What Utah Providers Need to Know About the FY2026 Continuum of Care Competition

The FY2026 Continuum of Care Program Notice of Funding Opportunity brings major changes for communities, providers, and people experiencing homelessness across the country. For Utah, this competition will require careful local planning, strong documentation, and difficult decisions about how projects are ranked and protected.

This year’s NOFO makes one thing very clear: not every renewal project is safe.

Funding Overview

HUD has announced approximately $4.04 billion for the FY2026 CoC Program competition. While this amount may appear large enough to cover national annual renewal demand, the structure of the competition changes how funding will be awarded. Set-asides, new national priorities, and the new tier structure mean that some existing projects may be at serious risk.

Key funding items include:

• CoC Planning Costs set at 5% of Annual Renewal Demand.

• Unified Funding Agency costs set at 3% of Annual Renewal Demand.

• At least $104 million for new Domestic Violence Bonus projects.

• At least $430 million for permanent housing projects serving families with children.

• Up to $1.3 billion set aside for new projects ranked in Tier 2, with priority for Transitional Housing and Supportive Services Only projects.

For communities across Utah, this means local ranking decisions will matter more than ever.

Tier 1 and Tier 2: A Major Shift

One of the most significant changes in the FY2026 competition is the reduction of Tier 1. In prior competitions, Tier 1 protected a much larger share of renewal funding. This year, Tier 1 is only 60% of a CoC’s Annual Renewal Demand.

Projects ranked in Tier 1 are the safest. HUD is expected to award Tier 1 projects if they meet threshold requirements and are not rejected for other reasons.

Tier 2 is much more uncertain. Tier 2 includes the remaining renewal projects, CoC Bonus projects, and DV Bonus projects. While Tier 2 projects can still technically compete, the NOFO creates a funding structure where renewal projects ranked in Tier 2 will likely not be funded.

This is a critical point for Utah providers: any renewal project placed in Tier 2 should be considered at high risk.

How HUD Will Approve or Deny Projects

HUD will use several layers of review when making funding decisions. Projects will not be evaluated only on local ranking.

HUD will consider:

• Project threshold requirements.

• Project quality standards.

• The CoC’s overall merit review score.

• The project’s Tier 2 score.

• Risk review findings.

• Availability of funds.

• HUD’s stated national priorities.

• Additional subjective factors, including whether HUD believes the project is likely to produce the expected benefits.

This gives HUD broader authority to deny projects, including projects that may have performed well locally. The risk review process has also expanded and may include public information, complaints, audit findings, financial controls, organizational capacity, compliance history, and the applicant’s ability to promote self-sufficiency and economic independence.

For providers, this means strong applications, clear documentation, compliance practices, and performance data will be essential.

What Happens First in the Selection Process

HUD will not simply fund projects from the top of every local priority list until the money runs out. Instead, HUD has created a specific selection order.

First, HUD will fund eligible CoC Planning and UFA cost applications. Then, HUD will select Tier 1 projects that meet threshold requirements. After that, HUD will look at whether the DV Bonus and family permanent housing set-asides have been met.

If those set-asides are not fully met through Tier 1, HUD will select additional qualifying projects from Tier 2. Then HUD will prioritize new Transitional Housing and Supportive Services Only projects in Tier 2 until the $1.3 billion new project set-aside is reached. Only after that will HUD consider other new Tier 2 projects, and then, if funding remains, renewal projects in Tier 2.

Because of this order, Tier 2 renewal projects are especially vulnerable.

Why Permanent Supportive Housing Matters

Permanent Supportive Housing remains one of the most important interventions for people experiencing chronic homelessness, people with disabilities, and those with the highest barriers to housing stability.

PSH provides long-term rental assistance paired with supportive services. It is especially important for individuals and families who cannot stabilize through short-term assistance alone. In Utah, PSH is a critical part of the homelessness response system, particularly for people who have experienced long-term homelessness, behavioral health challenges, disability, repeated institutional involvement, or significant housing instability.

The FY2026 NOFO includes important PSH-related changes. PSH projects that are not dedicated to chronically homeless households or designated as DedicatedPLUS may now serve people with disabilities who meet Category 2 of the homeless definition, in addition to Categories 1 and 4. This may create additional flexibility for some PSH programs.

New PSH and new Rapid Re-Housing projects also do not have to include service participation requirements. This is important because housing stability is strongest when services are accessible, voluntary, trauma-informed, and connected to the needs of the household.

