The Salvation Army may have to admit people with disruptive behaviour to its centre in Inverness to ensure continued support from Highland Council.
Highland Council is under pressure to find care for all homeless
Huntly House has received local authority funding since 1984.
However, councillor Peter Corbett said the council was under pressure to provide "wet" hostels where rules on alcohol are less strict.
The charity said it has house rules for the sake of its residents, but hopes to reach an agreement with Highland.
Salvation Army Major Martin Hill said: "Given the fact we are trying to run a home that has 26 residents obviously you need something in the form of house rules for the sake of the vast majority of those residents."
He added: "What we have to do is look at the provision throughout Inverness and area.
"I know the council is doing that to find what form of provision suits what sort of homeless client, but I am sure that we will be part of the ongoing discussions with council representatives."
Mr Corbett, councillor for Merkinch, said council officials have warned that the authority cannot continue funding Huntly House in its present form.
He said Highland was under increasing pressure to ensure care for all homeless people - including those who are disruptive because they may have addiction problems.
Mr Corbett said: "Huntly House will have to take that on board.
"They do have highly trained, highly qualified staff who work 24 hours a day, seven days a week, so they do know how to deal with clients such as these."