The head of Winnipeg's Red Road Lodge says he is baffled that he has been turned down for a federal grant, after years of receiving it.

Chief executive officer Richard Walls runs the lodge, which houses clients recovering from addictions and mental health issues, as well as providing programming for people on the street.

'Sept. 1 we close our resource centre. That affects everybody on the street.'—Richard Walls

Walls took over the Occidental Hotel years ago and turned it into a non-profit, alcohol-free facility that provides transitional housing, access to mental-health staff, and a resource centre that includes a computer lab and an art studio.

But Walls said he was recently turned down flat for a federal grant from the Homelessness Partnering Strategy after doubling his request for money.

Walls said without that money, he has to lay off staff and there will be an immediate impact.

"Sept. 1 we close our resource centre," he said. "So that affects everybody on the street."

While the 45 rooms inside the lodge will remain — funding for that part of the facility comes from the provincial government — the lack of federal funding means some clients will have to relocate.

"We are immediately … I wouldn't say evicting, we're transitioning six of our residents who have high-needs mental health issues," he said. "We have no one to supervise them [and] no one to help them."

Walls said he was told the committee that allocates the grants did not like his staffing model.

Community board makes decisions

Human Resources and Skills Development Canada says it recently gave the Red Road Lodge $54,570 for the Home for Recovery project, which a spokesperson says began on April 1 and will run until Sept. 30.

In an email to CBC News, a City of Winnipeg spokesperson said funding decisions under the Homelessness Partnering Strategy are made through a community assessment board that includes members from the public, private and non-profit sectors, as well as aboriginal groups and other concerned community members.

The city's goal under the strategy is to fund "quality projects that meet community needs, and not to provide core operating funding for organizations," the spokesperson stated.

"While many good quality project proposals are received, not all applications can be approved."

Word of the funding cut has appalled the lodge's clients, including Pat Bruderer, who has lived there for six months.

Bruderer, who produces birch bark biting artwork, said she fears she'll be homeless if the lodge closes.

"I had a really hard time finding housing, and so I was pretty well homeless when I came here," Bruderer said.

"What attracted me to this place is I found out it was an art studio," she added.

"By coming into the studio and having all the material available for them to be able to create, instead of concentrating on addictions or mental issues, it sort of just takes their mind off everything."