42 U.S.C. § 11381 · 24 CFR Part 578 · HEARTH Act

Continuum of Care & PSH.

HUD's principal funding stream for permanent supportive housing — operating subsidies for the deeply affordable, services-rich housing model that serves chronically homeless households and persons with disabilities.

~$3.9B
FY 2025 CoC NOFO total
~400
local Continuums of Care
30% income
tenant rent contribution
116K+
HUD-VASH vouchers awarded
Updated May 11, 2026 · Post-OBBBA landscape

What the Continuum of Care does

The Continuum of Care (CoC) Program, authorized by the Homeless Emergency Assistance and Rapid Transition to Housing (HEARTH) Act of 2009 which amended the McKinney-Vento Homeless Assistance Act, is the principal federal funding stream for permanent supportive housing (PSH), transitional housing, and supportive services for persons experiencing homelessness. It is administered by HUD's Office of Special Needs Assistance Programs (SNAPS) under 24 CFR Part 578.

The program operates through approximately 400 local Continuums of Care — geographic collaboratives of housing providers, government agencies, healthcare systems, and homeless service organizations — that compete annually for HUD CoC funding. The FY 2025 CoC NOFO totaled approximately $3.9 billion, of which approximately $3.5 billion was allocated to the CoC Program proper (with the remainder covering Youth Homelessness Demonstration Program, Domestic Violence Bonus, and supplemental renewals). The CoC Program funds five program components per 24 CFR § 578.37: Permanent Housing (with Permanent Supportive Housing and Rapid Re-Housing as subtypes), Transitional Housing, Supportive Services Only, HMIS, and Homelessness Prevention (limited to CoC-designated high-performing communities).

Permanent Supportive Housing in detail

PSH combines deeply affordable housing — tenants pay the highest of 30% of adjusted income, 10% of gross income, or the welfare rent; CoC PSH has no statutory AMI income cap, though chronically homeless residents typically have incomes well below 30% AMI in practice — with intensive supportive services for chronically homeless individuals and families and persons with disabilities. CoC PSH operating subsidies cover the gap between tenant rent contributions and operating costs, functioning analogously to project-based Section 8 in compliance and rent-setting mechanics but with the explicit purpose of serving formerly homeless households.

What CoC PSH funding pays for

  • Leasing. Lease costs for PSH units rented from private landlords or master-leased by the recipient.
  • Rental assistance. Tenant-based, sponsor-based, or project-based rental assistance. Project-based rental assistance grants may cover up to 15 years in a single competition; participants hold leases of at least one year. Renewals are subject to annual appropriations.
  • Supportive services. Case management, behavioral health services, employment assistance, life-skills training, and other services that maintain housing stability.
  • Operating costs. Maintenance, utilities, insurance, and other operating expenses of CoC-funded housing.
  • HMIS data costs. Costs associated with operating the Homeless Management Information System.
  • Administrative costs. Up to 10% for recipient and subrecipient administration.

Eligible PSH participants

  • Chronically homeless individuals and families, defined as homeless for at least 12 months continuously or 4 episodes totaling 12 months in 3 years, with a diagnosed disabling condition.
  • Homeless individuals and families with disabilities (broader than chronically homeless).
  • The CoC's prioritization policies may further restrict admission to specific sub-populations (e.g., chronic homelessness, veterans, families with children).

Labor standards — Davis-Bacon

CoC PSH new construction and rehabilitation does not trigger federal Davis-Bacon prevailing-wage requirements. 24 CFR 578.99(h) states expressly: “The provisions of the Davis-Bacon Act do not apply to this program.” CoC leasing, tenant-based rental assistance, sponsor-based rental assistance, supportive services, and HMIS activities are likewise outside Davis-Bacon. State and local prevailing-wage laws apply independently. PSH deals layered with LIHTC + HOME/HTF/HUD-insured financing carry Davis-Bacon obligations through each layered federal source at its own threshold.

LIHTC pairing

CoC PSH is regularly paired with 4% or 9% LIHTC to create deeply affordable, supportive-service-rich permanent housing. LIHTC equity finances the capital stack; soft debt (HOME, HTF, state, philanthropic) fills the remaining gap; CoC project-based rental assistance (typically SBRA or PBRA) covers operating shortfalls at deep-affordability rents. CoC grant funds used as a capital subsidy reduce LIHTC eligible basis under IRC § 42(d)(5)(A); operating rental assistance does not affect basis. Supportive services are funded by CoC, Medicaid (where state Medicaid pays for tenancy supports), and philanthropic sources — delivered by a partner agency rather than the LIHTC owner.

For full capital-stack mechanics — CoC-as-loan structuring, Medicaid HCBS waiver integration, and supportive-housing operating-budget math — see the dedicated guide: LIHTC Deal Structures Guide.

HUD-VASH

HUD-VASH is a joint HUD/Department of Veterans Affairs program that pairs HUD Housing Choice Voucher rental assistance (administered by local public housing authorities) with VA case management and clinical services for homeless veterans. Statutory authority sits at 42 U.S.C. § 1437f(o)(19) (Section 8(o)(19) of the U.S. Housing Act of 1937); voucher administration follows the HCV framework at 24 CFR Part 982. HUD-VASH is administratively a Housing Choice Voucher program rather than a CoC program but is functionally part of the homeless services system and often serves veteran tenants in CoC-supported PSH projects. HUD has awarded over 116,000 HUD-VASH vouchers since 2008 (including Tribal HUD-VASH) per VA program reporting. Annual appropriations for new HUD-VASH vouchers have varied widely; FY2025 enacted only $15 million for new vouchers, well below the FY2008–FY2021 historical range.

Post-OBBBA implications

OBBBA did not amend the McKinney-Vento Act or the CoC Program. Practitioners should monitor annual HUD CoC NOFOs for application timelines and any year-over-year policy changes in funding priorities, prioritization requirements, or scoring criteria.

Sources

  • McKinney-Vento Homeless Assistance Act, 42 U.S.C. § 11381 et seq.
  • HEARTH Act of 2009, P.L. 111-22
  • 24 CFR Part 578 (CoC Program regulations)
  • HUD FY 2025 Continuum of Care NOFO
  • HUD-VASH program: 42 U.S.C. § 1437f(o)(19); 24 CFR Part 982 (HCV program regulations)
  • IRC § 42(d)(5)(A), federal subsidy basis-reduction rule
  • P.L. 119-21, One Big Beautiful Bill Act, enacted July 4, 2025

Disclaimer

CoC funding is awarded through annual HUD NOFOs to local Continuums of Care, which subgrant to project recipients. Eligibility, funding levels, and project-type allocations vary by CoC. Practitioners should consult the relevant local CoC, the current HUD CoC NOFO, and HUD's CoC Program rules before structuring a transaction. This is educational content and is not legal, tax, or financial advice.