What Happens When Housing Disappears Before Reform Arrives?

In a time when access to housing is already a barrier to recovery for many Minnesotans, the state has officially approved a plan that will dismantle a critical housing support structure for individuals in substance use disorder (SUD) treatment: Free Standing Room and Board (FSRB).

As part of the most recent legislative session, the Governor’s budget recommendations were adopted, and the phase-out of FSRB is now law. No new FSRB applications are being accepted, and the program will be eliminated entirely by June 30, 2027.

At the same time, the implementation of Minnesota’s state-level EKRA (Eliminating Kickbacks in Recovery Act) law on August 1, 2025 threatens the viability of sober homes across the state. And while DHS points to a Housing Support Strategy as a long-term solution, that plan won’t be implemented until 2027.

In short, Minnesota is pulling down the scaffolding without first erecting the building—and the people falling through the cracks are some of the most vulnerable in our state.

Why Is Minnesota Phasing Out FSRB?

According to DHS and the Governor’s adopted budget language (check out page 76), several concerns drove this decision:

• Oversight and Billing Risks: FSRB sites are not licensed in the same way as residential treatment programs, which has raised concerns about the potential for inappropriate billing practices. With 52 FSRB locations serving approximately 700 people, the program has grown rapidly without a formal regulatory structure.

• Rising State Costs: Because Medicaid prohibits reimbursement for room and board in outpatient programs, the full cost of the lodging component—$6.5 million in FY23 and projected to exceed $10 million in FY25—is paid by Minnesota’s state behavioral health fund.

• Geographic Drift from Original Intent: FSRB was created to solve a rural treatment access problem. However, only 14 of the 52 FSRB sites are located outside the Twin Cities metro area, undermining the justification for its existence.

• Inconsistent Client Protections: Clients in FSRB housing are not considered vulnerable adults under law, unlike those in licensed residential treatment. This results in unequal legal protections and care standards, despite similar clinical needs.

• Program Popularity Outpacing Infrastructure: DHS acknowledged that FSRB has become an appealing workaround for providers—it’s easier to establish than residential treatment, less regulated, and more financially viable. But that popularity, they argue, is unsustainable without better licensing and payment reforms for residential care.

Because of these reasons, Minnesota has formally decided to end the FSRB model by June 30, 2027.

What’s Coming Next?

In place of FSRB, DHS plans to roll out a Housing Support Strategy aimed at providing stable housing for individuals with behavioral health needs. But the full implementation of that strategy is years away—not scheduled until 2027, the same year FSRB ends.

Meanwhile, the immediate need for safe, supervised lodging for individuals in treatment remains unmet. And that’s where the timing of the state’s actions becomes deeply problematic.

EKRA + FSRB: A Perfect Storm

Also taking effect this year is Minnesota’s version of the federal EKRA law, designed to crack down on illegal inducements and kickbacks in behavioral health. While well-intentioned, the law is causing panic among sober homes, which often rely on referral-based relationships that now risk being classified as illegal “remuneration.”

The impact?

• Many sober homes are considering shutting down or severely limiting admissions.

• FSRB is closed to new programs and will be phased out entirely.

• No immediate housing alternative exists until 2027.

This creates a massive housing crisis within the treatment system. The safety nets are vanishing at the same time, leaving clients and providers with few to no options.

Who Is Affected?

The phase-out of FSRB and tightening of EKRA enforcement hits one group hardest: clients in recovery who need stable, structured lodging to participate in outpatient treatment. Many of these individuals:

• Don’t have access to residential beds, or

• Don’t need residential intensity—just a roof, some supervision, and a fighting chance.

The state’s decision assumes these clients can be absorbed into residential programs, but the math doesn’t add up: Minnesota doesn’t have the residential bed capacity to take on this overflow. And not every client needs residential care—they need housing.

What Needs to Be Done—Now

This isn’t about defending a flawed system. FSRB had real issues. But tearing it down before building the replacement is not reform—it’s abandonment. If DHS and the Legislature are serious about protecting clients and ensuring ethical care, the following must happen:

1. Bridge Housing Now: Fund and fast-track transitional lodging programs to fill the 2-year gap.

2. Clarify EKRA Protections: Provide guidance and safe harbors so sober homes and providers can legally operate without fear.

3. Create Parity in Client Protections: If client rights differ based on setting, fix that. Don’t assume regulatory disparities are solved by eliminating options.

4. Acknowledge Housing as Core to Recovery: When housing determines whether a person engages in treatment, it's not a side issue—it’s central.

Action Items: What You Can Do

1. Contact Your Legislators

   • Ask them what bridge solutions are being implemented before 2027 to protect clients affected by the FSRB phase-out.

   • Share how EKRA and the FSRB shutdown are impacting real people in your community.

2. Submit Public Comment or Testimony

   • Email DHS or your county’s behavioral health authority with concerns about housing loss and client displacement.

   • Encourage clients (if appropriate) to share their lived experiences navigating housing instability during treatment.

3. Ask DHS for Immediate Guidance

   • Request clear, written interpretation of the state-level EKRA law to ensure your program is compliant—without dismantling housing access.

4. Join Advocacy Organizations

   • Engage with groups like MARATP, NAMI MN, or MN Recovery Connection to elevate housing as a top SUD treatment priority.

5. Educate Your Community

   • Share the article with local elected officials, health boards, and the media to increase public pressure and awareness.

6. Document and Report Impacts

   • Track any adverse outcomes—like early discharges or housing loss—related to FSRB closures or EKRA restrictions. Aggregate data will be critical in future legislative sessions.

Conclusion: Dismantling Without Rebuilding is Dangerous

Minnesota is eliminating a flawed but vital housing option in FSRB. At the same time, it’s choking off sober homes under EKRA. And the alternative—DHS’s Housing Support Strategy—is still two years away.

In the meantime, where do clients go?

Until we have a viable replacement, ending FSRB without immediate, scalable alternatives is a policy failure with human consequences. We owe it to our clients—and our communities—to do better.

About the Author
Carmichael McKinley Finn, LMFT, LADC, ADCR-MN
Carmichael Finn is a Licensed Marriage and Family Therapist and Licensed Alcohol and Drug Counselor based in Minnesota. He serves as Executive Director at Recovering Hope Treatment Center, a gender-responsive, trauma-informed program specializing in substance use and co-occurring care for individuals and families. With two decades of experience in behavioral health and community leadership, Carmichael is a fierce advocate for ethical reform, access to care, and policy grounded in reality—not just rhetoric. He also teaches addiction counseling at the collegiate level and serves on the Ethics Committee for MARATP. Carmichael’s writing often bridges the gap between policy and practice, giving voice to what’s happening on the ground in real time.