What's Happening Right Now
The U.S. Department of Housing and Urban Development (HUD) just made the biggest policy shift in decades for how America funds housing for people experiencing homelessness and addiction. And if you operate recovery housing, this is the moment you've been waiting for.
The headline: More than half of HUD's 2026 Continuum of Care (CoC) funding—roughly $3.9 billion total—is being redirected from permanent supportive housing to transitional housing and recovery-focused programs. That's a massive redirection of federal dollars toward exactly what you do.
The deadline: Applications opened November 13, 2025 and close January 14, 2026. Awards are expected around May 1, 2026.
The Numbers That Matter
- $3.9 billion in total CoC funding available for 2026
- 30% cap on permanent housing projects (down from 87%)
- 70% of projects now must compete (up from 10% under previous administration)
- 170,000+ individuals potentially impacted by the shift
- ~7,000 awards expected to be issued
The message from HUD Secretary Scott Turner is clear: "Our philosophy for addressing the homelessness crisis will now define success not by dollars spent or housing units filled, but by how many people achieve long-term self-sufficiency and recovery."
Why This Matters for Recovery Housing Operators
For years, recovery housing has been fighting for recognition and funding while federal dollars poured into permanent supportive housing models that often allowed active substance use. That's changing—fast.
The Old Way vs. The New Way
Before: Federal policy prioritized "Housing First" models where permanent housing came with minimal requirements. In San Francisco alone, this approach correlated with a 30% increase in homelessness and high overdose rates in supposedly "supportive" units.
Now: HUD is prioritizing programs that require:
- Sobriety or active recovery participation
- Work or service engagement
- Measurable outcomes around independence and self-sufficiency
- Time-limited transitional support (up to 2 years)
This isn't just a funding tweak—it's a philosophical realignment that puts recovery-focused transitional housing at the center of federal homelessness policy.
Four Major Funding Opportunities Opening Up
1. Continuum of Care (CoC) Transitional Housing Grants
What it is: The primary HUD funding stream for housing and services. With the new 30% cap on permanent housing, CoCs nationwide need transitional housing partners.
Who can apply: Nonprofit organizations, state and local governments, or faith-based organizations working with your local CoC lead agency.
Funding amount: Awards range from $2.5 million minimum to $25 million maximum per project.
Key requirements:
- Programs must provide supportive services alongside housing
- Maximum 24-month stays for residents
- Residents must have lease, sublease, or occupancy agreement
- Focus on wraparound services: mental health treatment, substance abuse support, job assistance
Action steps:
- Contact your local Continuum of Care coordinator immediately
- Express interest in becoming a transitional housing provider
- Review the CoC NOFO (Notice of Funding Opportunity) released November 13
- Prepare documentation of your track record and outcomes data
- Submit applications by January 14, 2026
Pro tip: CoCs are scrambling to meet the new transitional housing requirements. If you're NARR-certified and have good outcomes data, you're in high demand right now.
2. Recovery Housing Program (RHP)
What it is: State-administered HUD funding specifically for recovery housing serving individuals with substance use disorders.
Current opportunities:
- Indiana: Applications open now through December 21, 2025 (proposals) and February 22, 2026 (full applications). Up to $750,000 per project available.
- Multiple states received RHP allocations and are opening funding rounds throughout 2026
Eligible activities:
- Property acquisition or rehabilitation
- Lease, rent, and utility payments for up to 2 years per resident
- Services coordination and case management
- Expanding existing programs or starting new ones
Who can apply: Local governments, tribal entities, and nonprofit partners
Action steps:
- Check if your state received RHP funding allocation
- Connect with your state housing authority or community development office
- Partner with a local government if you're a nonprofit
- Document your ability to serve low-to-moderate income populations
- Prepare evidence of community need and your organizational capacity
3. Faith-Based and Community Organization Partnerships
What's new: The Trump administration's Executive Order 14321 explicitly encourages HUD to work with faith-based organizations and community groups. The White House Faith Office is directly involved in CoC implementation.
