Trump administration to divert billions of dollars from homeless housing programs

The Trump administration is moving forward with plans to divert billions of dollars in homelessness funding earmarked for permanent housing, a decision state and local officials warn could push thousands of formerly homeless Californians back to the street.

The plans redirect the funds toward shorter-term housing and outreach efforts, prioritizing programs that impose work requirements, mandate addiction or mental health treatment and help police close encampments, among other conditions.

California officials estimate the policy shift could mean a loss of $250 million to $300 million in grant money this year for local homeless housing sites and rental assistance programs statewide.

“Trump’s plans will only exacerbate the problems created by his administration’s failures, putting formerly homeless people who have found stable housing back out on the streets,” the office of Gov. Gavin Newsom, a critic of the president, said in a statement.

The long-anticipated updates were made official on Thursday, when the U.S. Department of Housing and Urban Development posted notice for $3.9 billion in Continuum of Care funding, the primary source of federal homelessness dollars.

According to the new funding guidelines, local governments will only be allowed to use 30% of those dollars on permanent housing or rental aid, freeing up more money for transitional housing and sober-living programs. In California, 87% those funds currently go toward long-term housing services, officials said.

“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 in a statement.

The news has sent homelessness service nonprofits across the Bay Area scrambling to understand the impact on their programs. Providers worry that, without finding ways to fill the funding gaps, they may be forced to close housing sites and end rental aid efforts, leaving thousands without a crucial lifeline in one of the country’s most unaffordable rental markets.

“This overnight change is going to be a jolt to the system, at the peril of the most vulnerable in our communities — it’s devastating,” said Vivian Wan, chief executive of Abode Services, which receives Continuum funding to help operate 28 housing facilities across the region.

The changes come as President Donald Trump has sought to prevent local governments from using federal homelessness funds on what his administration describes as “illegal DEI” programs, issued an executive order aimed at forcing homeless people into involuntary treatment and proposed steep cuts to housing vouchers and homelessness programs in the next federal budget.

Earlier this year, Santa Clara County and San Francisco, along with other local governments, sued to overturn the funding restrictions for homelessness programs that consider diversity, equity, and inclusion in their services.

Administration officials have argued the shift away from permanent supportive housing and voluntary services is necessary to reverse what they describe as decades of failed polices that have led to rising homeless populations and an explosion in dangerous encampments.

In California, homelessness has surged 62% over the past decade to an estimated 187,084 people, though some large counties reported encouraging declines this year. The Bay Area’s estimated homeless population reached 38,891 last year, a 46% spike since 2015. The increases came as housing costs have also soared over the last decade.

Additionally, the Trump administration contends that federal homelessness funding has gone to support unsafe housing sites where people frequently use drugs without getting the help they need.

“We can’t subsidize a destructive lifestyle — we need to take that into account,” said Wayne Winegarden, a senior fellow with the Pacific Research Institute, a conservative think tank in Pasadena, while acknowledging some of the concerns raised by critics of the funding shift.

While moving people directly from the street into permanent housing can be effective for some, Winegarden said others need the structure and stability of treatment-based, abstinence-only programs before transitioning to a long-term home. He added that investing in temporary housing options, such as tiny homes, is a more cost-effective solution than building expensive permanent housing.

Jennifer Loving, CEO of Destination Home, a nonprofit that collaborates with South Bay officials on solving homelessness, described the Trump administration’s move as a “cruel” regression to the homelessness strategies of the 1980s and 1990s. She said that moving homeless people into housing without preconditions — a strategy known as “Housing First” — is a research-backed approach that has proven successful in preventing them from returning to the street.

The challenge, Loving said, is ensuring services are available to help residents with addiction or mental health challenges and offer support in finding jobs.

“It’s not that it doesn’t work, it’s that it hasn’t been adequately funded,” she said.

Officials in Santa Clara County said they currently receive $48 million in annual Continuum of Care funding. Of that total, $44 million goes toward supportive housing or rental aid that HUD seeks to defund. In Alameda County, officials said they receive $60 million in annual funding, with $51 million for permanent housing programs.

Local governments in California also receive homelessness funding from the state, though lawmakers in Sacramento, facing a budget deficit, agreed to scale back the money earlier this year. Santa Clara County, for example, has received $97 million from the state’s primary homelessness grant program over the past half-decade.

Santa Clara County Executive James Williams said the administration’s “unlawful” move “will overwhelm local shelters and emergency rooms, and cost taxpayers far more in crisis services.” He called on local leaders to work together to ensure people remained housed.

“We must pursue every option at our disposal,” he said in a statement, “including litigation.”