At the same time, PSH renewals placed in Tier 2 are still at risk. Communities will need to carefully protect high-performing PSH projects, especially those serving people with the greatest needs.

Families with Children

HUD will award at least $430 million for permanent housing projects serving families with children. This includes Permanent Supportive Housing and Rapid Re-Housing.

This set-aside may benefit family-focused housing projects, but it also creates another layer of competition. Communities will need to be clear about which projects serve families, how those projects perform, and how they connect families to long-term stability.

Domestic Violence Bonus Projects

The FY2026 NOFO sets aside at least $104 million for new DV Bonus projects. Transitional Housing is now an eligible project type for the DV Bonus.

However, DV Bonus projects no longer receive special protection. They must be ranked and scored, and if they are not selected in Tier 1, they will compete in Tier 2 based on HUD’s selection process.

This is a major change for victim service providers and CoCs working to preserve survivor-centered housing options.

New Priorities for Transitional Housing and Supportive Services Only Projects

HUD has created a $1.3 billion set-aside for new projects in Tier 2, with priority for new Transitional Housing and Supportive Services Only projects.

This is a significant shift. While PSH and RRH remain eligible project types, the

NOFO prioritizes new TH and SSO projects within the Tier 2 set-aside. New

Transitional Housing projects must also include individualized services that result in at least 20 hours per week of engagement in services, activities, or employment for most participants.

New SSO-Street Outreach projects must demonstrate a history of, or plan for, partnering with first responders and law enforcement.

Merit Review and Local System Performance

The former CoC scoring criteria are now part of a merit review process worth 200 points, with up to 20 additional bonus points available.

HUD will evaluate CoCs on project review and ranking, system performance, coordination, and engagement. New scoring areas include:

• Reductions in homelessness since 2024.

• Reductions in encampments or people living in encampments.

• The percentage of participants exiting CoC-funded housing to unsubsidized housing.

• Employment income growth.

• Coordination with public officials, law enforcement, healthcare, workforce systems, recovery housing, and courts.

• Availability of treatment and recovery services.

• Supportive service participation requirements.

• Data sharing with government partners.

• Partnerships with Public Housing Authorities.

• Responses to families, youth, veterans, survivors, justice-involved individuals, high utilizers of healthcare systems, older adults, and chronically homeless households.

These criteria represent a major change in how HUD is evaluating local homelessness response systems.

CoC Bonus and Reallocation

CoCs may apply for new projects through the CoC Bonus or reallocation process. Eligible project types include Supportive Services Only, Transitional Housing, Permanent Supportive Housing, Rapid Re-Housing, Dedicated HMIS, and SSO-Coordinated Entry.

However, replacement and transition opportunities are more limited this year. Communities considering reallocation from permanent housing to transitional housing should be especially cautious, because current PSH and RRH participants are housed and may not automatically be eligible for transitional housing.

Any reallocation decision should be made carefully, transparently, and with a clear understanding of how it may affect people currently housed.

What Utah Providers Should Do Now

Utah providers should prepare early and assume this will be a highly competitive and high-risk funding year.

Providers should:

• Review current project performance.

• Strengthen documentation of outcomes, compliance, and financial management.

• Prepare clear narratives about who the project serves and why the intervention matters.

• Identify whether projects serve families with children, chronically homeless households, survivors, veterans, youth, older adults, justice-involved individuals, or people with disabilities.

• Document partnerships with healthcare, behavioral health, workforce, public housing, legal, and community systems.

• Review risk factors that could affect HUD’s evaluation.

• Understand that Tier 2 renewal projects are unlikely to be funded.

• Advocate locally for the protection of critical PSH and high-performing housing projects.

The Bottom Line

The FY2026 CoC competition is not business as usual. The reduction of Tier 1 to 60%, the creation of a $1.3 billion new project set-aside, the prioritization of new Transitional Housing and Supportive Services Only projects, and HUD’s expanded authority to deny applications all create serious risk for existing renewal projects.

For Utah, the stakes are high. Permanent Supportive Housing, Rapid Re-Housing, survivor housing, youth housing, and family housing programs all play an important role in preventing and ending homelessness. As communities respond to this NOFO, the Utah Housing Coalition will continue to support transparent planning, strong local coordination, and the protection of housing resources that keep Utahns safely and stably housed.