Supportive Housing, and Other Solutions Proposed in This Legislative Session

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One of the first bills passed by the Minnesota House of Representatives in the 2026 Legislative Session was House File 3425. The legislation, authored by State Representative Michael Howard (DFL–Richfield), directs $9 million from the Strengthen Supportive Housing Program to recipients of the federal Continuum of Care Program, which provides permanent supportive housing in many areas of Minnesota. This is a budget-neutral bill because this funding is coming from an existing appropriation from 2023.

Supportive housing providers in Minnesota have for decades built the state’s homelessness response system, assisting individuals, youth, and families with access to both stable housing and services. In 2025, the Trump administration halted funds to previously approved HUD projects, including a drastic cut to Continuum of Care permanent supportive housing. This left 3,000 supportive housing units throughout Minnesota in limbo, unsure if and when they would receive funds. The millions in federal dollars cut by the U.S. Department of Housing and Urban Development are currently being challenged in court.

This infusion of $9 million will help supportive housing providers stay open in 2026. The potential permanent funding loss for supportive housing providers could be more than $50 million per year, underscoring the need for permanent funding solutions at the federal and state level.

The House legislation passed on a vote of 103-31. Companion bill SF3425 passed the Senate, with a vote of 39-28. It was one of the first four bills signed into law from this legislative session on March 27.

The proposal was part of a broader effort at the Capitol this session: stabilizing programs that serve people already experiencing homelessness while also increasing the number of homes available to people at risk of losing housing.

 

 

Why Supportive Housing Matters

Supportive housing pairs affordable rental assistance with case management and services, often for people with complex needs — such as chronic health conditions, substance use disorders, or severe mental illness. Minnesota providers have relied heavily on federal Continuum of Care (CoC) grants from the U.S. Department of Housing and Urban Development (HUD) to fund these programs since the 1990s. But the Fiscal Year 2025 notice of funding opportunities was rescinded.

The bill directs $9 million to Minnesota’s Continuum of Care grantees — the nonprofit and local government partnerships that administer federal homelessness programs — to keep services operating if federal funding gaps emerge. Another $1 million would go toward related supportive housing efforts. “These programs work,” Howard told lawmakers. “They prevent homelessness and create a pathway out of it.”

Supportive housing is considered one of the most effective responses to chronic homelessness. Nationally, programs pairing housing with services often report housing retention rates above 80 to 90 percent, according to federal housing data. But the model only works if funding for services is stable.

Kristine Davis, executive director of Hearth Connection, and Anne Smetak, director and senior counsel for housing system response of the Housing Justice Center, prepared documentation in February 2026 indicating that people in supportive housing:

• are able to stay out of shelters
• have better preventative and crisis health care
• reduces justice system interaction
• improves child welfare
• is cost-effective strategy to reduce homelessness

Find details here.

The Stakes for Greater Minnesota

The funding uncertainty could hit rural and Greater Minnesota communities particularly hard. Unlike larger cities, many rural housing programs depend almost entirely on federal grants. Local governments and private philanthropy often lack the resources to fill gaps. Howard said if providers lose funding and have to shut down programs, the result could be immediate. “The people who are in those programs don’t have another place to go,” he said.

Supportive housing providers typically serve people who have already cycled through emergency shelters, hospitals, or the criminal justice system. Without stable housing, many return to those systems — often at far greater public cost. Research consistently shows that providing housing with services reduces expensive emergency interventions, including hospital stays and jail bookings.

Support for the bill has crossed party lines, with Republican lawmakers also highlighting the human consequences of losing housing services. Rep. Spencer Igo (R-Wabana Township) described a ride-along he took with police in Grand Rapids. The night ended with a commotion at the docks, where a woman had attempted to drown herself. Emergency responders recognized her immediately.

“Everyone knew her name,” Igo said — sheriff’s deputies, emergency room staff, police officers. The woman had been through repeated mental health crises.Without housing and services, he said, situations like that can become recurring emergencies.“Why do I tell this story now?” Igo said. “Because without continuum of care services, this person is back on the street and back in harm’s way.”

He called HF3425 a practical step the legislature can take while broader funding issues are resolved. “It’s a good bill because we can provide help when it’s needed,” he said.

Building Housing — Not Simply Preserving 

While the bill focused on stabilizing existing programs, Minnesota lawmakers are also debating several proposals aimed at expanding housing supply. Housing advocates say both approaches are necessary: keeping people housed today while building enough homes to prevent homelessness tomorrow.

Several proposals under consideration this session target structural barriers that limit new housing development. These include:

• Revisions to the “Starter Homes Act,” which supporters say could allow cities more flexibility to permit smaller and more affordable homes.
• Limits on private equity purchases of single-family homes, aimed at keeping more entry-level houses available for residents instead of large investment firms.
• Changes to local housing regulations, including restrictions on certain homeowners association mandates.

Together, supporters say these policies could help expand the availability of lower-cost housing — a key factor in preventing homelessness in the first place. Not surprisingly, housing researchers consistently find that regions with higher housing supply and lower rents experience significantly lower rates of homelessness.

The Challenge Ahead

Even with successful programs, communities across the country face a similar problem: more people are entering homelessness than housing programs can currently serve. Housing providers say Minnesota faces similar pressures from rising rents, tight housing markets, and limited funding for services. That’s why lawmakers say the immediate goal is to prevent existing programs from collapsing while they continue building long-term housing capacity.

For Howard, the stakes are straightforward. Supportive housing programs keep people alive, stabilize communities, and reduce strain on emergency systems, he said. Losing them would ripple across healthcare, law enforcement, and social services. “This is about making sure the safety net doesn’t disappear overnight,” Howard said.

Minnesota’s supportive housing providers now gain a temporary financial bridge — buying time for federal decisions and for the state to continue working on broader housing solutions. For the people living in those homes, lawmakers say that stability can make the difference between recovery and returning to the streets.

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