State legislators passed a bipartisan $165 million housing bill on Wednesday afternoon, providing $40 million for emergency rental assistance and $100 million in bonds to support the maintenance and development of affordable homes. 

A small fraction of the funding – $4 million – is marked for permanent supportive housing, a strategy to prevent homelessness that has come under renewed threat from the U.S. Department of Housing and Urban Development.

Permanent supportive housing is just what it sounds like: Affordable housing paired with programs aimed at ensuring residents remain housed, without a time limit. 

Chris LaTondresse, President and CEO of Beacon Interfaith Housing Collaborative, called it “the invisible backbone of our community response to homelessness,” providing homes for thousands of Minnesotans who struggle with conditions like substance use disorder and mental illness, or who might otherwise find themselves in a shelter, a jail cell, an emergency room or on the street.

But as HUD weighs massive shifts to spending, some worry the program’s low profile has worked against it.

HUD’s proposed budget for fiscal year 2027, released on April 3, calls for the complete elimination of the grant program that provides much of the funding for supportive housing programs. The budget would, instead, allocate the dollars largely to Emergency Solutions Grants, which focus on temporary measures like emergency shelters and time-limited housing assistance.

The move comes as no surprise to the nonprofits who provide most of Minnesota’s supportive housing – they’ve been sounding the alarm since the administration’s sudden changes late last year to how funds from that same grant program could be used. In March 2026, a federal judge ruled those early efforts to be unlawful based in part on their surprise timing. But providers expect new funding guidelines, to be released by June 1, to derail their work again.

Related: Massive changes to federal funds to end homelessness reopen debate over solutions

In the wake of Operation Metro Surge, nonprofit housing providers joined a long list of causes advocating for state support. They faced long odds to convince state legislators to help close what could be a $48 million gap. But without it, they said, homelessness statewide could surge.

In an interview prior to Wednesday’s vote, State Sen. Lindsey Port, DFL-Burnsville, who chairs the Senate’s Housing and Homelessness Prevention Committee, called supportive housing funding a top priority. She worried that the program’s relative obscurity meant that some of her fellow legislators might not realize what could happen if it goes away.

“Some of these people (who depend on supportive housing) will be at risk of dying,” she said.

‘A generational federal retreat’

LaTondresse calls supportive housing “the best bang for your buck” if you want to prevent homelessness.

Minnesota Housing, a state agency addressing housing security across the state, currently funds 6,843 site-based units, with another 751 under a scattered site model, where units are placed individually instead of in a larger development. Other supportive housing units in the state receive funding from local and philanthropic sources.

In addition to providing housing at reduced rents, supportive housing programs can offer case management services, healthcare, transportation and more. Some are focused on residents with alcohol or drug use disorders, while some aim to provide financial or independent living skills.

And it simply works, providers say. Scott Cordes, the chief operating officer at Project for Pride in Living, said more than 90% of their supportive housing households maintain stable housing for two years or more.

It’s why LaTondresse is frustrated by what he calls a “generational federal retreat” on the model.

The funding issue has centered on “Continuum of Care” groups, regional bodies formed under HUD that strategize and implement plans around reducing homelessness. 

Minnesota has 10 CoCs that, collectively, received about $48 million in 2024. About 55% went to permanent supportive housing, while 27% went to “rapid rehousing,” a similar program that provides more temporary support.

Under the proposals that were eventually deemed unlawful, the Trump administration looked to cap funding for supportive housing at 30%, with the rest directed at measures like shelters and transitional housing.

While it won’t be clear exactly what the next round of CoC funding will look like until HUD publishes the Notice of Funding Opportunity later this month, it’s expected to have similar restrictions. 

HUD Secretary Scott Turner’s department said on April 30 that “harm reduction” and “housing first” programs – under which many supportive housing units would be categorized – have failed “at great cost to those suffering on our streets and to working American taxpayers.” The department’s proposed 2027 budget calls for eliminating CoCs altogether.

Related: Harm reduction saves lives. That might not be good enough.

Currently, federal funding makes up a considerable portion of many providers’ budgets. For PPL, Cordes says $1.9 million is in jeopardy, or about a third of the organization’s budget for supportive housing.

“Think about a third of that funding going away,” Cordes said. “It means that we have to drastically change and reduce the amount of services that we’d be able to provide.”

Port, who called supportive housing “the most effective tool that we have to move people from chronic homelessness out of it,” told MinnPost that strategies like emergency rental assistance and funds to build affordable homes perhaps saw more agreement among her colleagues because supportive housing is less visible.

“It’s an inside baseball game that housing folks know about,” Port said, adding that next year, the legislature will need “a much larger answer” for the millions of dollars that could be gone for good.

“If we lose those providers, we lose those units,” Port said. “And they’re not coming back.”

‘The entire thing could collapse’

Should supportive housing see its funding stripped, the Twin Cities would take a hit: Of the nearly 7,000 units funded by Minnesota Housing, more than 80% of them are located in the metro area.

But while metro housing providers may be able to lean on a larger portfolio of projects – and perhaps find some outside funding – Port said residents in Greater Minnesota could feel a more acute impact, since many of those programs are more singularly dependent on federal funding.

Catholic Charities Twin Cities manages about 1,100 units of supportive housing – 900 that the organization owns and operates, and another 200 through connections with landlords.

They help house people like Patrick, who preferred to go by his middle name. Following time spent in a local shelter, Patrick has lived in supportive housing for four months. “I’ve really, really found this to be a great stepping stone,” he said, “just an all-around good place.”

Related: I know what homelessness feels like, and solutions need to remain a policy priority

He said he’s been working with Emerge, a Minneapolis nonprofit that helps people find jobs, and that he’s already applied for several. If supportive housing services weren’t available, he said he’d likely go back to a shelter.

“I don’t even want to think about that scenario,” he said.

Keith Kozerski, Catholic Charities Twin Cities’ chief program officer, said his organization covers “the entire continuum of housing,” from diversion programs to emergency shelters to supportive housing. It’s a birds-eye view of addressing homelessness, Kozerski said, which he compared to a Jenga tower.

“If any one of those pieces gets pulled out of the puzzle,” he said, “the entire thing could collapse.”

MinnPost photojournalist Ellen Schmidt contributed reporting to this story.

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