The federal government is making sweeping changes to how it funds housing programs across the country, leaving metro Detroit social service providers scrambling to keep people housed going into next year.

On Nov. 13, the U.S. Dept. of Housing and Urban Development, or HUD, announced $3.9 billion in competitive grant funding to initiatives addressing homelessness for the 2025 fiscal year. HUD is pivoting funding away from permanent housing to transitional housing and support services. Transitional housing is a model that costs more, serves fewer people and is not as effective as other interventions, homeless service providers say. The administration is essentially clamping down on what’s known as “housing first,” a way of addressing homelessness by focusing on permanent housing as a baseline.

Michigan Attorney General Dana Nessel, alongside a contingent of other state attorneys general and governors, filed a lawsuit in federal court on Nov. 25 against HUD alleging that new policies could plunge families into homelessness, and that the federal government is holding funds and the people the money aids “hostage.”

The advocacy organization Michigan Coalition Against Homelessness estimated that more than 7,000 households, including roughly 2,000 families with children, could be impacted by HUD’s policy shift.

“Those families impacted are going to be facing imminent homelessness − returning to homelessness − because you’re capping that money. So, you’re picking winners and losers of people that are already in the system,” said Nick Cook, the organization’s director of public policy.

The changes come at a time when there’s already a shortage of 119,000 affordable housing units in Michigan and the waitlist for the state’s largest housing choice voucher program, which subsidizes rents for low-income families, remains closed and is not drawing names.

What are some of the changes?

HUD said in a news release earlier this month that the new funding plan redirects the majority of dollars to transitional housing − temporary housing which typically covers housing costs and supportive services for up to 24 months − and ends “the status quo that perpetuated homelessness through a self-sustaining slush fund.”

Past funding awards encouraged reliance on “endless government handouts while neglecting to address the root causes of homelessness, including illicit drugs and mental illness,” HUD said in the release.

The agency, which did not immediately respond to a request for comment, said in its release it is prioritizing treatment for behavioral health, working with law enforcement, promoting self-sufficiency and ending homelessness on the streets. The government encouraged faith-based organizations to apply and said it reserves the right to “reduce or reject” a project’s application for using “a definition of sex other than as binary in humans” or what’s known as harm reduction − a way of addressing the risks of drug use through measures such as free syringe programs or fentanyl tests.

“Our philosophy for addressing the homelessness crisis will now define success not by dollars spent or housing units filled, but by how many people achieve long-term self-sufficiency and recovery,” HUD Secretary Scott Turner said in a news release.

The National Alliance to End Homelessness, a Washington, D.C.-based advocacy organization, said the plan puts a 30% cap on permanent housing and makes funding more competitive. Nationwide, 88% of current funding is dedicated to permanent housing, according to the group.

Permanent housing includes permanent supportive housing, which offers rental assistance and support services to households with disabilities; rapid re-housing, which provides rental assistance up to 24 months; and a combination of rapid rehousing and transitional housing.

In Michigan, permanent supportive housing has a 95% success rate and rapid rehousing is at about 90%, compared with transitional housing, which is 60% successful, Cook said. Success means keeping people out of homelessness.

“Not only does transitional housing cost more, it’s less effective,” he said.

Metro Detroit providers react to changes: ‘They’re radical’

Social service providers all across metro Detroit warned of a looming crisis for hundreds of vulnerable residents − people with disabilities, children and seniors.

“When the federal government limits these programs, it creates real risk of displacement, longer shelter waitlists and more people living unsheltered,” said Shama Mounzer, chief programs officer for the Wayne Metropolitan Community Action Agency.

The Homeless Action Network of Detroit (HAND) said scaled-back funding for permanent housing would support an estimated 500 units, instead of the current 1,800 primarily in Detroit − a 72% decrease.

“We’re just concerned because we don’t have a shelter system that can support this mass amount of people going into homelessness,” said Tasha Gray, executive director of HAND.

Detroit allocates nearly $34 million in permanent housing, with the vast majority for permanent supportive housing set aside for people with disabilities. With a 30% cap, Detroit could ask HUD for about $11 million worth of funding for permanent housing projects − a 67% decrease.

“They’re abrupt. They’re radical,” said John Stoyka, president and executive director of the Detroit-based Community & Home Supports, Inc. of the federal policy changes. His nonprofit could potentially lose about $2.5 million in permanent housing funds, which helps more than 140 households.

Linda Little, president and CEO of the Detroit-based Neighborhood Service Organization (NSO), said the city already has an affordable housing crisis and another one could emerge − homelessness.

“It presents a crisis for us because it’s rapid and it’s affecting thousands and thousands of people,” Little said.

Ryan Hertz, president and CEO of Lighthouse in Pontiac, echoed concerns raised by several others about the proposed cuts to permanent housing − it would hit people who need help the most and reverts back to how social service providers tried to tackle housing insecurity in the past.

“Trying to shift that population … into a transitional housing model would just simply be going back to how we were doing things before, which was not working,” he said.

A third of Samaritas’ budget for its Westland family shelter is at stake, according to the organization’s chief growth officer Kelli Dobner.

“If local programs are defunded, we’ll see more families, youth, seniors experiencing homelessness, period. That is going to happen,” she said.