McHenry County providers warn HUD rule change could slash local permanent supportive housing

McHenry County providers and staff told the county’s Public Health & Community Services Committee on Dec. 3 that a newly released U.S. Department of Housing and Urban Development (HUD) Notice of Funding Opportunity (NOFO) could sharply reduce the county’s awards for permanent supportive housing and force rapid programmatic changes.

"Last year almost 90% of the funding went to permanent supportive housing, and they're changing that now to 30%," Kelly Wagner, director of finance at Pioneer Center, told the committee, adding that the change ‘will drastically reduce the amount of permanent supportive housing here in the county.’ Wagner said the new rules also require evidence of anti-camping laws and other changes that local jurisdictions would struggle to adopt on the short timeline HUD set.

Why it matters: County staff and service providers said the combination of a much smaller share of protected, “Tier 1” funding and new eligibility requirements could force agencies to change service models, cut beds and move people back into homelessness. Carrie Friend, McHenry County’s director of homeless services, told the panel that funding reductions “by up to 71 percent” could create a bottleneck in emergency shelter and lengthen stays, undoing gains in housing stability.

What providers said: Representatives from multiple agencies described immediate operational and programmatic impacts. Aaron Neal of Thresholds highlighted the risk of additional demand as neighboring counties face similar pressures; Kristen Miller of Home of the Sparrow said the county’s rapid rehousing and permanent housing programs rely heavily on Continuum of Care (CoC) funds and urged county leaders to coordinate with the CoC and partner agencies.

County staff summary and timeline: County staff summarized the NOFO’s timeline and requirements: HUD issued the NOFO Nov. 12, project applications to the local collaborative are due Dec. 14, and the collaborative application to HUD is due Jan. 14. Staff said Tier 1 funding protections drop from roughly 90% to 30%, and that Tier 2 awards will be competitive and subject to an expanded risk review. Staff also said litigation has been filed in multiple states challenging parts of the NOFO, and that award announcements could be delayed into midyear.

Operational concerns: Committee members and providers raised practical questions about implementation. The NOFO’s anti-camping evidence requirement appears to demand countywide or municipal ordinances, which staff said could not realistically be changed through the county’s zoning process in the short window provided. Staff also described new service requirements—such as on-site treatment and expanded case-management time expectations—that could require substantial staffing and policy shifts at providers.

Funding scale: County briefings estimated roughly $22 million in CoC-related funds over two years flow through the collaborative, with staff and providers offering conservative scenarios that significant portions of those dollars could be at risk; one staff speaker characterized a plausible local funding reduction as around 60% under the NOFO as currently interpreted.

Next steps: Staff said the county and CoC are meeting frequently to prepare a collaborative application and are collecting materials from service providers. Staff noted HUD representatives suggested using planning dollars to hire experienced consultants for a third-party review. The committee requested that staff circulate the full NOFO and continue updates to the board as more legal and administrative guidance becomes available.

The committee did not take formal action on funding policy at the meeting; staff and providers said litigation and further guidance could alter the outcome.