On November 13, 2025, the U.S. Department of Housing and Urban Development issued a sudden and sweeping revision to the fiscal year 2025 Continuum of Care Notice of Funding Opportunity. The change fundamentally altered how the nation’s largest federal homelessness response program could be used, placing a 30 percent cap on permanent housing investments for people experiencing homelessness.
On December 8, HUD temporarily withdrew the revised NOFO just hours before a scheduled federal court hearing challenging the policy. While the pause provides short-term relief, the underlying policy shift and its potential consequences for Texas communities remain unresolved.
Why the FY 2025 NOFO Posed an Immediate Risk to Texas
Texas Continuums of Care rely heavily on Permanent Supportive Housing and Rapid Rehousing as the foundation of their homelessness response systems. Most Texas CoCs currently dedicate between 81 and 92 percent of their funding to permanent housing models. This reflects decades of evidence-based planning, coordination with local governments and service providers, and alignment with federal policy that has long prioritized housing stability as the most effective solution to homelessness.
The revised NOFO would have reversed that framework overnight. By imposing a federal cap on permanent housing investments, the policy would not have trimmed excess capacity. It would have cut directly into the core of Texas’ homelessness infrastructure.
National partners estimate that at least 170,000 people nationwide could lose access to permanent housing under the revised NOFO. Texas, with some of the largest CoCs in the country and a strong reliance on permanent housing, would be among the hardest-hit states.
Texas Impact Based on National Modeling
Using publicly available HUD data, including 2025 Annual Renewal Demand, 2024 CoC award announcements, and the most recent Housing Inventory Count, national partners modeled the projected state and local impacts of the permanent housing cap.
Under this analysis, Texas would stand to lose approximately $114.6 million in CoC funding statewide, along with nearly 9,700 permanent housing beds. The largest losses would occur in the state’s major metropolitan regions, where CoCs serve tens of thousands of people each year.
Using the Alliance’s Texas-specific modeling, the projected losses for Texas CoCs are:
| Texas CoC | % to PH | Funding Loss | Housing Beds Lost |
|---|---|---|---|
| TX-500 San Antonio/Bexar County | 81% | $10,896,769 | 837 |
| TX-503 Austin/Travis County | 82% | $7,454,737 | 670 |
| TX-600 Dallas City & County/Irving | 92% | $21,401,087 | 2,041 |
| TX-601 Fort Worth/Arlington/Tarrant | 87% | $13,158,426 | 966 |
| TX-603 El Paso City & County | 81% | $2,297,037 | 228 |
| TX-604 Waco/McLennan County | 54% | $793,103 | 61 |
| TX-607 Texas Balance of State (BoS) | 88% | $13,832,743 | 1,201 |
| TX-611 Amarillo | 50% | $135,352 | 9 |
| TX-624 Wichita Falls/WiseÐRegion CoC | 100% | $232,453 | 24 |
| TX-700 Houston/Harris & Surrounding Counties | 91% | $44,058,807 | 3,600 |
| TX-701 Bryan/College Station/Brazos Valley | 92% | $303,363 | 42 |
Lawsuits Force a Pause but Not a Resolution
In response to the revised NOFO, twenty states, along with local governments and national organizations including the National Low Income Housing Coalition, filed suit arguing that HUD unlawfully rewrote federal homelessness policy and contradicted congressional intent.
On December 8, HUD rescinded the NOFO shortly before a federal court hearing, stating that it needed time to assess the issues raised in the lawsuits and to develop a revised funding notice. The presiding judge sharply criticized the agency’s last-minute approach and ordered HUD to submit updated arguments.
HUD has indicated that it intends to reissue a revised NOFO and has framed the withdrawal as temporary. A key court hearing on the plaintiffs’ request for a preliminary injunction is scheduled for December 19, 2025.
What This Means for Texas Housing Providers
For Texas, the pause provides breathing room but not certainty. The revised NOFO exposed how vulnerable Texas homelessness systems are to abrupt federal policy changes, particularly when those changes disregard local data and established best practices.
If similar restrictions return in a revised funding notice, Texas providers could face forced reductions in Permanent Supportive Housing and Rapid Rehousing capacity, including programs layered with Housing Credits. The ripple effects would extend beyond housing providers to hospitals, emergency responders, school districts, and local governments already under strain.
TAAHP will continue monitoring the litigation and HUD’s next steps and will coordinate with national partners to assess implications for Housing Credit properties, permanent housing operations, and member stability across Texas. We will keep members informed as this situation develops and as more clarity becomes available.