The Bloomington Urban Enterprise Association has promised $150,000 for the shelter previously known as Martha’s House.
Right now there is an eight-room emergency housing facility in Columbus, and during the winter agencies often have to place homeless people in hotel rooms.
The Indiana Housing and Community Development Authority expected only a 5 percent cut.
A spokesman for the mayor's office says the tent that has been erected on the city's west side is illegal.
Safety experts say newer homes are often better anchored than older ones and some places that may not initially come to mind can offer good shelter.
Bloomington's Interfaith Shelter says it does not have enough space for the number of homeless people seeking its services Saturday nights.
The Genesis House says it is closely because of a lack of volunteers and resources.
The executive director of Martha's House in Bloomington is retiring.
An emergency shelter is now open at the First United Methodist Church in Bloomington.
Emergency Management personnel are monitoring and providing sand bags and shelters to people who need help.