The Trump administration announced sweeping changes to the nation’s largest homeless services initiative, requiring providers to enforce behavioral health treatment for recipients of long-term housing assistance—a move that places federal and state funding requirements in direct conflict across Oregon.

On Thursday, the U.S. Department of Housing and Urban Development (HUD) unveiled a major overhaul of the $3.9 billion federal Continuum of Care program. The changes significantly reduce funding for permanent housing projects and abandon the long-established “Housing First” approach, which prioritizes quickly connecting people to housing without prerequisites such as sobriety or employment.

The new federal guidelines introduce eligibility conditions that directly contradict Oregon state funding rules. While federal grantees must now require treatment participation for people in permanent housing programs, Oregon mandates that all services be “voluntary” to qualify for the $80 million allocated for permanent housing projects over the next two years.

“The feds are saying one thing and the state is saying another thing, and that doesn’t work for me, the service provider, to be in compliance,” said Marion County Commissioner Danielle Bethell. “I’m out of compliance with one government or the other.”

Other controversial provisions require applicants to operate in areas that enforce laws against public camping and illicit drug use, comply with federal immigration enforcement, and not recognize nonbinary or transgender identities by using definitions of sex “other than as binary.”

County officials and service providers told InvestigateWest this conflict will force them to choose between state or federal funding streams, potentially reducing services and displacing vulnerable populations. The National Alliance to End Homelessness estimates the changes could displace more than 2,500 Oregonians currently housed through permanent supportive housing or rapid rehousing programs.

“For a lot of providers, they’re going to be asked to do things that are kind of outside our DNA—things that we don’t believe in, things that undermine human dignity,” said Jimmy Jones, director of the Mid-Willamette Valley Community Action Agency, which receives about $2.1 million from the Continuum of Care program.

Federal housing officials defended the changes during a Friday press briefing, framing them as necessary reforms to increase fairness and competition among providers. “We have laid out the rules of the road,” a HUD spokesperson said. “If they want to take us up on this opportunity of funding, organizations are more than welcome. If organizations decide that adherence to certain policies or certain criteria is more important than the federal dollars, they are more than welcome to look at other sources of funding.”

The changes have drawn bipartisan concern in Congress. In October, more than a dozen House Republicans urged HUD to implement policy changes more gradually and extend existing awards to prevent housing instability. On Thursday, 42 Democratic senators, including Oregon’s Ron Wyden and Jeff Merkley, sent a letter asking HUD to “immediately reconsider” the policy changes.

Continuum of Care funding will continue normally through the end of the year. After that, federal funding becomes uncertain—and state funds are unlikely to fill the gap. Oregon has already reduced its housing agency’s 2025-2027 budget by more than $1 billion due to declining revenue forecasts.

Rural communities face particular challenges. Brooke Matthews, program manager for the Oregon Community Continuum of Care, emphasized that the 26 rural and frontier counties she represents heavily depend on federal dollars—nearly $2.8 million this year—to conduct outreach and house vulnerable populations.

“These are disabled veterans. These are people with disabilities. These are families with children,” Matthews noted.

The administration’s changes align with President Trump’s July executive order directing agencies to shift away from “Housing First” programs toward transitional housing and short-term interventions. The new guidelines cap permanent supportive housing spending at 30% of program funds—a dramatic reduction from the current allocation of nearly 90%.

HUD Secretary Scott Turner stated that the administration’s philosophy “will now define success not by dollars spent or housing units filled, but by how many people achieve long-term self-sufficiency and recovery.”

Supporters of Housing First argue that stable housing provides essential foundation for addressing other challenges and is more cost-effective than treatment-first approaches.

HUD is already facing several lawsuits over changes to grant eligibility requirements. In May, multiple local governments, including Multnomah County and the cities of Bend, Portland, and Wilsonville, sued over requirements to comply with federal immigration enforcement. A federal judge has temporarily halted implementation of those changes during litigation.

Ann Oliva, CEO of the National Alliance to End Homelessness and former HUD official across three presidential administrations, said the scope of these changes is unprecedented. “When Congress says the funds need to be used for this purpose and awarded through a national competition, that seems pretty clear that the competition should be national,” Oliva said. “When the criteria is set such that most of the country isn’t even eligible to compete fairly, that’s where a line gets crossed.”

For Oregon’s homeless service providers, the financial outlook is increasingly precarious. The state recently cut its housing budget by $1 billion, with eviction prevention programs seeing a 75% reduction from previous funding levels.

Tillamook County Commissioner Erin Skaar compared the current funding structure to “a house of cards” that could collapse if certain elements are removed. “I don’t think any of us think that somehow we’re just going to slide through this unscathed and provide all the same quantity of services we have in the past.”