The Abridged version:
- New federal government funding restrictions have signaled a major shift in the Trump administration’s approach to housing and homelessness.
- Instead of prioritizing permanent housing, HUD has decided to put most of its resources behind temporary housing with stricter requirements for residents.
- The move has sent local organizations scrambling to figure out how to make up for what could be a damaging loss of funds.
Thousands of Sacramento-area residents could be at risk of losing housing after the Trump administration released new federal funding criteria.
In a reversal of policies that previously prioritized permanent housing, the U.S. Department of Housing and Urban Development last week said it would shift most of its resources into temporary housing, including shelters and transitional housing, that has more stringent participation requirements. Program funding could shift starting as early as January.
“Everyone’s very much in damage control mode at this point,” said Peter Bell, chief planning and strategy officer for Sacramento Steps Forward, which is responsible for distributing federal Continuum of Care funds that come to Sacramento County. “It’s really kind of a whole system reconfiguration in many ways from years past.”
Last Thursday, HUD released its application for the money, a nearly $4 billion bucket of funding that low-income housing organizations across the country, including dozens in the Sacramento region, rely on to operate. In an abrupt move, the administration has instituted new restrictions on the funding that could take millions away from local programs designed to serve vulnerable residents, including people with disabilities and seniors.
“These long-overdue reforms will promote independence and ensure we are supporting means-tested approaches to carry out the President’s mandate, connect Americans with the help they need, and make our cities and towns beautiful and safe,” HUD Secretary Scott Turner said in a press release announcing the changes.
A big change at the last minute
With the decision, which HUD called “the most significant policy reforms and changes in the program’s history,” the federal government is taking aim at a homelessness response system that has traditionally received bipartisan support — a “Housing First” approach that limited preconditions and requirements for use of mental health and addiction services.
With applications for funding due in mid-January, local organizations have little time to respond.
“The challenge, of course, is because it’s coming so late, and they’ve only given us effectively 60 days to kind of turn this whole thing around,” Bell said. “We’re essentially designing this entire competition from scratch. It’s a big lift.”
Temporary housing was a popular homelessness response years ago but has since become less prominent.
“It’s probably been at least more than a decade since HUD provided funding for transitional housing,” said Ian Evans, executive director of Yolo County Housing Authority.
Tightening restrictions
Many organizations have structured their programs around an understanding that they would be able to operate permanent housing. With up to 87% of its Continuum of Care funding going to permanent housing in the past, Sacramento County has been able to support almost 1,600 units and close to 2,200 people, Bell said. Now, with HUD’s new restrictions, only 30% of funding can be used for permanent units, which Bell said could jeopardize housing for nearly 1,400 residents.
Even if local organizations are able to make the transition and prioritize temporary housing, the change would likely have far-reaching consequences.
“Transitional housing is time limited and (permanent) supportive housing isn’t,” Bell said. “You’ve got folks who have been housed for quite a number of years already who are now essentially going to be told that they will have maybe a maximum of two years under transitional housing.”
That is on top of participation requirements for residents that are more restrictive than already established practices like Housing First.
Programs would be required to demand that clients participate in support services, such as mental health or addiction treatment. HUD’s new application also suggests programs that give racial preferences or “use a definition of sex other than as binary in humans” would be less likely to receive funds.
Some program participants may not be able to meet these requirements, further risking their access to housing and services.
“It puts folks at risk, not just to lose their housing, but they often are being served by case managers or peer support workers or something like that,” Evans said. Without that support, people may have a harder time accessing resources like Medi-Cal, CalFresh, mental health and substance use appointments, resume help and job coaching.
Scrambling for funds
Though specific outcomes of this policy shift remain unclear, housing organizations across the region are already rushing to figure out how to sustain crucial programs that could be crippled by the loss, or even delay, of funds.
In part because of the federal government shutdown, the Continuum of Care application was released by HUD later than usual, meaning funds likely will not be awarded until the spring or summer of 2026. For some programs, that will mean several months without sufficient money.
“There will likely be a four- to six-month gap between this last year’s CoC funding they received and this next year’s CoC funding,” Evans said.
Some might not be able to bridge that gap, meaning they will “either significantly reduce what they’re doing or to shutter programs for four to six months and then try to stand them back up if they’re awarded,” he added.
Even when they finally do receive the funds, the new restrictions could mean they get 40% or 50% less than they have in previous years, Evans said.
State housing funds continue to support Housing First programs, further complicating program structures. That disconnect could mean tough decisions for how organizations apply for grants.
‘There could have been a runway’
Evans, with Yolo County, said no matter the policy change, counties needed more time to react.
“I think there could have been a runway or an off-ramp for some of these programs if it was signaled ahead of time,” he said.
Previously, when HUD made the transition from prioritizing temporary housing to more permanent solutions, they deliberately did it over multiple administrations, he said.
As it is, local counties and organizations have about two months to make what the federal administration called “monumental reforms.” Whether they are successful or not, many region residents face a more unstable housing future than they did last week.
Daniel Hennessy joins Abridged from the California Local News Fellowship. He’s a reporter covering Yolo County.