Earlier this month, the North Carolina General Assembly passed House Bill 437 to clean up unsanctioned homeless encampments and protect the homeless from predatory drug dealers. Gov. Josh Stein then vetoed it, parroting the arguments made by the state’s entrenched industry of homeless services providers.
Fortunately, lawmakers in the House have signaled that they intend to override the governor’s veto, as they have on several occasions this session. The Senate, too, has implied they are ready to act.
HB 437 is good policy, and that alone is reason enough for the General Assembly to correct Stein’s mistake. It does not “criminalize homelessness,” as critics have alleged. Instead, it rejects the status quo, which condemns too many people to squalid encampments, in favor of a more compassionate approach that aims to help them get off the street for good.
But opponents of HB 437 have overlooked a second reason North Carolina lawmakers can’t afford to let the bill die: Without it, North Carolina risks losing up to $46 million in federal homelessness funding — the vast majority of the state’s annual homelessness budget.
That’s because the US Department of Housing and Urban Development, which oversees federal homelessness funding, recently announced a complete overhaul of homelessness assistance to reflect President Trump’s priorities, which were outlined in a 2025 executive order titled “Ending Crime and Disorder on America’s Streets.”
This overhaul, detailed in a Notice of Funding Opportunity released at the beginning of June, includes the largest investment in homeless services in this nation’s history, at a record $4.04 billion. But unlike the Housing First approach that dominated federal homelessness assistance in recent decades, HUD’s new strategy targets the root causes of chronic homelessness: not only housing insecurity, but also serious mental illness and substance abuse.
HUD changed the federal approach to homelessness because Housing First had clearly failed. For more than a decade, under Housing First, federal policy strongly incentivized state homeless service providers to focus singlemindedly on housing, to the detriment of other factors. What began as a worthwhile insight into the cause of some types of homelessness gradually transformed into a rigid ideology that insisted on its own universality and pushed out all alternatives.
As a result, North Carolina and other states have watched chronic homelessness, which housing interventions alone aren’t suited to address, worsen. Between 2024 and 2025, the segments of North Carolina’s unsheltered population struggling with chronic addiction or serious mental illness grew dramatically. Over that period, the number of people on the streets with serious mental illness increased 43% and the number with chronic addiction issues grew 49%, despite the many millions of taxpayer dollars service providers received to combat homelessness.
The longer-term trends look similar. Since 2013, North Carolina’s population of unsheltered people with severe mental illness has increased 41%. The state has fewer chronically addicted unsheltered people than in 2013, when Housing First formally became federal policy, but the number has steadily increased in recent years — as has the pace of the increases. These disappointing results are consistent with the lackluster record of Housing First policies across the country since 2013.
Today, North Carolina has more chronically homeless residents than ever before. Established homeless service providers have an interest in resisting change, which is likely to leave them with less funding unless they can demonstrate better outcomes.
But federal funding isn’t meant to help service providers. It’s meant to help the homeless, and North Carolina lawmakers have an opportunity to show that they understand that distinction. To reverse North Carolina’s downward trend on chronic homelessness, and to guarantee continued federal funding for such efforts, a new direction is badly needed.
HUD has already pointed the way. HB 437 aligns with it.
States that want to seize the opportunity offered by new federal priorities, or even just keep their current level of federal homelessness funding, would be prudent to follow HUD’s lead. Unlike in past years, most federal homelessness grants won’t be renewed automatically. This time around, the process will be competitive, with an emphasis on measurable outcomes. States that reject HUD’s reforms are likely to lose out on funding to those that embrace them and show progress on key metrics. Overriding the governor’s veto of HB 437 would signal that North Carolina is committed to these common-sense reforms.
The alternative, which Stein seems to prefer, would mean doubling down on an approach that clearly hasn’t worked, against the evidence and at risk of tens of millions in crucial homelessness dollars. It’s not too late for the General Assembly to avert this predictable error of judgement.
