Julian House caters for up to 100 homeless people at any one time
Vital funding for a new hostel for homeless people in Bath has been withdrawn by the government.
Julian House was due to receive £2.5m as part-funding towards a new facility to include accommodation for 30 beds.
The project which was also being funded by Bath and North East Somerset Council has now been put on hold indefinitely.
The funding was withdrawn by the Homes and Community Agency as it decided the council was unable to meet the agreed timescale for the "aspirational" plan.
Julian House, which caters for up to 100 homeless people at any one time, said that although the withdrawal of the funding was a huge blow it would not have any impact on the current services it provides.
Julian House is the leading provider of services to single homeless men and women in Bath but describes its accommodation as "inappropriate for use".
"The existing facilities are inadequate, claustrophobic and difficult to maintain. We all agree that dormitories have had their day; a replacement is long overdue, said Ian Sutherland, Julian House director.
"Apart from the fact that a huge amount of effort had gone into securing the funding and then trying to find a suitable site, the real losers in all this are our clients."
Councillor Vic Pritchard, cabinet member for adult social services and housing, said: "Bath and North East Somerset Council must now review its current position but still maintain its commitment to improving facilities for homeless people in the city."