On Thursday November 13, 2025, the US Department of Housing and Urban Development (HUD) issued a notice of funding opportunity (NOFO) that shifts federal funding away from permanent housing programs and toward transitional housing programs. This change could affect tens of thousands of people who formerly experienced homelessness and are currently housed with federal resources.
The Continuum of Care (CoC) program, established under the McKinney-Vento Homeless Assistance Act of 1987 and administered by HUD, supports a range of homeless assistance programs: permanent supportive housing, rapid rehousing, and transitional housing. In 2024, there were 412,623 total permanent supportive housing beds in the US (including Puerto Rico, Guam, and US Virgin Islands). Urban Institute analysis of 2024 Housing Inventory Count data shows that approximately 41 percent—just over 170,000 beds—rely on CoC funding.
Although there is an important conversation to be had about helping people experiencing homelessness access treatment for substance use, the vast and growing evidence base, which we detail here, is clear: Permanent supportive housing effectively helps people exit homelessness; transitional housing does not.
Given the large number of people who may have their housing program changed overnight with this funding shift, policymakers must understand the evidence for permanent supportive housing programs and how much their jurisdictions will be affected when CoC program changes are implemented.
What the evidence says about permanent supportive housing and transitional housing
In 2009, Congress reauthorized the McKinney-Vento Homeless Assistance Act with bipartisan support. Since then, HUD has prioritized permanent housing solutions to homelessness based on an extensive and growing evidence base of its effectiveness. Simultaneously, HUD has deprioritized transitional housing solutions, as little evidence has found that transitional housing programs are effective. However, the proposed shift in federal funding would reverse this prioritization, despite the rigorous research evidence.
States and local communities rely on permanent supportive housing to help people and families living with disabilities and experiencing long-term or repeated homelessness. Rigorous studies consistently show that it is the most effective solution to increasing housing stability and reducing chronic homelessness. Research has found that permanent supportive housing
- decreases time spent homeless or in shelters,
- increases housing stability,
- decreases arrests and jail stays,
- decreases use of emergency health care systems,
- improves people’s quality of life,
- increases out-patient mental health treatment participation, and
- can decrease a community’s overall rates of chronic homelessness.
In contrast, studies have shown that transitional housing excludes the people who most need support, that people get into permanent housing more slowly and are less likely to remain housed, and that people exiting transitional housing still rely on public assistance despite the stated goals of self-sufficiency. No evidence has found that transitional housing reduces rates of homelessness or successfully houses people experiencing chronic homelessness.
State-by-state implications of reported changes to funding priorities
If federal funding cuts to the permanent supportive housing CoC program are applied uniformly across states, Louisiana, Maine, Michigan, Missouri, and Delaware would experience declines in resources for most of their permanent supportive housing beds, between 68 and 75 percent.
Of the more than 400,000 permanent supportive housing beds nationwide, 171,490 beds were dedicated specifically to people experiencing chronic homelessness—those living with disabilities who have experienced long-term or repeated episodes of homelessness—in 2024. Roughly 103,000 of those beds (60 percent) rely on CoC funding. Assuming changes to the CoC program are implemented uniformly across states, New Hampshire, South Dakota, and Oklahoma may experience the greatest proportional reductions in federal support for permanent supportive housing beds dedicated to people experiencing chronic homelessness.
Evidence shows the most effective use of taxpayer dollars is to abide by the existing two-year agreement to fund current programs. There is bipartisan support in Congress for the CoC program, as both House Republicans (PDF) and Senate Democrats have written letters expressing concerns around releasing this NOFO. Now that the NOFO has been released, Congress can still act to protect the program. Then, a debate needs to be had on the merits of future policy changes.
If Congress does not act and the NOFO moves forward, it will reshape the current state of homelessness response, largely for the worse. State policymakers will need to be prepared to fill the resulting gaps in permanent housing solutions and support people who lose their housing. To do so, policymakers can use state and local resources to fund housing subsidies and services; maximize efforts to transfer people onto mainstream voucher programs, such as Housing Choice Voucher programs; and explore other pathways for service transfers, such as nursing homes or assisted living for those who may qualify.
Whatever state and local policymakers do will be a Band-Aid and cannot replace the support and efficacy of the federal CoC program, especially on this timeline.
Let’s help communities build more secure, hopeful futures.
Today’s complex challenges demand smarter solutions. Urban brings decades of expertise to understanding the forces shaping people’s lives and the systems that support them. With rigorous analysis and hands-on guidance, we help leaders across the country design, test, and scale solutions that build pathways for greater opportunity.
Your support makes this possible.
