HUD Temporarily Withdraws Continuum of Care NOFO Amid Program Uncertainty

Key Takeaways

On Monday, November 8, the U.S. Department of Housing and Urban Development (HUD) withdrew a notice of funding opportunity (NOFO) that would have made substantial changes to the Continuum of Care (CoC) program's expenditure flexibility and competition framework. The NOFO, initially issued on November 13, was promptly met with a pair of legal challenges. The first suit was filed by a coalition of 21 state Attorneys General; the second, by a coalition of local governments and non-profit organizations. County plaintiffs on the suit include King County, WA, Davidson County, TN, Santa Clara County, CA, and San Francisco's consolidated government. As part of the announcement to rescind the NOFO, HUD signaled their intent to make revisions and reissue a modified version in the coming weeks. 

Notably, the NOFO placed a 30 percent cap on permanent housing (PSH) expenditures within the program. As it stands, PSH services represent roughly 87 percent of the CoC program’s spending. Much of this funding is expected to be repurposed to instead support shorter-term transitional housing with conditional work or treatment requirements. 

Additionally, the new competition framework limits "tier 1" funding, which is functionally protected year-over-year to maintain continuity of existing CoC operations, to 30 percent. In prior grant cycles, tier 1 funding generally comprised upward of 90 percent of program totals. As a result of this change, more funding will now be awarded on a fully competitive basis, and grantees that do not meet program benchmarks may be subject to funding loss.

Adding to the uncertainty surrounding the program, CoC funding is set to expire in January 2026, potentially threatening service delivery to individuals and families within the Continuum-of-Care. Even as HUD prepares to move forward with a new program competition, it is unlikely that funding will be awarded in time to prevent a lapse.  

In addition to the ongoing litigation, these program changes generated broad, bipartisan pushback, primarily among local stakeholders and members of Congress. NACo previously issued a letter to HUD urging Secretary Scott Turner to renew the current CoC grants for an additional year, as authorized by Congress. Joining NACo on this letter were the National League of Cities and U.S. Conference of Mayors, marking a significant consensus among local governments that these policies would erode local capacity to respond to homelessness. 

Coalitions of House Republicans, House Democrats and Senate Democrats, respectively, similarly issued letters to HUD urging the agency to extend the current year grants by twelve months. An extension would help prevent service interruptions, satisfy covenants with participating landlords and non-profits and sustain continuity of care for vulnerable populations.

Counties, as direct recipients and administrators of the CoC program, are essential partners to HUD in responding to homelessness in our communities. As HUD prepares for the upcoming program year, NACo urges our federal partners to maintain a program framework that avoids funding gaps and maximizes counties’ ability to support those facing housing insecurity.