HUD cut the guaranteed-renewal floor under homeless housing from 90% to 60%

The federal government does not build homeless shelters directly.▸ It funds roughly 380 local Continuums of Care — the planning bodies that run shelters, supportive housing, and rapid re-housing in every state — through one annual grant competition. For most of the program's history, a project that was already funded and still met basic requirements got renewed automatically. That assumption ended with the FY2026 Continuum of Care NOFO, published June 1, 2026.

Every year, HUD splits the Continuum of Care Program into two tiers.▸ Tier 1 projects meet a quality threshold and get renewed without a competitive score. Tier 2 projects are ranked against each other, and the lowest scorers can simply lose their funding. The size of that guaranteed Tier 1 slice is the single number that determines how much of the program runs on inertia versus competition — and HUD's own account of the prior framework put it at roughly 90 percent through FY2024, with about 10 percent of projects competed at all.

The FY2026 Consolidated Appropriations Act set a new statutory floor: Tier 1 can be no less than 60 percent of a CoC's Annual Renewal Demand.▸ HUD wrote the FY2026 NOFO at that floor. In practice, that means 40 cents of every dollar a Continuum of Care used to count on now has to be won in competition — including, for the first time, renewal projects that land in Tier 2, which the National Alliance to End Homelessness's analysis of the NOFO says are "unlikely to be awarded" regardless of their rank.

Of the $4.04 billion, up to $1.3 billion is set aside for brand-new projects ranked in Tier 2 — with explicit priority for transitional housing and standalone supportive-services projects, the categories HUD says were shortchanged under the prior "Housing First"-oriented framework.▸ At least $430 million is floored for permanent supportive housing and rapid re-housing serving families with children, and at least $104 million is floored for new domestic-violence-specific projects. None of these are carve-outs from a single fixed pie so much as separate statutory and administrative promises layered onto the same $4.04 billion — which is part of why Continuums of Care describe the NOFO as hard to budget against.

The count HUD uses to justify the overhaul is real: after climbing from a 2016 low of 549,928 to a 2024 record of 771,480, the January 2025 Point-in-Time count fell to 745,652 — a 3 percent drop, the first year-over-year decline since 2016.▸ HUD Secretary Scott Turner has cited that decline, and the prior decade's 27 percent net increase in homelessness alongside a 111 percent increase in CoC spending over the same period, as evidence that the "Housing First" model needed replacing. What the count does not show is how the FY2026 funding rules will land on the people already housed by CoC-funded programs — those grants haven't yet run their new competitive gauntlet. The National Alliance to End Homelessness, an advocacy organization that has tracked CoC funding cycles for over a decade, is the one estimating a number for that: at least 97,000 people currently in CoC-funded permanent housing likely to lose it as Tier 2 renewals go unfunded.

Dollar and percentage figures describe the FY2026 CoC Program NOFO as published June 1, 2026; award decisions are not due until December 1, 2026, so the 97,000-person estimate is a projection from program rules, not yet an observed outcome. Point-in-Time counts are a single-night snapshot each January and are widely understood, including by HUD, to undercount unsheltered homelessness.