Staff Reports
HUD this week dropped a major change in homelessness policy. The Fiscal Year 2026 Continuum of Care Notice of Funding Opportunity (NOFO) — about $4.04 billion — shifts federal money away from a pure “Housing First” approach and toward treatment, recovery, transitional housing and programs tied to measurable results. That change will reshape who gets federal grants and how communities respond to addiction and mental illness on the streets.
What the FY2026 NOFO actually does
The new NOFO lays out roughly $4.04 billion for homelessness programs and sets aside about $1.3 billion for new projects. It also enshrines a 60% Tier 1 floor for renewals, as required by Congress, and reweights scoring so projects that pair housing with treatment, recovery services, transitional housing or strong ties to mental‑health and employment programs score higher. Applicants win extra points for partnering with treatment providers, coordinating with law enforcement, quickly clearing encampments and refusing to operate safe consumption sites or hand out drug paraphernalia. The NOFO says funding will be tied to performance — in short, results over rhetoric.
How this changes the Housing First era
Housing First put subsidized housing at the front of the line with few or no preconditions. For 15 years HUD leaned on that model. The new NOFO doesn’t outlaw housing without conditions, but it stops treating Housing First as the only game in town. The feds will now reward programs that demand engagement with treatment and recovery. That’s a big shift for a program that critics say too often became a permanent subsidy with little progress on addiction, public drug use or repeat homelessness.
Political fights and legal limits
This NOFO did not appear in a vacuum. An earlier attempt to cut renewal protections sharply was blocked by a federal court after lawsuits by cities and nonprofits, and Congress stepped in to require a 60% renewal floor and a timetable for the competition. So HUD had to thread a narrow needle: respond to legal constraints, honor congressional language and still change incentives. Expect grantees and advocacy groups to push back — they already argue that Housing First has an evidence base — while HUD and its allies insist taxpayer money must produce results.
What will change on the ground — and why taxpayers should care
Local Continuums of Care will translate these federal priorities into local rankings and funding decisions. Some CoCs already assume the 60% Tier 1 baseline and are revising scoring to favor recovery‑oriented projects. That means more transitional housing and more programs that require engagement with treatment. The proof will be in the outcomes: point‑in‑time counts, exits to permanent housing and reductions in public drug use. If the shift reduces visible drug use, encampments and repeat homelessness, taxpayers will have cause to celebrate. If it doesn’t, critics will be right to call it political theater.
Bottom line: the FY2026 NOFO is a long‑overdue course correction that puts some common sense back into homelessness funding. Conservatives have argued for accountability and treatment first for years. HUD’s move won’t end the problem overnight, and litigation will keep the fight alive. But demanding results instead of ideology is a sensible start — and taxpayers deserve no less than policy that actually works.