Why this matters: If you're a faith-based recovery housing operator, you now have preferential positioning for federal partnerships.
Funding mechanisms:
- Direct CoC awards
- Solo Applicant process (HUD can award funds outside traditional CoC competition)
- Special consideration in scoring criteria
Action steps:
- Document your faith-based or community organization status
- Highlight peer support, community integration, and values-based programming
- Connect with other faith-based providers in your area for collaborative applications
- Emphasize accountability measures and outcome tracking
4. Second Chance Act & Justice-Involved Population Programs
What it is: Department of Justice funding for reentry programs, including transitional housing for people leaving incarceration.
Why it aligns: The new HUD policy emphasizes accountability and self-sufficiency—exactly what reentry populations need. Recovery housing for justice-involved individuals checks multiple boxes.
Funding available: Various grant amounts through Bureau of Justice Assistance
Action steps:
- If you serve justice-involved populations, emphasize this in applications
- Partner with probation/parole departments and reentry programs
- Track recidivism reduction and employment outcomes
- Consider Level 2 or 3 certification to demonstrate appropriate support levels
What HUD Is Looking For (How to Win These Grants)
The new funding priorities are crystal clear. Here's what will score well:
1. Measurable Outcomes—Not Just Occupancy
HUD's new metrics emphasize:
- Sobriety rates during and after program completion
- Employment gains and income increases
- Independence measures (moving to permanent housing)
- Reduced emergency services usage (hospital, police, jail)
What this means for you: Start tracking these now if you're not already. Programs like Recovery Resolutions boast a 95% success rate—that's the kind of data that wins grants.
2. Evidence-Based Service Models
Programs that will score highest:
- Partnerships with clinical treatment providers
- Integration with employment services and job training
- Life skills programming (financial literacy, parenting, etc.)
- Peer support and recovery coaching
What this means for you: Get certified if you're not. Document your partnerships. Show how services connect to outcomes.
3. Work and Service Requirements
The new policy explicitly supports programs requiring:
- Work participation or active job search
- Treatment program engagement
- Educational or vocational training participation
- Community service contribution
What this means for you: If your program already has these requirements, highlight them prominently. If not, consider adding structured programming.
4. Community Coordination
Strong applications demonstrate:
- Collaboration with local CoCs and homeless services
- Referral relationships with treatment centers
- Partnerships with workforce development programs
- Coordination with healthcare and mental health providers
What this means for you: Build these relationships now. MOUs (Memorandums of Understanding) and partnership letters strengthen applications significantly.
State-by-State Opportunities to Watch
Several states are already moving aggressively on the new funding priorities:
Indiana
- Recovery Housing Program actively accepting applications (Dec 21 & Feb 22 deadlines)
- Up to $750,000 per project
- Strong rural focus
California
- Facing massive pressure to adopt sobriety-focused models after $30 billion in spending correlated with 31% homelessness increase
- Local jurisdictions likely to shift funding away from failed Housing First approaches
- Watch for new state and county RFPs in 2026
Ohio
- Strong emphasis on outcomes tracking (abstinence, employment, wellbeing)
- Active state support for recovery housing infrastructure
- NARR affiliate providing strong technical assistance
North Carolina
- Multiple RHP funding rounds through state Commerce Department
- October 2024 round awards announced in November 2024
- Watch for 2026 reopening
Other states to watch:
Contact your state housing authority about RHP allocations and upcoming funding rounds: Maine, Oklahoma, West Virginia, and states with active NARR affiliates.
The Challenges (What You Need to Know)
This shift isn't without controversy and complications:
Timing Pressure
Many current grants expire January-June 2026, but new awards won't be issued until May 2026 at the earliest. This creates a funding gap that could displace residents.
What this means for you: If you're currently HUD-funded, prepare for potential funding interruptions. If you're new to HUD funding, this transition period creates opportunities to step in.
Competitive Landscape
70% of CoC projects must now compete (vs. auto-renewal). Everyone's competing for the same pot of money.
