The Department of Housing and Urban Development is preparing a wholesale reform of its homelessness intervention policy in a move expected to redirect billions of dollars in federal funding away from housing assistance.

The shift is coming in a 100-page notice governing the $3.5B in the Continuum of Care program, the primary source of federal funding to fight homelessness.

The notice, expected to be released in the coming days, would cut aid for permanent housing by two-thirds and instead direct money toward programs focused on mental health and addiction treatment and projects aimed at clearing homeless encampments.

The changes were first reported by The New York Times on Wednesday, and Bisnow hasn’t independently reviewed the notice.

“HUD has not made any announcements regarding this program,” a HUD spokesperson said in a statement. “Broadly speaking, HUD will continue to serve the American people through means-tested measures to encourage self-sufficiency.”

Critics of the proposed policy change told the Times that it could quickly push as many as 170,000 formerly homeless people back onto the streets.

The steep cuts to permanent housing aid could result in the sudden end of support for most of the people who are part of a Continuum of Care program. Aid recipients are all disabled, a condition of the aid, and a large cohort is over 50.

Under the new rules, Continuum of Care funds would prioritize programs that require the aid recipient to accept addiction or mental health treatment to receive housing assistance.

It would also give priority to programs that impose work requirements and aid and enforce public camping bans while also steering funding to municipalities that already have bans in place.

Taken together, the changes are a shift away from advocacy for housing as the first solution, a bipartisan effort that had led policy framing since at least 2009, toward a treatment-first approach.

Supporters of a housing-first model say it saves lives by getting troubled people into stable housing. Critics say it provides an incentive to aid recipients to behave irresponsibly, saying that the treatment-first approach is designed to get at what they see as the root causes of homelessness.

Devon Kurtz, an analyst with the Cicero Institute, whose “policies are grounded in the principles of liberty, accountability, and entrepreneurial innovation,” told the Times that existing aid programs could shift to adopt the rules to avoid funding disruptions, but advocacy groups said that solution was untenable for most providers.

The two-thirds of funding being redirected from permanent housing would go to programs that are only allowed to offer services to a person for a maximum of two years.

It would also slash the amount of guaranteed cash local grantmaking groups can expect for existing programs, which are practically assured roughly 90% of the previous year's funding. The cap for Tier 1 funding, as it is known, would be cut to 30% under the new rules.

HUD would also be empowered to reject programs that help or previously helped “facilitate racial preferences” or “violate the sex binary in humans,” according to the Times. No definitions are included, but past HUD rules have required grant recipients to discuss diversity and gender equality goals.

Ann Oliva, the CEO of the National Alliance to End Homelessness, told the Times that she worried the new rules would allow HUD to effectively end funding for any program it doesn’t like.

HUD’s budget faced steep cuts during negotiations for President Donald Trump’s signature tax and policy package that he signed into law in July. The legislation, which at one point was set to cut HUD’s budget by 44% to $42B, ultimately shaved $939M in funding.