Federal Funding Cuts To Permanent Housing For Homeless Could Leave More Chicagoans On The Streets

CHICAGO — When Mildred Jenkins finally found a home at Deborah’s Place, it was one of the best things that ever happened to her.

After living in the organization’s shelter for a year, she got her own apartment through the nonprofit’s Permanent Supportive Housing program, which subsidizes long-term housing for people experiencing homelessness. Living in the Deborah’s Place apartment building meant easy access to food, an employment specialist and health offerings through the program’s wraparound services.

“I didn’t have anything, and they fully furnish apartments for you,” Jenkins said. “They give you a bed, a dining table, dishware — things that you need — and I thought that was the greatest thing. It offers so much more than you expect.”

But the same program that changed her life could be in jeopardy due to potential federal funding cuts, according to Chicago housing providers and homelessness prevention organizations.

Permanent Supportive Housing is a federally funded program that offers long-term housing assistance to chronically homeless people who may face severe mental illness or substance use disorder. Unlike transitional or temporary shelters, participants in the program sign standard leases with no limits on the length of stay. Providers also pair housing assistance with voluntary support services, including community-based health care, substance abuse treatment and employment services.

Changes to the program, as announced by the U.S. Department of Housing and Urban Development in June, could leave nonprofits without funding for long-term housing by next year.

Deborah’s Place serves nearly 700 women, with about one-third living in federally funded Permanent Supportive Housing units. Its executive director, Kathy Wilson, fears that funding cuts will force them to convert their programs into shorter-term transitional housing, displacing housing-insecure people in the process.

“All of the women that we’re serving have disabilities that would be barriers to them all of a sudden going out to get a full-time job. Many of them get Social Security or disability income, and that is not enough to afford fair-market rent,” Wilson said. “If we converted to transitional, they would have two years of a subsidy, and then they would be on the streets.

“It’s like going backwards 20 years to that old system that didn’t work well, while we currently have a system that’s working,” she added. 

Changes To Federal Funding

On June 1, Housing and Urban Development announced it would deprioritize Permanent Supportive Housing programs to expand funding for other projects, such as shorter-term transitional housing and supportive services.

Permanent Supportive Housing is a program of the government’s Housing First policy, which looks to connect people experiencing homelessness to permanent, stable housing without preconditions like employment, sobriety or participation in mental health treatment. In a press release, Housing and Urban Development Secretary Scott Turner called Housing First a failed experiment, saying that “billions of taxpayer dollars were spent while homelessness increased to record levels.”

The proposed changes could cause 5,105 Illinoisans, including 3,247 Chicagoans, to lose housing through the program, according to a report from the National Alliance to End Homelessness.

While the federal agency awarded nearly 90 percent of its largest homeless prevention funding source to permanent housing in 2024, next year’s grants will reserve 40 percent of funds for a competitive process with new priorities.

Most of this funding in Chicago currently goes toward Permanent Supportive Housing efforts, leaving the future of the programs uncertain, said multiple housing providers, who estimate that $40 million in federal funding is at risk of being lost statewide.

The funding changes will impact programs with federal grant awards beginning in 2027, as grants and renewals are currently being accepted through Aug. 26.

Cutting Funding For ‘Evidence-Based Models’

Housing First, which the federal government began to adopt into national homelessness prevention policies in 2009, offer participants the stability needed to actually take advantage of health services, advocates say.

Kathleen Molnar, director of external resources at the Uptown-based women’s shelter Sarah’s Circle, called the policies that came before this shift a “punitive and judgmental approach” that often prevented homeless people from getting care.

“What came before was: Fix yourself, make sure you’re abstinent from drugs or alcohol, make sure you’re getting your mental health treatment and taking all your meds. And then, we’ll get you housing,” Molnar said. “It really discounts how difficult it is to take care of your health, including your mental health, when you are without a home — whether you’re in a shelter or on a street or couch surfing.”

A 2021 study found that, compared with housing programs that required mental health and substance use treatment first, Housing First programs reduced homelessness by 88 percent and yielded greater health benefits for participants. 

“To get somebody into housing where they’re safe, where they can start to form relationships with case managers and other program staff … tends to make people more open to looking at their substance use or looking at their mental health, and what they could do to better address it,” Molnar said. “That’s why Housing First has been so effective.”

Nadia Underhill, chief operating officer at the mental illness and substance abuse care provider Thresholds, says these long-term housing programs work best for people with chronic homelessness, rather than transitional housing, which is time-limited.

“There are a lot of people who experience episodic homelessness and people [who] don’t have a lot of a safety net, but are able to be in the workforce. They need a soft landing; they need to get themselves back together. That is what transitional housing is made for,” she said.

“But some of those people have been chronically homeless on the streets for years, in and out of shelters and out of emergency rooms, hospitals, institutions,” Underhill said. Doing away with permanent housing programs puts these clients “back to the cycles of homelessness, shelters, hospital emergency rooms, nursing homes, jails, maybe friends’ and family’s couches.”

Nicole Bahena works at All Chicago, a nonprofit that coordinates grants for the city’s organizations serving homeless communities. She worries that these organizations may face greater disadvantages due to new changes that could affect programs beginning in 2027.

“It’s housing that people have been living in for sometimes five or 10 years,” Bahena said. “It is one of the most evidence-based models that has been proven to end homelessness for people.”

‘Where Will We Go?’

Housing and Urban Development announced the agency will instead prioritize new transitional housing and supportive service projects, setting aside $1.3 billion for them. But housing advocates, like Deborah’s Place’s Wilson, believe it won’t be an adequate replacement for permanent housing.

Many of her shelter’s participants have disabilities that create barriers to getting a full-time jobs or are on Social Security income, which makes it harder to afford market-rate housing after a short-term program ends. With fewer affordable housing options available, transitional housing will serve as merely a short reprieve from the streets, she said.

“If we converted to transitional [housing], they would have two years of a subsidy, and then they would be on the streets,” she said. “Converting to transitional really just delays the problem.”

When Deborah’s Place provided transitional housing in the past, Wilson found that “the women would work really hard, and they would get jobs, get income, do what they needed to do, but the two years would come, and there was just nowhere to go. There were not enough apartment units that people could afford,” she added.

The loss of funding for permanent housing programs could undermine the city’s efforts to address a homelessness crisis that has led to tent encampments in parks and other places, a spokesperson for the Department of Family and Support Services said.

“Any threat to stable and permanent housing has significant impact on our system. Not having a pathway for residents that are sheltered and unsheltered creates bottlenecks in our system and it increases encampments. Those are the direct results of not having that permanent housing,” said Linsey Maughan, director of public affairs at the Department of Family and Support Services.

On June 7, Illinois Attorney General Kwame Raoul filed a lawsuit with more than 20 other states against HUD, arguing that the agency’s decision would result in tens of thousands of people losing their homes. The week before, states won a separate lawsuit against HUD under similar circumstances.

With the program’s future uncertain, Jenkins said it’s already difficult enough for people in shelters to secure housing. She fears new changes will make it even harder.

“People have the stigma of homeless people — they’re dirty, they’re nasty, they’re lazy sometimes, and they really don’t want them near their home,” she said. “But it will happen because if we all lose our housing, where are we to go?”