State preps for cuts to housing funds

Across the state, homeless service providers and local leaders are convening emergency meetings to figure out just how bad the cuts are going to be and what to do about them. Some are scrambling to move money around or even relabel their programs to save hard-won housing. Others have already started helping fewer people in anticipation of the cuts.

But they agree on one thing: If these cuts go through, thousands of California’s most vulnerable residents likely will be evicted from their subsidized housing, and may end up back on the street. 

It would likely reverse recent progress made in fixing the state’s severe homelessness problem. 

“I don’t know what they think is going to happen with all these people,” said Maryn Pitt, chair of the Stanislaus County Continuum of Care, which manages the county’s federal homelessness funds. “We’re just going to turn them out and they’ll just disappear? I have no idea, but it seems rather inhumane.”

Her county has 17 permanent housing projects funded with money at risk from federal cuts.

Already reeling from upcoming state cuts to homeless funding, California’s homelessness agencies have been bracing for federal cuts for months, without knowing exactly what to expect. Now, some of those cuts have come into sharper focus. The Trump administration intends to redirect a significant chunk of money away from permanent housing and into temporary housing — while also adding requirements for people to qualify for that temporary aid, according to reporting from Politico, which cited internal HUD documents and interviews with anonymous HUD employees. 

If that happens, only 30% of federal homelessness funds would be available for permanent housing — down from the current rate of 87%. Nationwide, that means the money available for permanent housing will shrink from $3.3 billion down to about $1.1 billion, Politico reported.

That would be a major strategy shift. For years, the Department of Housing and Urban Development has prioritized permanent housing over temporary housing and shelter. Permanent housing is designed to end someone’s homelessness for good, while temporary housing and shelter is a Band-Aid solution: It gets people off the street, but only for a limited time. 

When CalMatters asked the agency to comment on the reported funding cuts it responded with an automatically generated email: “The Radical Left has shut down the government. As a result, HUD’s Office of Public Affairs is operating in a limited capacity, which impacts our ability to promptly engage with the mainstream media.”

The federal government is expected to issue a “notice of funding opportunity” this fall for its continuum of care program, the country’s main source of federal homelessness funding, laying out how much money is available, what it can be used for and what rules apply. That’s where the feds are expected to give official notice of the permanent housing cuts.

Los Angeles County, which has the largest homeless population in California, has $217 million at stake. More than 80% of that goes toward keeping people in permanent housing, said Jessica Reed, associate director of continuum of care planning for the Los Angeles Homeless Services Authority. If the projected cuts go through, more than 8,000 units of housing would be at risk, she said. 

It would be “absolutely devastating,” Reed said.

People living in subsidized permanent housing tend to be among California’s most vulnerable, including those who have chronic disabilities and were homeless for years before moving indoors. Many live on meager disability benefits. If their housing subsidies dry up, there’s no way they’ll be able to pay their rent, Reed said. 

Those renters also often have criminal records, poor credit and a history of evictions — making it almost impossible for them to compete for housing on the open market, even if they could afford rent, Pitt said.

Santa Cruz County’s latest continuum of care allocation was about $7.7 million — of which about 82% is for permanent housing, said Robert Ratner, director of Housing for Health for the county. About 290 people live in those units.

If the spending cap takes effect, Santa Cruz County likely would try to shift some state money to cover the housing no longer eligible for federal funds, Ratner said. 

“We’re going to end up having to close most of these programs, because there’s not enough state money,” he said. “There’s no way the math works.”

To prepare, Santa Cruz County has already started winding down some services. 

“We’re helping far fewer people,” Ratner said.

Typically, Santa Cruz County helps between 40 and 60 households move from homelessness into housing each month. If the permanent housing cuts take effect, Ratner expects that to eventually drop by as much as three-quarters. 

To make matters worse, when awarding homelessness grants, the feds plan to deduct points for organizations that have used “racial preferences” or recognized transgender people, according to Politico. The Trump administration already has attempted to impose similar restrictions on other homelessness grants, prompting multiple lawsuits.

Ratner worries those new rules could mean Santa Cruz County isn’t eligible for any money.

Other counties are making similar dire predictions.

Santa Clara County estimates at least 1,000 households would be at risk of homelessness if the feds cap funding for permanent housing at 30%, said Kathryn Kaminski, director of the county’s Office of Supportive Housing. 

Sacramento County, which dedicated about 86% of its $40 million in federal continuum of care funding to permanent housing in 2024, worries the cuts could displace residents, slow housing placements and force service providers to lay off staff. 

The scariest part is that this funding change signals the federal administration is turning its back on the long-standing belief that permanent housing solves homelessness, said Gita O’Neill, interim CEO of the Los Angeles Homeless Services Authority. And the feds are making that shift suddenly, giving service providers no time to wind down their programs.

“Which is going to be devastating across the country, no matter where you are,” O’Neill said. “Losing that much permanent housing will have an impact for generations to come.” 

CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.