HUD is considering a major change in how it rewards communities competing for federal homelessness funding.
In a notice published September 11, the department identified five activities it proposes to recognize as proven strategies under the Continuum of Care program. HUD could use that determination to provide bonuses, scoring advantages, set-asides or other incentives in future CoC funding competitions.
The proposed activities include transitional housing paired with employment and behavioral-health services, supportive-services programs, individualized service-participation agreements, recovery-oriented housing and coordination with law enforcement and first responders.
Comments on the proposal are due October 13, 2026.
The notice does not immediately change an existing CoC grant or require a community to adopt any of the identified models. It also does not create new eligible activities. Each activity is already permitted under existing CoC rules.
What may change is how strongly HUD favors those activities when it decides which applications receive federal funding.
HUD proposes to recognize five categories of activity as proven effective for purposes of the incentive authority contained in the McKinney-Vento Homeless Assistance Act.
The proposed categories are:
Transitional housing with services focused on employment income and behavioral-health needs, particularly for youth, families and survivors of domestic violence, dating violence, sexual assault or stalking;
Supportive services addressing employment, health care, mental illness, substance-use disorders and other barriers to housing or self-sufficiency;
Individualized agreements intended to engage participants in services tailored to their needs and goals;
Drug-free or sober housing supported by behavioral-health care and recovery services; and
Coordination with law enforcement, emergency medical personnel, firefighters, mobile crisis teams and other first responders.
HUD says these approaches can help communities address needs that permanent housing assistance alone may not resolve.
The department could incorporate the determination into future CoC competitions through bonus points, set-asides, scoring criteria, certifications or other competitive preferences.
The actual consequences will depend on the language of a future Notice of Funding Opportunity. The September 11 notice does not specify how many points or dollars would be connected to any individual activity.
The distinction between program eligibility and funding priority is important.
Transitional Housing and Supportive Services Only projects are already eligible CoC program components. Existing regulations also contemplate service-participation agreements and sober housing.
HUD is not asking for authority to create these activities. It is building a formal record that could justify giving them greater weight in future funding decisions.
That means a CoC does not need to alter its current program immediately because this notice was published. However, collaborative applicants and service providers should begin evaluating how the proposed priorities could affect their future project rankings and funding strategies.
Programs built primarily around permanent supportive housing or rapid rehousing should not assume those activities are becoming ineligible. Both remain authorized CoC interventions, and the statute specifically identifies permanent supportive housing for chronically homeless people and several rapid-rehousing activities for families as proven strategies.
The larger change is HUD’s attempt to encourage a broader mix of housing, treatment, service and public-safety responses.
The notice contains a direct criticism of the federal government’s longstanding emphasis on Housing First.
Housing First generally prioritizes rapid placement in permanent housing without requiring a person to complete treatment, achieve sobriety or participate in services as a condition of receiving housing assistance.
HUD argues that implementation of that approach beginning in 2013 pushed CoC funding away from transitional housing and Supportive Services Only projects.
According to the department, 36% of the national CoC award went to transitional housing or Supportive Services Only projects in 2009. HUD says that share had fallen to 6% by 2024.
The notice also states that the national supply of transitional housing decreased by approximately 60% after HUD began collecting comparable data in 2007. Meanwhile, permanent housing inventory - including permanent supportive housing and rapid rehousing - expanded substantially.
HUD points to national homelessness trends as evidence that the existing balance has not produced the promised results. The department reports that homelessness increased 27% after 2013, while chronic homelessness increased 80.5%, unsheltered homelessness rose 36% and family homelessness increased 4%.
Those figures establish that homelessness grew during the period cited by HUD. They do not, by themselves, prove that Housing First caused the increases.
Housing availability, rent growth, poverty, behavioral-health access, the opioid crisis, domestic violence, local program capacity and other economic and social conditions can also affect homelessness.
HUD nevertheless maintains that an approach concentrated too heavily on permanent housing has not adequately addressed employment, addiction, mental illness and other barriers to long-term stability.
Transitional housing is intended to help individuals and families move into permanent housing, generally within 24 months.
Programs can combine temporary housing with case management, employment assistance, health care, behavioral-health treatment, childcare and other services.
HUD says transitional housing may be particularly useful for young people, families with children and survivors of domestic violence who need time and intensive support before moving into permanent housing.
The department also points to the difficulty new providers face when competing against established renewal projects. HUD reports that only an average of 5.45% of annual CoC funding has gone to new projects since 2013.
Future incentives could give communities more room to propose transitional-housing or services-based projects that have struggled to compete under previous funding structures.
For CoCs, the operational question will be whether HUD rewards a balanced local system or effectively requires communities to redirect money from existing permanent-housing projects.
That answer is not contained in the September notice.
HUD also proposes incentives for individualized service-participation agreements.
These agreements would be intended to connect a participant with services based on that person’s needs and goals. Depending on the program, the services could involve employment, health care, mental-health treatment, recovery support, education or assistance overcoming barriers to stable housing.
The notice describes these agreements as a method of promoting engagement and accountability.
However, CoCs will need to examine how any future requirements interact with existing program rules, disability protections, fair-housing obligations and the circumstances of individual participants.
The notice does not establish a universal work, treatment or service mandate. It identifies participation agreements as an activity HUD may favor in future competitions.
The details of any future scoring standard will determine whether participation remains meaningfully individualized and how programs must respond when a participant cannot engage because of a disability, health crisis or other protected circumstance.
Another proposed priority involves housing designed for people with substance-use disorders or people in recovery.
HUD specifically identifies drug-free housing, sober housing, behavioral-health care and on-site recovery support.
