Recovery Housing Funding Update: January 2026
Beyond HUD's Continuum of Care and Recovery Housing Program, significant funding opportunities are emerging at the state and federal level. This update covers new investments, policy shifts, and funding sources that recovery housing operators should know about heading into 2026.
State-Level Investments
Michigan: $37.5 Million from Opioid Settlement Funds
The Michigan Department of Health and Human Services (MDHHS) announced a $37.5 million investment specifically for substance use disorder (SUD) recovery housing. The funding comes from opioid settlement dollars and emphasizes data-informed strategies for improving resident outcomes.
What this means for operators: Michigan-based recovery housing providers should contact MDHHS directly for application timelines and requirements. The emphasis on "data-informed strategies" signals that operators with strong outcomes tracking will have an advantage.
Contact: Michigan Department of Health and Human Services — michigan.gov/mdhhs
Wisconsin: Young Adult Recovery Housing Initiative
The Wisconsin Department of Health Services is actively seeking partners to provide recovery residence support for individuals aged 18-24 with opioid or stimulant use disorders. This initiative aims to enhance structured living environments and track long-term recovery outcomes for a demographic that often falls through the cracks.
What this means for operators: If you serve or want to serve young adults in recovery, Wisconsin offers a model worth watching. Even if you're outside Wisconsin, similar state-level initiatives targeting the 18-24 population are likely to expand given federal priorities.
Contact: Wisconsin Department of Health Services — dhs.wisconsin.gov
Federal Funding: SAMHSA's $45 Million for Young Adult Sober Housing
In September 2025, the Substance Abuse and Mental Health Services Administration (SAMHSA) awarded over $45 million to expand sober housing specifically for young adults with opioid or stimulant use disorders.
Program focus areas:
- Housing stability for young adults in early recovery
- Overdose prevention integration
- Long-term recovery tracking and outcomes measurement
What this means for operators: This funding flows through grantees, not directly to individual operators. However, it signals strong federal prioritization of young adult recovery housing. Operators serving this population should identify SAMHSA grantees in their region and explore partnership opportunities.
More information: samhsa.gov
Policy Shifts Affecting Funding Models
Minnesota: $48 Million Redirect Toward Transitional Housing
Minnesota is redirecting $48 million from permanent supportive housing to two-year transitional programs that require work participation and addiction treatment. This shift affects housing for approximately 3,600 people and represents a significant policy pivot toward accountability-based models.
What this means for operators: Minnesota-based recovery housing providers aligned with work requirements and treatment integration may find new funding pathways opening. This also reflects the broader national trend (see: HUD's recent policy shifts) toward transitional and recovery-focused housing models.
Minnesota: New "Kickback" Law Disrupting Funding Models
A new Minnesota law now deems treatment centers' coverage of sober housing costs as illegal kickbacks. This has led to housing losses for residents who previously had their sober living expenses covered by treatment providers.
What this means for operators: If your revenue model depends on treatment center referrals paying for resident housing, this regulatory approach may spread to other states. Diversifying funding sources and building direct relationships with state programs becomes more important.
California: Potential Funding Pivot from Permanent to Transitional Housing
People Assisting The Homeless (PATH) CEO has raised concerns about a potential shift from permanent to transitional housing funding in California, which could affect $7 million in statewide Continuum of Care allocations.
What this means for operators: California operators should monitor county and state contract opportunities closely. If the shift materializes, transitional and recovery housing providers may see expanded funding access, while permanent supportive housing providers may face cuts.
The Common Thread: Data Wins Funding
Across all of these funding developments, one pattern is clear: funders are increasingly requiring outcome data to justify investments.
- Michigan's opioid settlement funding emphasizes "data-informed strategies"
- Wisconsin's young adult initiative focuses on "long-term recovery outcomes"
- SAMHSA's $45 million prioritizes "recovery tracking and outcomes measurement"
- Minnesota's $48 million redirect requires demonstrable progress toward work and treatment goals
Recovery housing operators who can document resident outcomes—sobriety rates, employment, housing stability, reduced recidivism—will be positioned to capture these funding opportunities. Those who can't may be left behind.
Action Items
This month:
- If you're in Michigan, contact MDHHS about the $37.5M opioid settlement funding
- If you serve young adults (18-24), research SAMHSA grantees in your region
- Review your current outcomes tracking—can you document the metrics funders are asking for?
This quarter:
- Diversify funding sources beyond a single stream
- Build relationships with state housing authorities before application deadlines hit
- Implement or upgrade your outcomes tracking system
How Sobriety Hub Helps
Sobriety Hub provides recovery housing operators with the tools to track and report the outcomes that funders require—resident compliance, program completion, employment status, and more. When grant applications ask for data, Sobriety Hub customers have it.
