A New Federal Notice Offers Bonuses for Transitional Housing, Service Requirements, and Police Partnerships
After a federal court blocked its overhaul of the Continuum of Care program, the Department of Housing and Urban Development is trying another legal route to steer homelessness funding toward transitional housing and away from Housing First.
On Sept. 11, HUD published a notice in the Federal Register outlining new incentives for “activities [that] are proven to be effective at reducing homelessness or preventing homelessness.” Those activities include expanding transitional housing with supportive services that focus on employment and behavioral healthcare, housing for people with substance use disorders, and coordination with law enforcement to address homelessness. Applicants who prioritize these programs may be eligible for bonuses or other incentives, according to the notice.
Public comments are due Oct. 13.
In the notice, HUD blamed Housing First for the federal government’s shift away from these policies.
“HUD acknowledges that a select subpopulation of homeless individuals are unlikely to regain self-sufficiency or independence and may require long-term assistance,” the notice reads in part.
“However, there are countless individuals who, with supportive services and transitional housing, can become self-sufficient, and who deserve the opportunity to do so,” it added. “HUD’s past focus on permanently subsidized housing without conditions has failed to afford them that opportunity, and in doing so, has caused tremendous harm to vulnerable Americans.”
‘Housing First Does Not Mean Housing Only’
The notice sparked widespread concern among advocates and providers who build housing for people exiting homelessness. They say it would tie housing to participation in services, reversing Housing First’s core principle.
“Housing First does not mean housing only,” Michael Piccioli, housing and outreach support specialist at the City of Avondale, Arizona, wrote in a public comment on the notice. “Housing provides the stable foundation from which meaningful case management, treatment, recovery, employment, healthcare, and independent living skills can become much more realistic.”
Other advocates called on HUD to “preserve a full continuum of housing” that supports “locally flexible interventions” rather than forcing service providers into a small box.
“Expanding or incentivizing additional interventions should not require communities to destabilize effective Permanent Supportive Housing or other permanent housing resources,” Welcome House, a men’s sobriety and recovery center in Kansas City, wrote in a public comment on the notice. “Existing PSH serves some of the most vulnerable individuals in our communities, including people with disabilities and long histories of homelessness. Changes in federal priorities should protect the housing stability of individuals already being successfully served.”
Court Clears the Way for HUD’s Overhaul
The incentives were issued at a fraught time for homeless service providers. Although the federal Point-in-Time Count recorded a greater-than-3% decline in homelessness between 2024 and 2025, many local jurisdictions have since seen the need for services rise because of the increasing cost of living.
Meanwhile, service providers face one of the most uncertain funding landscapes in generations, which has sent “widespread anxiety” through the system, according to a recent poll from the National Alliance to End Homelessness. That anxiety has been driven in part by HUD’s continued efforts to revise its metrics for the CoC grant program to focus on temporary solutions to homelessness like temporary housing and substance use counseling.
In August, a federal judge in Rhode Island struck down HUD’s 2026 funding notice, ruling the agency had skipped the required public comment process. The National Alliance to End Homelessness estimates HUD’s changes would cause at least 97,000 people to lose their homes. On Sept. 16, five days after HUD released its new incentives, a federal appeals court panel paused that ruling while HUD’s appeal proceeds, allowing the agency to move forward.
“We are both surprised by and disappointed with the Court’s determination, which provides little reasoning for its decision,” Ann Oliva, CEO of the National Alliance to End Homelessness, said in a statement. “Despite our coalition’s repeated triumphs in the lower court, this decision will give new life to HUD’s attempt to radically upend this critical program by defunding permanent housing solutions, which threatens to push 100,000 Americans into homelessness, including veterans, people with disabilities, and families with children.”
Part of a Broader Push Toward Criminalization
The new incentives also fit neatly within President Donald Trump’s attempts to get cities to criminalize homelessness. Last year, he signed an executive order called “Ending Crime and Disorder on America’s Streets.” According to the ACLU, the order urges cities and states to ticket, arrest, jail, and forcibly institutionalize people who are homeless.
HUD’s notice cites camping bans as evidence that its approach works, pointing to declines in unsheltered homelessness after Austin reinstated its camping ban.
But the Austin example is more complicated than the notice suggests. The city launched its HEAL Initiative, which moves people from encampments into shelter and housing, around the same time the ban returned. Then-Mayor Steve Adler also warned that enforcement pushed people into woods and greenbelts, where they were harder to find.
The Cost of Criminalization
Advocates have long warned that increasing criminalization does not lead to better outcomes for people who are homeless. Encampment cleanups have been found to be expensive, traumatic, and ineffective at preventing future encampments. Yet these policies have become more popular since the 2024 Supreme Court decision in Grants Pass v. Johnson, which found that criminalizing homelessness does not violate the Eighth Amendment’s protections against cruel and unusual punishment, even when people who are homeless have no reasonable shelter available.
Since that decision was handed down, the ACLU and the National Homelessness Law Center have found that more than 350 cities have passed new laws criminalizing acts associated with homelessness, such as building temporary shelter in a park or sleeping in public.
“Punishing people for being unhoused in a system that fails to offer safe shelter is unjust and shortsighted,” Tori Truscheit, senior director of strategic partnerships at Sacred Heart Community Service in San Jose, recently told Invisible People.