The department cites research indicating that some sober-living models have produced improvements involving substance use, employment, income and criminal-justice involvement.
HUD presents recovery housing as one option within a larger continuum, rather than a replacement for all permanent supportive housing.
Programs serving people with substance-use disorders should watch the final determination closely. Future CoC incentives could create new opportunities for recovery-oriented providers, but they may also require careful attention to fair-housing protections.
A person recovering from a substance-use disorder may be protected as an individual with a disability under federal law. Policies involving sobriety, relapse, medication and program termination must therefore be designed and administered carefully.
HUD’s fifth proposed priority would encourage formal coordination between CoCs and law enforcement, firefighters, emergency medical personnel, clinicians, mobile crisis teams and other first responders.
The department argues that these professionals frequently encounter people experiencing mental-health crises, substance-use emergencies and unsheltered homelessness.
Coordination could include outreach, crisis response, referrals, information-sharing procedures and connections to shelter, treatment or housing.
This portion of the notice will likely receive close scrutiny.
Supporters may view coordinated response teams as a way to reach people who are not connected to conventional service systems. Critics may raise concerns about criminalization, trust, privacy and the treatment of people living in encampments or public spaces.
CoCs considering these partnerships should distinguish crisis-response coordination from enforcement activity and establish clear rules concerning consent, confidentiality, data sharing and the role of each participating organization.
HUD’s action comes after a federal court vacated the department’s fiscal 2026 CoC and Youth Homelessness Demonstration Program funding notice.
On August 7, the U.S. District Court for the District of Rhode Island concluded that HUD had not completed the notice-and-comment process required before establishing certain incentives involving transitional housing and Supportive Services Only projects.
HUD states that it disagrees with portions of those rulings and continues to defend its broader authority over competitive grant criteria.
The department nevertheless published the September notice to complete a public-comment process, present the research supporting its proposed determination and strengthen its ability to use these priorities in future funding opportunities.
HUD says it will review the comments and either revise the determination or adopt it for use in a future CoC competition.
The notice places HUD’s research and policy conclusions before the public.
CoCs, recipients, service providers, public agencies, researchers, people with lived experience and other interested parties can comment on whether the five identified activities should be recognized as proven strategies.
Useful comments should address the evidence behind each proposed activity, not merely express general support or opposition.
Organizations may want to provide:
Program-level outcome data;
Housing-retention and exit information;
Evidence involving employment or income;
Behavioral-health and recovery outcomes;
Information about differences among subpopulations;
Participant experiences;
Cost comparisons;
Fair-housing or disability-access concerns;
Evidence about voluntary and mandatory service models;
Results from first-responder partnerships; and
Recommendations for measuring future performance.
Comments should also explain how HUD can encourage additional interventions without destabilizing permanent housing occupied by vulnerable households.
Comments must be submitted by October 13, 2026, and must identify Docket No. FR-6628-N-01.
Electronic comments may be submitted through Regulations.gov.
Comments may also be mailed to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 Seventh Street SW, Washington, DC 20410.
Organizations submitting data, reports or supporting research should explain the methodology, population, time period and limitations of the information they provide.
Commenters should remember that submissions to the federal docket generally become publicly accessible.
Collaborative applicants should not wait for the next funding notice to begin assessing the proposal.
Each CoC should inventory its permanent supportive housing, rapid-rehousing, transitional-housing, Supportive Services Only, outreach and recovery-oriented capacity.
Communities should also determine which services are currently voluntary, which involve written participation agreements and how existing policies protect people with disabilities or other legally protected needs.
CoCs with first-responder partnerships should document how those programs operate, how participants are referred and what safeguards govern enforcement, consent and information sharing.
Existing recipients should preserve outcome data that could help HUD evaluate the proposed models.
Most importantly, communities should not begin moving participants, terminating assistance or redesigning funded projects based solely on this notice. It requests public comment and signals a potential funding direction; it is not a final CoC competition or an instruction to modify current grants.
HUD is taking formal steps toward rewarding a broader range of homelessness interventions through future Continuum of Care competitions.
The proposed priorities include transitional housing with intensive services, Supportive Services Only projects, individualized participation agreements, recovery-oriented housing and coordination with law enforcement and first responders.
All five approaches are already allowed under the CoC program. What HUD proposes to change is their competitive position.
The notice also signals a fundamental policy dispute over whether federal homelessness funding has placed too much emphasis on permanent housing and too little on services, treatment, recovery and self-sufficiency.
No immediate funding change occurs through this notice alone. The practical effect will depend on HUD’s final determination and the scoring, set-aside and renewal provisions included in a future CoC funding opportunity.
For housing and homelessness organizations, October 13 is the immediate deadline. The next CoC funding notice will determine the stakes.
HUD is building the legal and research foundation for a significant change in Continuum of Care funding priorities. Transitional housing, supportive services, recovery-oriented programs, individualized service agreements and first-responder partnerships could receive new competitive advantages in future CoC funding rounds.
Continuums of Care, collaborative applicants, CoC grant recipients, permanent supportive housing and rapid-rehousing providers, transitional-housing operators, Supportive Services Only programs, recovery-housing providers, behavioral-health organizations, domestic-violence service providers, local governments, public housing agencies, law-enforcement and emergency-response partners, and people experiencing or at risk of homelessness.
HUD is seeking comments on five activities it may reward in future Continuum of Care funding competitions: transitional housing with supportive services, broader supportive-service programs, individualized service-participation agreements, recovery-oriented housing and coordination with first responders. The notice does not create new eligible activities or immediately change current grants. Comments are due October 13, 2026.
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