Developers Scramble To Fill Gaps In Critical Funding To House Most Vulnerable Tenants

Developers and housing providers that rely on billions in funding from the Department of Housing and Urban Development’s Continuum of Care program face financing gaps and mounting uncertainty as the Trump administration seeks to change the program’s structure.

The lack of clarity weighs heavily on providers of permanent supportive housing, who say the confusion around the changes could delay project construction or lease-up, reduce assistance availability or force organizations to pull money from other places to keep people housed. 

“At this point, that's kind of the contingency, because the alternative is that these folks become homeless again, and we just can't go backwards,” Jamboree Housing Corp. Senior Vice President of Community Operations Natalie Reider said. 

A court order has paused any changes following HUD’s November notice of funding opportunity, or NOFO, which made available $3.9B for continuums of care, a federal effort that seeks to end homelessness by coupling grants for housing access and supportive services. 

For now, those grants can be renewed, but funds won’t be disbursed until a ruling is made in a lawsuit brought by a consortium of nonprofits and local governments protesting the changes laid out in the November NOFO. The suit is playing out in the U.S. District Court for the District of Rhode Island.

The changes introduced in November signal a major shift from a focus on permanent housing to more temporary housing solutions, which are generally capped at two years of residence.

Specifically, HUD planned to put a 30% cap on the amount of funding that entities can request for permanent supportive housing.

Doing so, advocates say, would push those using Continuum of Care funds to reallocate from existing permanent housing projects to create new projects, and preference would be given to transitional housing, Politico previously reported. 

This cap alone could put 170,000 people living in supportive housing out on the street, according to the National Alliance to End Homelessness, one of the homelessness advocacy groups suing HUD for reasons including the timing of the NOFO and the funding delays it is expected to cause. 

Although the court injunction orders HUD to renew eligible recipients speedily once a final order is made, industry professionals say funding gaps could take money from existing projects and delay those in the planning stages.

“We as a developer are also looking at this impacting our pipeline, because if housing authorities are having to backfill existing vouchers they weren't anticipating or if they receive other cuts, then that really impacts us because they won't have additional vouchers that might be utilized for development,” Reider said. 

The money is used to pay landlords whose buildings take on formerly homeless tenants and for services to these residents, including drug treatment and job support.

Proponents and providers of permanent supportive housing tout its success, backed up by studies going back decades, that show the effectiveness of combining housing stability and services that help people navigate the transition back into health, employment, being housed and being sober.

A 2021 study led by the Centers for Disease Control and Prevention found that people participating in housing-first programs were 88% less likely to experience homelessness than those in treatment-first programs.

“Permanent supportive housing reduces individuals’ usage of emergency services, including costly emergency rooms, and it also has an extraordinarily high success rate compared to many other government-funded programs,” said Brad West of the Supportive Housing Alliance. 

Ninety percent of the Supportive Housing Alliance’s tenants remain housed after one year, and 80% are still housed after two years, West said.

But the Trump administration has shown that it is looking to reevaluate the status quo of previous leadership as it relates to publicly funded housing for some of the nation’s most economically disadvantaged populations. HUD didn’t respond to a request for comment.

The importance of this federal money was underscored in 2025 when its disbursal was delayed by a federal government shutdown.

“Earlier this year, when grant agreements for the last round of funding were delayed, state and local governments had to absorb the gaps to ensure rents were paid to landlords and programs could continue to operate,” a bipartisan coalition of more than 120 mayors from across the country wrote to Congress in December.

“It is simply not feasible for us to absorb these gaps again in 2026,” they added. 

Affordable housing is generally paid for by a complicated capital stack that usually includes lenders, grants and tax credits. 

With uncertainty about this important piece of the puzzle, investors and lenders are more reluctant to fund those deals, throwing off timelines, according to Anna Gwyn Simpson, vice president of resident services at EAH Housing, an affordable housing developer in California. 

Jamboree has one project that is fully dependent on Continuum of Care funding. Because that funding always operates on a year-to-year basis, the organization is used to reapplying, and in the past, it has received what it needed to continue operations.

In a worst-case scenario, Jamboree will have to find a way to fund the project by pulling from other pots of funding, Reider said. 

“We’ve been trying to figure out: Do we all have the reserves that we need to operate while there is going to be a gap in funding?” Reider said.

Many in the supportive housing field, while accustomed to identifying and filling gaps, say that this time is different and, in some cases, feels like an indication of things to come. 

California and New York have the most grants by dollar volume that will expire by June 2026 — approximately $216.9M and $117.6M, respectively. Those grants are expected to be renewed, but the pending court cases mean the disbursal of funds is likely to be delayed.

At existing projects by EAH Housing, service providers are nonprofits that don’t have reserves to rely on until more funding comes in. A pause or stoppage in funding would very quickly have an impact on whether services could be provided.

“It affects us being able to move people in timely and keep our units fully occupied, which then, when the units aren't occupied, that impacts our operating expenses and sort of has a trickle effect on the building's operations and sustainability, not to mention it leaves people out on the street when they could be housed,” Simpson said.