LA could lose millions in federal housing aid as new rules force funding shift

Los Angeles’ regional homelessness agency is working to find ways to keep thousands of people in their homes, while complying with new federal funding restrictions on permanent housing.

The governing board for the L.A. Homeless Services Authority voted Monday to start the process of reallocating about $130 million in federal funding currently being spent on permanent housing to other projects meant to serve unhoused Angelenos.

Because of new funding restrictions from the U.S. Office of Housing and Urban Development, known as HUD, about 5,000 households in the county will lose their rental subsidies, according to several LAHSA officials who spoke at a commission meeting Monday.

Those changes, along with state and county funding shortfalls for homeless services, threaten to drastically worsen the region’s homelessness crisis, they said.

"The fact of the matter is there’s going to be a tremendous and terrible impact on people, on agencies, on landlords,” said Nathaniel VerGow, LAHSA’s chief program officer.

Officials said they’re scrambling to maximize federal funding under the new guidelines while also advocating against the new HUD policy.

“It is a cliff and it feels catastrophic, but I think it forces us as a region to figure out how to save ourselves,” LAHSA Commission Chair Amber Sheikh said.

The funding challenge

Most federal homelessness dollars flow into the L.A. region through the Continuum of Care program, managed by HUD.

The Los Angeles region is eligible for more than $260 million in federal funding under that program in the coming fiscal year, including $217 million for existing projects.

But no more than 30% of those funds can go toward permanent housing projects, according to a “notice of funding opportunity” HUD issued last month.

That’s a challenge for L.A. County, because 90% of regional HUD funds currently cover people’s rent, according to LASHA officials.

Instead, L.A. and other cities and counties must spend the bulk of their federal funds on other interventions, including transitional housing and street outreach.

HUD officials have said the policy is meant to encourage self-sufficiency.

At Monday’s meeting, Commissioner Justin Szlasa urged his colleagues to consider larger funding trends.

“ There's actually a 23% increase in available funding from HUD, the federal government,” he said. “It just doesn't work with the way that we normally have done things here.”

“We need to find, in this crisis, a way to be constructive about this,” Szlasa added.

HUD policy changes

HUD released its new notice of funding opportunity last month and rescinded a previous two-year funding agreement.

Opponents have concerns with the federal housing department’s move away from “housing first” approaches. They also said HUD rolled out the changes without providing enough time to prepare service providers and clients for disruptions.

Last week, 21 states, including California, sued HUD, claiming the new federal policies “essentially guarantee that tens of thousands of formerly homeless individuals and families will be evicted back into homelessness.”

This week, a group of cities and homelessness organizations also sued over the changes. Plaintiffs include the city and county of San Francisco. The Continuum of Care for San Francisco was awarded $56 million in federal funding for Fiscal Year 2024.

Approximately 91% of that funding supports permanent housing projects, according to the complaint.

What’s next?

The LAHSA Commission voted Monday to approve its request for applications for existing and new projects.

Providers must submit applications to LAHSA over the next two weeks, and LAHSA has until Jan. 14 to craft and submit a new application to HUD.

The agency is now talking with 130 contractors about the transition.

LAHSA is also working with some permanent supportive housing providers to convert their programs to transitional housing instead, officials said.

People who were in permanent housing projects aren’t eligible for transitional housing under HUD’s guidelines because they're not considered unhoused, VerGow said.

The commission also reviewed a policy for ranking project applications and prioritizing them for federal funding. Officials said that policy has to be approved at a LAHSA Commission subcommittee on Dec. 10.

Funds are expected to be awarded in May 2026.