Southeast TN FY2025 HUD CoC NOFO Impact Briefing

Below is a comprehensive briefing on the anticipated impact of the newly released FY2025 HUD CoC grant NOFO. It opens with an executive summary concludes with the full report. A downloadable version of the report is also available.

Southeast TN FY2025 NOFO Impact Briefing.pdf

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Executive Summary:

FY2025 HUD CoC NOFO Impact

on Chattanooga & Southeast Tennessee

The FY2025 HUD Continuum of Care (CoC) NOFO introduces significant changes to federal homelessness funding that will substantially affect Chattanooga and Southeast Tennessee. The new framework reduces protected Tier 1 funding to 30 percent of the Annual Renewal Demand (ARD) and imposes a strict 30 percent cap on Permanent Housing (PH) expenditures (which includes PSH, RRH, and Joint TH/RRH projects). Because the region currently invests approximately $4.2 million of CoC funding in such PH programs—well above the new cap—roughly $2.85 million of existing PH funding would need to be reduced or reclassified without new local investment.

Using cost-per-bed estimates and capacity figures from the 2025 Southeast Tennessee State of Homelessness Report, this funding reduction corresponds to an estimated loss of 567 PH beds. When applying conservative annual turnover rates, the loss of these beds results in approximately 397 fewer exits from homelessness per year.

The most recent PIT Count estimated 1,092 individuals experiencing homelessness across the Southeast Tennessee region. In the absence of additional, coordinated local investment, homelessness is projected to rise by 450 to 685 individuals over the next 12 months, including 275 to 410 more unsheltered individuals, as a result of the new NOFO.

These increases represent the mathematical consequences of reduced permanent housing capacity in a system already facing significant shortages and rising unsheltered homelessness. Protecting Chattanooga’s homelessness response system will require local strategic investment to replace lost PH capacity and support shelter expansion, diversion efforts, and youth and survivor programs newly vulnerable under the 2025 NOFO.

Southeast TN Continuum of Care Briefing:

FY2025 HUD CoC NOFO Impact on Southeast Tennessee

I. Introduction

This briefing provides a comprehensive evaluation of the expected effects of the FY2025 HUD Continuum of Care (CoC) Notice of Funding Opportunity (NOFO) on Chattanooga and the broader Southeast Tennessee (TN-500) region. The FY2025 NOFO introduces substantial structural changes to federal homelessness funding, including a reduction of Tier 1 protected funding to 30 percent of the Annual Renewal Demand (ARD) and a strict 30 percent cap on Permanent Housing (PH) investments (which includes PSH, RRH, and Joint TH/RRH projects). Because Southeast Tennessee currently allocates approximately $4.2 million in CoC funds to such PH projects, these changes carry significant implications for the region’s homelessness response system.

II. Overview of FY2025 HUD CoC NOFO Changes

The FY2025 NOFO departs sharply from historical CoC funding structures. Previously, 90 percent of the ARD was protected within Tier 1; under the new framework, only 30 percent is protected, leaving the remaining 70 percent competitively scored in Tier 2 (nationally, not regionally). The NOFO further caps PH expenditures at 30 percent of the total award, requiring substantial reductions or conversions in PSH, RRH, YHDP, and DV-funded programming. YHDP and DV Bonus renewals are no longer protected categories and must compete alongside all other projects.

HUD’s revised priorities also emphasize mandatory service participation, structured transitional housing, work-requirements, street-level engagement aligned with public safety initiatives, expansion of camp displacements, and additional compliance requirements. These shifts alter both project design and CoC-level scoring.

III. Local Context and System Conditions

The 2025 Southeast Tennessee State of Homelessness Report documents significant unmet needs at present across the region’s homelessness response system. The 2025 Point-in-Time count identified 1,092 people experiencing homelessness, a 12 percent increase from the prior year, with approximately 60 percent living unsheltered. The Housing Inventory Count lists 901 year-round beds across all project types, far short of estimated need.

Current PH capacity includes 433 PSH beds and 155 RRH beds; however, system modeling indicates a need for roughly 700 PSH beds and 255 RRH beds to meet demand. Shelter capacity is estimated to meet only 22 percent of the region’s required year-round need. YHDP and DV programs have produced meaningful improvements in youth and survivor outcomes but will no longer receive protected renewal status.

IV. Quantitative Impact Model

Southeast Tennessee currently allocates approximately $4.2 million to PH-related CoC programs. Under the FY2025 NOFO, the PH cap is $1,348,405, requiring a reduction or reclassification of approximately $2.85 million. Using locally documented per-bed funding, this reduction corresponds to an estimated loss of 567 PH beds.

Applying conservative turnover rates—1 exit per RRH bed, 0.25 exits per PSH bed, and 1.3 exits per youth/DV bed—the projected reduction in permanent exits from homelessness is approximately 397 individuals annually. Assuming system inflow remains stable, this reduction in exits, combined with limited shelter capacity, results in a projected increase of 450 to 685 individuals experiencing homelessness within 12 months, including 275 to 410 unsheltered individuals.

V. Implications for Regional Policy and Governance

The region's homelessness response system is heavily dependent on CoC-funded PH programs. Under the FY2025 NOFO, Chattanooga and Southeast Tennessee will likely need to identify supplemental local funding sources to preserve or expand PSH and RRH capacity. Without such investment, reductions in PH programming will produce significant increases in unsheltered homelessness, encampment density, EMS and law enforcement utilization, and chronic homelessness. Youth and DV programs face particular vulnerability under the new competitive structure.

VI. Conclusion

The FY2025 CoC NOFO represents a major inflection point for federal homelessness policy and for Southeast Tennessee's homelessness response infrastructure. Absent local intervention, mathematically driven reductions in PH capacity will result in substantial increases in homelessness over the next one to two years. Strategic local planning and investment will be essential to stabilize system capacity and mitigate projected increases in unsheltered homelessness.