Supportive Services Are at Risk. Here’s What You Need to Know.
Three threats affordable housing developers must confront as HUD and CoC funding shifts.
Permanent Supportive Housing is one of the most effective tools we have to address chronic homelessness. It’s evidence-based, replicable, and grounded in a simple reality: People with the highest needs succeed in housing when long-term stability is paired with consistent, targeted services.
Yet PSH is now at an inflection point. As funding through HUD and local Continuum of Care programs grows increasingly uncertain, affordable housing developers and owners face three serious threats—threats not only to project viability but to residents, communities and the integrity of public-private partnership itself.
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1. Service funding that cannot be underwritten
Affordable housing is financed for the long term. Developments using Low-Income Housing Tax Credits are underwritten for affordability periods of at least 15 years, with operating assumptions scrutinized by lenders, investors, and public agencies alike.
PSH service funding does not follow this logic. HUD CoC service dollars are awarded annually, with no guarantee of renewal across the affordability period. What was once viewed as a relatively reliable funding source has become increasingly uncertain, making PSH exceptionally difficult to underwrite responsibly.
This disconnect creates a structural flaw: Developers are asked to commit to permanent housing while relying on temporary service funding. The result is not theoretical. Deals stall or die—not because of lack of mission alignment, but because the financial assumptions no longer pencil out.
2. An impossible catch-22 for new development
Current policy design also creates a practical barrier that discourages new PSH construction altogether.
To receive HUD CoC service funding, applicants must demonstrate site control. But to close on a development and secure site control, developers must show committed service funding. This circular requirement makes it nearly impossible to align service awards with real-world development timelines.
The contrast with other federal housing tools is striking. Housing Choice Vouchers, for example, are deliberately structured to pair with long-term affordable housing development and mirror affordability requirements. PSH service funding is not. While well intentioned, the policy misalignment actively suppresses production.
At a time when communities are calling for more supportive housing, the system is quietly making less of it feasible.
3. Housing without services isn’t viable
The most serious risk emerges after a building opens.
PSH residents often include people who have experienced chronic homelessness, trauma, disability, or serious health challenges. With onsite supportive services, outcomes improve dramatically. Without it, the consequences are predictable: higher eviction rates, increased turnover, lost rent, costly vacancies, and destabilized properties—followed by a return to homelessness.
Developers and owners have welcomed vulnerable residents and service providers in good faith. Many have created 15-year operating pro formas and syndicated deals to tax credit investors based on the assumption that PSH is permanent in practice, not just in name.
Abrupt shifts in service funding—without regard for existing contracts, occupied buildings, or residents already housed—leave owners exposed and undermine confidence across the development ecosystem. This is not only a financial failure; it is a policy failure with real human consequences.
Why this moment matters
PSH is still here—and it works. According to the most recent HUD data (2024), more than 410,000 PSH units exist nationwide, with roughly one-quarter supported through CoC funding. While exact counts are difficult due to data tracking limitations, tens of thousands of people have exited homelessness through this model.
Organizations like The NHP Foundation pursue PSH because of mission and a belief in stronger, more stable communities. But mission cannot compensate for structural funding gaps. The service side of the equation must be as durable and predictable as the housing itself.
It is also important to acknowledge nuance: PSH and HUD CoC funding are not synonymous. Even within a single portfolio, only a small number of projects may be directly exposed. But that reality should prompt action, not complacency. If anything, this is the moment to fix what isn’t working—before more developments, and more residents, are put at risk.
A call for collaboration, not retreat
PSH represents one of the clearest examples of public policy aligned with evidence-based practice. Weakening one side of the partnership threatens the entire model.
Developers, service providers, CoCs, and policymakers must work together to:
- Better align service funding terms with affordability periods
- Coordinate award timing with real development cycles
- Protect existing PSH residents and contractual commitments
Absent that collaboration, we risk losing more than projects. We risk losing trust, momentum and the very outcomes PSH was designed to achieve.
Housing may be permanent—but without stable services, permanence becomes an illusion.
Eva Thibaudeau-Graczyk is director of supportive housing The NHP Foundation.
