Nonprofit service providers and San Francisco officials are seeking funding approaches to blunt federal shifts that they worry could force many formerly homeless residents of subsidized supportive housing back onto the streets.
On Nov. 13, the U.S. Department of Housing and Urban Development announced a sudden, disruptive change in its funding priorities for homelessness programs, reducing grants available for permanent supportive housing and rapid rehousing — programs that provide rental assistance — in favor of transitional housing programs that are temporary and could come with work or drug treatment requirements. The department also said cities must compete for a larger share of federal grants that previously renewed on an annual, noncompetitive basis.
“We’re in an area of extreme uncertainty, which our tenants obviously feel,” said Cody Keene, public policy manager at Delivering Innovation in Supportive Housing, which manages supportive housing for more than 800 low-income formerly homeless people across the city. “They’re really scared about being put back onto the street, and they’re asking a lot of questions that we can’t answer at this point because we haven’t fully gotten a picture of what San Francisco’s response to it is going to be.”
On Tuesday, 20 states including California sued the Trump administration over these changes to its Continuum of Care program, which funds local organizations working to reduce homelessness.
San Francisco has been setting aside some money as a contingency for HUD cuts, but supporters of homelessness programs say that how much is unclear. The city is working on its grant application for projects that align more closely with federal priorities, in hope of moving local dollars to fill gaps for existing programs that might lose funding.
At a Nov. 21 public meeting, Shireen McSpadden, executive director of the city Department of Homelessness and Supportive Housing, acknowledged that there will be “inevitable gaps in funding.” She said her department “is collaborating closely with nonprofit service providers and the Local Homeless Coordinating Board to develop our application, ensuring that we maximize our efforts to secure the resources needed to combat homelessness.”
The city has not announced a long-term plan to make up for subsidy losses beyond this year.
“Even if we do have a contingency plan for this year that we’re able to backfill that funding,” Keene asked, “what does next year look like, or the year after that?”
Homelessness response system threatened
Permanent supportive housing and rapid rehousing account for 90% of San Francisco’s Continuum of Care dollars. In previous years, the city could count on most of that funding being renewed automatically. It was anticipating an estimated $54.7 million in HUD renewals for this year.
Under HUD’s proposed changes, much of those funds will no longer be guaranteed and cities across the nation instead will be competing for a larger share of funding. One homelessness nonprofit organization said San Francisco could lose $38.3 million for permanent supportive housing subsidies. The California Business, Consumer Services and Housing Agency estimates that localities could lose $250 million to $300 million. Nationally, as many as 170,000 people could lose federally subsidized housing and end up back on the streets, according to internal HUD documentation obtained by Politico.
“I think the city will likely step up and find those local resources to keep people housed.”
Christin Evans, former Homeless Oversight Commission member
“These shifts not only threaten existing programs,” the California agency said in a statement, “they jeopardize the braided system of federal, state, and local investments that keep California’s homelessness response viable.”
Besides prioritizing programs that institute work and drug treatment requirements, HUD said it would restrict funding for programs that have focused on racial equity or support for transgender people.
The new funding priorities align closely with values President Trump espoused in a July executive order that encouraged legal crackdowns on people experiencing homelessness or using drugs in public. It also denigrated the concept of harm reduction, which emphasizes health interventions to save the lives of drug users over mandatory abstinence.
“Our philosophy for addressing the homelessness crisis will now define success not by dollars spent or housing units filled, but by how many people achieve long-term self-sufficiency and recovery,” HUD Secretary Scott Turner said. “We are stopping the Biden-era slush fund that fueled the homelessness crisis, shut out faith-based providers simply because of their values, and incentivized never-ending government dependency.”
HUD’s latest spending plan needs to be approved by Congress by Jan. 30 as part of a budget package to avoid another government shutdown.
In 2024 under President Joe Biden, grant funding for existing programs was renewed for two years. But HUD recently declared it would no longer honor those commitments, and this month set a grant application deadline of Jan. 14, 2026. The shortened timeline for municipalities to draw up funding proposals would pose a challenge.
The change “is very unrealistic and is going to, frankly, wreak havoc on cities all over this country that rely on this funding,” said Deborah Thrope, deputy director of the National Housing Law Project.
Policy experts and housing providers stressed that permanent supportive housing is an evidence-based model shown to help people exit homelessness and remain stably housed. They said shifting most funding to transitional housing requiring work and drug treatment could force people unprepared to meet those conditions into the streets, jails or hospitals — at a social and economic cost far higher than the existing standard of stable housing with wraparound services.
“It’s going to put a wrench in the system,” said Jason Dewes, a member of San Francisco’s Local Homelessness Coordinating Board, which oversees federally funded homelessness services. Dewes, who experienced homelessness and lived in permanent supportive housing, worries that housing clients will be forced to seek market-rate housing after living for several years on rental subsidies.
San Francisco looks to bridge gaps
Providers and advocates said they hoped the city could reallocate funding to fill gaps created by HUD’s changes.
“We would just need to shift things around,” said Christin Evans, a former member of the city Homelessness Oversight Commission. “We might not get as much federal funding as we had before, but I don’t know that it’s catastrophic.”
Evans added, “I think the city will likely step up and find those local resources to keep people housed.”
San Francisco is better positioned to weather this storm than many other counties, said Megan Rohrer, policy director at Compass Family Services. Continuum of Care funding represents about 10% of the local Department of Homelessness and Supportive Housing annual budget, but in other cities federal money represents a much higher slice.
The city has various locally funded programs that could compete under the new rules. It also collects significant local tax revenues through the Our City, Our Home Fund that could help minimize housing dislocations.
Rohrer said that while he hoped the city could continue its full spectrum of services, it might take creative budgeting. If time-limited rental subsidy programs like rapid rehousing lose federal funding and are not replaced by local dollars, families would find it difficult to exit the already overextended shelter system.
HUD’s conservative agenda
One of the biggest problems facing housing providers is a contract provision that would allow HUD to refuse to fund programs that have promoted diversity, equity and inclusion, or acknowledged the existence of transgender and nonbinary people.
San Francisco has long been vocally committed to racial and trans justice, stances that could put the city at a competitive disadvantage, Keene said. This puts applicants in an impossible bind, since under the Biden administration, municipalities were required to describe how programs would further racial equity.
The Department of Homelessness and Supportive Housing is trying to thread the needle by reaffirming its commitment to racial equity while trying to adapt its application to keep programs competitive, said Keene.
Providers said they feared other vulnerable groups, such as survivors of domestic violence, seniors or people with disabilities, could suffer disproportionate impacts, especially in an era of slashed federal funding for Medicaid, food assistance and workforce development.
While programs serving military veterans are set to receive higher priority among applications, the proposed HUD changes are threatening local programs serving that demographic. In particular, the new rules could destabilize longstanding subsidies and services for about 170 veterans at multiple housing sites, and jeopardize housing construction, reversing more than a decade of progress in reducing veteran homelessness, wrote Colleen Corliss Murakami, chief development officer at Swords to Plowshares, in an email to the staff of the San Francisco-based nonprofit agency.
Congress has not passed a final version of HUD’s 2026 fiscal appropriations request, and advocates said it was still possible to press legislators to extend the existing program contracts. And city residents can ask elected officials to fund local solutions to housing insecurity and poverty that have been demonstrated to work.
“We should make sure all of our local supervisors and mayor know that we want to use a scientific and research-based approach of housing first,” Evans said. “We want to have real solutions to address homelessness, not Band-Aids. And honestly, shelter beds are actually more expensive than housing.”