HUD Continuum Of Care Funding Gap: Risks And Recommendations

What Developers Need to Know

This article summarizes information contained in recent HUD guidance and public notices regarding the Continuum of Care (CoC) program funding cycle for FY 2025 (which funds projects operating into 2026). We provide immediate action items and strategic considerations on how the timing of CoC awards may affect HUD-financed and HUD-assisted projects serving homeless populations. For additional details, refer to HUD's official CoC program resources here.

Overview

HUD's CoC program funds critical housing and services for individuals experiencing homelessness through formula-based and competitive grants. The FY 2025 CoC Notice of Funding Opportunity (NOFO) is scheduled to close on January 14, 2026. While HUD has indicated that it is targeting award announcements around May 2026, that date should be considered preliminary, and based on prior funding cycles, some additional delay remains possible. This timeline may create a noticeable gap between the expiration of existing grants and the availability of new funding, potentially leaving providers without confirmed reimbursement during late winter and spring 2026.

The delay could affect thousands of households in permanent supportive housing and rapid rehousing programs, as well as the nonprofits and public agencies that operate these programs. Stakeholders should evaluate their exposure early, assess liquidity options, and coordinate proactively with partners to reduce the risk of service disruption.

HUD Program Operations During the Gap

• Current CoC grants may expire between January and June 2026. Providers relying on these funds may face cash flow challenges if they cannot access reserves or alternative funding.
• While HUD's scoring and review process is intended to strengthen accountability and equity, the extended timeline may create budgeting and staffing challenges for grantees during the interim period.
• Permanent housing programs most at risk. Organizations that operate Housing First models or long-term supportive housing may face heightened vulnerability without interim funding.

Steps Providers and Partners Should Take Now

• Confirm grant timelines and reserves. Determine when current CoC funds will run out and whether emergency reserves can cover operations.
• Pursue short-term funding alternatives. Engage local governments, foundations, and philanthropic partners regarding potential interim support.
• Maintain documentation and compliance readiness. Ensure reporting systems remain current to facilitate smooth transition once new awards are issued.

Strategic Considerations for Developers

Funding delays in the CoC cycle can ripple into housing operations, so developers should plan for these risks early:

• Monitor CoC Stability: Understand how local CoC funding gaps may affect supportive housing occupancy and compliance requirements tied to HUD-assisted units.
• Structure Deals with Contingency Plans: Incorporate operating reserve requirements or escrow provisions in partnership agreements to cover potential service interruptions.
• Engage Service Partners Early: Confirm that property managers and supportive service providers have strategies for maintaining tenant stability during funding gaps.
• Assess Compliance Exposure: Review regulatory agreements and financing documents to ensure that temporary service disruptions do not trigger defaults or noncompliance.

Summary

• HUD has indicated that award announcements for FY 2025 CoC funding are targeted for spring 2026, with May serving as an early benchmark rather than a guaranteed date.
• Providers should prepare for several months of uncertainty and plan accordingly.
• Ongoing policy discussions continue to evaluate the feasibility of interim funding mechanisms to reduce systemic disruption in future funding cycles.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.