Why Washington Is Paying To Keep People On The Streets

“Never confuse motion with action.” Often attributed to Ernest Hemingway, this aphorism captures a fundamental problem with Washington’s approach to homelessness: More spending, more providers, and more services, but not more progress.

America’s homelessness crisis is too serious for a federal funding system that incentivizes activity over results. Federal policy too often rewards providers for beds, housing slots, and services instead of helping people exit homelessness.

A new Cicero Institute report makes a persuasive case for change: taxpayers should finance results, not simply activity.

The report examines IRS filings from 1,458 nonprofit providers receiving Housing and Urban Development (HUD) Continuum of Care funding. Between 2013 and 2024, their total revenue increased 123.9%, compared with 34.7% inflation. Over the same period, the national one-night count of people experiencing homelessness rose 30.7%. The report’s analysis documents these concerning figures.

Federal funding has also grown. HUD Continuum of Care awards increased 67.3% between fiscal years 2018 and 2024, according to the report’s analysis of HUD award data. Meanwhile, the National Alliance to End Homelessness has called for $9.6 billion in additional federal appropriations, including $4.8 billion specifically for salary increases at homeless-service organizations. Congress should ask whether more money on the same terms will produce better outcomes.

The answer, in large part, lies in the incentives. Under the traditional Continuum of Care model, grants have largely funded activities such as maintaining beds, operating housing units, and delivering services. Renewal funding has depended more on carrying out funded activities and meeting compliance requirements than on measurable outcomes. As the Cicero report explains, this is essentially a fee-for-service model. Providers are paid to maintain services, not necessarily to reduce the number of people who need them.

Judge a homelessness program by whether it helps people move from the streets or shelters toward stable housing, treatment, employment, and greater independence — not by how many beds it funds. Funding should reward measurable progress without penalizing providers who serve people with complex needs.

The Cicero report supports HUD’s fiscal year 2026 shift toward a more competitive, outcome-oriented Continuum of Care program. The FY2026 Notice of Funding Opportunity (NOFO) makes 40% of renewal funding competitive and sets aside $1.3 billion for transitional housing and supportive services. It gives greater weight to reductions in unsheltered homelessness, treatment, employment income, and exits to housing without ongoing subsidies. The competition is proceeding under a First Circuit stay pending appeal, after a district court ruling vacated the NOFO.

These changes do not guarantee success; they must be judged by results. HUD should publish performance data and refine its measures. But preserving a system that rewards inputs over outcomes is no answer.

Better government programs are only part of the answer. The most enduring way to expand society’s capacity to address difficult problems is sustained economic growth and rising prosperity. Economic growth supports job creation and higher incomes, while higher incomes expand the tax base and resources available to finance public services.

As a commissioner of The Growth Commission, I work alongside colleagues focused on policies that expand growth and prosperity. Our International Advisory Board brings together current and former national leaders who understand firsthand the transformative power of economic growth. We share a conviction that prosperity is essential to rising living standards and addressing longstanding challenges, including homelessness.

A wealthier society can do more for its most vulnerable citizens, including people who may never achieve full independence. Growth will not eliminate human suffering, but stagnation makes it harder to address. Washington should pursue economic opportunity and accountability in public spending. Federal grants should reward genuine progress, while economic policy should expand the prosperity that makes lasting solutions possible. Taxpayers deserve no less, and people experiencing homelessness deserve a system measured by whether it helps them rebuild their lives.

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James Carter is a commissioner on The Growth Commission. He previously served as associate director of the National Economic Council at the White House and deputy undersecretary for international affairs at the U.S. Department of Labor.

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