After three years as a "pathfinder" pilot, the Housing First project run by a consortium of third sector organisations is due to be taken over by Dundee City Council in September.
It was expected the project’s support workers would transfer across, but instead all but a few are set to lose their jobs and their work will be taken on by a smaller team.
The decision has sparked concerns that people who have been helped to change their lives through intensive support could now "fall through the cracks".
Homelessness rose by 10 per cent in Dundee last year despite falling across Scotland as a whole. And the city has the worst drug death rate in Scotland.
Rather than have vulnerable people sleeping rough or placed in unsuitable temporary accommodation, Housing First – based on an approach first developed in New York – provides a settled home as the first response to homelessness, then seeks to address people's other problems, such as alcoholism, drug addiction, trauma and poor mental health.
But key principles of the Housing First approach are the intensive support available – each worker has a case load of no more than seven people – and a commitment to continue the support for as long as required.
Gordon Sharp, of grassroots project Making Dundee Home, based in Dundee West Church, works closely with the Housing First team and is impressed with the work they have done.
"They are an excellent team who have worked intensively with some of the challenging folk in the city and have been making real inroads in the difficulties some people have presented,” he said.
"They have enabled some people to make progress who haven't made progress before."
But he was shocked when he learned of the council's plans. "It came as a surprise to participants, staff and projects working with them," he said.
It is understood the established team of 12 employed by the consortium, led by Transform Community Development, will be replaced by just four or five staff having to support the project’s 80 clients.
Mr Sharp said there was no doubt the Dundee project – one of five similar pathfinders across Scotland – had worked well.
"It's not just about homelessness, it's also about addiction – and we know Dundee has a record that is not enviable on the drug recovery front,” he said.
"That's another reason it came as a bit of a shock to us. If it's working for homelessness, it's also working for addiction because the two things go hand in hand."
And now he fears the relationship of trust established between the workers and the project participants will be broken.
"There is a solid relationship of trust built up over a number of years when a worker sticks with the participant and it's not about blaming or judging them; they make mistakes, but you stick with them and eventually the person may come round to saying they can get their way forward,” he said.
"People have had a difficult life and so I am concerned if this intensive support does not continue for the right people and I'm concerned if it takes time, as it will, to build up trust afresh.
"I am genuinely fearful of the consequences. There is a concern people will fall between the cracks and fall back the way in their lives."
A spokesperson for Dundee City Council said the authority was in the process of mainstreaming Housing First in Dundee once the pathfinder programme ended on September 30.
"Dundee City Council and Dundee Health and Social Care Partnership will continue funding support delivered by Transform Community Development aligned to Housing First principles and work with the pathfinder throughout this transition to ensure those participants in the pathfinder continue to receive support,” the spokesperson said.
"The partnership is committed to making Housing First Dundee successful and to continue delivering person-centred wrap around support to people that closes the door on a recurring cycle of homelessness for a number of individuals."
‘I’m not going to get the support I need’
Susan (not her real name) says she was devastated when her support worker told her they were being made redundant.
The 41-year-old had lived on the streets in Edinburgh and Dunfermline for eight years before she moved to Dundee.
She had suffered domestic violence, had problems with drink and drugs and was living in a hostel when the Housing First project made contact with her.
They got her a house, helped her move in and got her onto a drug programme.
"This is the first stable home I've had and it's only because I've had that support," she said.
"I'm an alcoholic, but I've stopped drinking for over a year now and that's with the support from Housing First.
"My support worker has been brilliant and I just feel when September 30 happens I'm going to end up breaking down.
"I don't think it's fair what they're doing because I'm not going to get the support I'm needing and other people will be the same.
"People won't go to appointments and go back on drugs because they're used to that support and they're not going to get it any more. If they go, there's going to be a lot more deaths here in Dundee."