limited, income-constrained, employed) and showed how the federal poverty rate no longer reflects modern American life. We took a look at how the measured need in our communities uses antiquated metricsd metrics and how paying minimum wage puts the most vulnerable in our community at risk of falling into homelessness. We also explored the connection between the rise in our unhoused population and limited affordable housing in our community. (You can read The Real Cost of Living Series here)
Last month, we explored Housing First and showed how providing unhoused individuals with a stable home leads to strong success rates. Our series did a deep dive into where Housing First works. (You can read the Housing Is the Answer Series here.) Today we are bringing the last piece of the puzzle together as we kick off this month’s series on housing pressure, policy, and what’s at stake.
A Very Rocky Summer
On June 1, 2026, HUD, or the Department of Housing and Urban Development, proposed significant changes to the funding for Housing First initiatives. This is known as the HUD Notice of Funding Opportunity (NOFO). The changes proposed a significant overhaul to funding for the Housing First movement, stating that Housing First doesn’t work. These proposed changes would have the following impact:
A third of the $1.3 billion budget would be directed solely to transitional housing for service-only programs, rather than to permanent housing programs that these funds have historically supported.
Renewals were squeezed to a breaking point. Historically, organizations and communities could see about a 90% renewal rate on protected funding. This proposed change lowered the renewal rate to 60%, leaving a massive funding gap.
Communities and organizations are scored to determine the severity of the need. The matrix used to score these communities was changed in a way that disqualified most organizations entirely.
HUD Secretary Scott Turner stated that “Housing alone will not solve a crisis driven by addiction and mental illness.” This statement contains two factual inaccuracies: first, Housing First works; the data proves it time and again. Secondly, not everyone who is experiencing homelessness has a mental health issue or substance use disorder. Housing groups across the United States have noticed this sharp reversal, and many believe this course of action puts 97,000 people living in permanent housing at risk of losing their homes.
The Courts Stepped In
Housing advocates stepped in and brought a lawsuit against HUD on July 2, 2026. On July 24, 2027, a Rhode Island judge dismissed the proposal as unlawful. Congress had already earmarked these funds for appropriation for HUD to fund these programs as it normally would. This meant that, for now, those 97,000 potentially impacted individuals are safe.
However, as much as this feels like a victory, the enthusiasm is short-lived because this isn’t the first time the court has had to step in to block these cuts. An earlier version of this idea was proposed back in January and struck down. What’s important to understand is that the courts did not strike down the idea, but only the method they wanted to use to make changes.
Where Are We Now?
As of the publication of this article (9/1/26), HUD has not appealed the ruling. However, providers are building next year’s budget without notice, deadlines, or any idea what next year’s awards will be. This can create a significant funding gap for service providers; it is like knowing a cliff is coming but not being able to see it. You don’t know when it is coming, how deep the chasm will be, or how long you’ll have to endure it. Meanwhile, services and operations must continue because people are counting on you; lives are being saved. This puts everything in jeopardy: the organization, staffing, operations, and the ability to keep the lights on.
Impacting Indiana
In Indiana, we had about $24.3 million in renewals on the table from HUD, and almost all of it is earmarked for permanent housing, supportive housing, rapid re-housing, and the support systems that make this work possible. This proposal will pull funds from programs that are working, leaving a massive funding gap.
If Housing First and housing programs are gutted, the system essentially grinds to a halt. People living in shelters need time to save for deposits, find a place to live, secure a better-paying job, etc. Without housing support, this system moves much more slowly, and shelters stay fuller longer, leaving less room for incoming individuals. As a result, more people are left without options and end up living on the streets. More simply put, cutting funding doesn’t reduce homelessness; it backs up on the streets. In Indiana, that now carries a risk of arrest.
How to Help
While these funding changes keep resurfacing, organizations, civic groups, and activist organizations remain vigilant. In the meantime, here are a few ways to support our service providers:
Stay informed. We don’t know whether these proposed changes will come back for consideration, but staying vigilant and informed on this topic is key.
Contact your state and national representatives to say that you want Housing First and service providers that support rapid rehousing models to be funded.
Give, donate, volunteer. Our nonprofits across the board are being squeezed like never before. With drastic funding cuts across the board, our nonprofit organizations have never been asked to do more with increased need and less funding. This is especially true in housing.
Stay Tuned This Month:
Throughout September, our goal is to look at policy and advocacy and their impact on housing. We encourage you to follow along as we show the true landscape so many organizations face in our current economic climate, and why their work has never been more vital in our communities.
Sources:
HUD news release, FY2026 CoC NOFO (June 1, 2026) https://www.hud.gov/news/hud-no-26-038
• Congressional Research Service, HUD’s FY2026 Continuum of Care Program Competition https://www.everycrsreport.com/reports/IN12709.html
• NACo, Court vacates FY 2026 Continuum of Care grant changes https://www.naco.org/news/court-vacates-fy-2026-continuum-care-grant-changes
• NACo, Congress directs HUD to renew expired CoC projects (Sec. 244) https://www.naco.org/news/litigation-delays-new-funding-congress-directs-hud-renew-expired-continuum-care-projects
• National Alliance to End Homelessness, CEO Corner: The FY2026 NOFO is Vacated (Aug. 11, 2026) https://endhomelessness.org/blog/ceo-corner-week-of-8-11-26-the-fy-2026-nofo-is-vacated/
• NLIHC, HUD releases FY26 CoC NOFO, putting at least 97,000 people at risk https://nlihc.org/resource/hud-releases-fy26-continuum-care-nofo-putting-least-97000-people-risk-losing-housing
• IHCDA, FY2025 IN-502 Grant Inventory Worksheet (annual renewal demand) https://www.in.gov/ihcda/indiana-balance-of-state-continuum-of-care/files/FY-2025-IN-502-GIW.pdf