What this means for you: Your application must be strong. Outcomes data, partnerships, and track record matter more than ever.
Capacity Requirements
Transitional housing requires significant operational capacity:
- Case management (1:15 ratio recommended)
- 24/7 staffing or on-call support
- Coordinated entry system participation
- HMIS data reporting
- Regular inspections and compliance
What this means for you: Don't overextend. Start with one quality program and grow from there.
Action Plan: What to Do This Week
Immediate Steps (This Week)
- Contact your local CoC coordinator
- Find them at hudexchange.info/programs/coc
- Express interest in becoming transitional housing provider
- Ask about current gaps and priority populations
- Check your state RHP status
- Visit your state housing authority website
- Search for "Recovery Housing Program" or "SUPPORT Act funding"
- Sign up for grant announcements
- Assess your readiness
- Do you track outcomes? If not, implement tracking now
- Do you have partnerships documented? Start getting MOUs signed
- Review the CoC NOFO
- Download from hudexchange.info
- Note scoring criteria and priorities
- Identify which program components fit your operation
Short-Term Steps (Next 30 Days)
- Build your data story
- Compile success rates, employment outcomes, sobriety data
- Get resident testimonials and case studies
- Calculate cost savings (reduced emergency services, incarceration avoided)
- Strengthen partnerships
- Meet with treatment centers, probation departments, workforce programs
- Formalize referral relationships
- Get letters of support for applications
- Prepare your application materials
- Organizational capacity documentation
- Financial statements and audit reports
- Program descriptions and service models
- Outcomes data and success metrics
- Consider collaborative applications
- Partner with other recovery housing operators
- Team up with treatment providers
- Work with your local CoC to identify gaps you can fill together
Long-Term Positioning (Next 90 Days)
- Technology and tracking systems
- Implement robust case management software (this is where Sobriety Hub comes in)
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- Set up outcomes tracking and reporting systems
- Diversify funding streams
- Don't rely on one source
- Pursue federal, state, local, and private funding
- Build sustainable resident fee structures
- Advocacy and visibility
- Share your outcomes publicly
- Engage with policymakers
- Build community support for recovery housing
The Bottom Line
This is the biggest opportunity for recovery housing operators in a generation. HUD is redirecting billions toward exactly what you do—providing accountability-based transitional housing that helps people achieve lasting recovery and independence.
But the window is short. Applications close January 14, 2026 for the first round of CoC funding under the new rules. State RHP programs are opening now.
The operators who will benefit most are those who:
- Act quickly to position themselves with local CoCs
- Have strong outcomes data to demonstrate effectiveness
- Can show evidence-based programming and proper certification
- Build solid partnerships across treatment, employment, and housing sectors
- Document everything with robust tracking systems
The federal government is finally putting its money where recovery housing has been all along—on programs that require accountability, provide wraparound support, and measure success by how many people achieve self-sufficiency, not just how many beds are filled.
This is your moment. The funding is there. The policy priority is clear. Now it's time to position your program to capture these opportunities and scale your impact.
Resources
Key websites:
- HUD CoC Program: hudexchange.info/programs/coc
- Recovery Housing Program: hudexchange.info/programs/rhp
- SAMHSA Resources: samhsa.gov/recovery-housing
- Grant opportunities: grants.gov
Important documents:
- Executive Order 14321: "Ending Crime and Disorder on America's Streets"
- CoC Program NOFO FY2025 (released Nov 13, 2025)
- Recovery Housing Best Practices (SAMHSA)
- RHP Program Models Quick Guide (HUD)
State contacts: Check your state housing authority website or contact:
- State Office of Community Affairs/Rural Development
- State Substance Abuse Agency
- State NARR Affiliate
- Local CoC Coordinator
Need help positioning your recovery housing program for these funding opportunities? Strong outcomes tracking and data management are essential for competitive applications. Learn how Sobriety Hub can help you demonstrate your impact and streamline compliance at sobrietyhub.com.