The council said no decision had been made about the funding
The homeless charity Shelter Cymru claims hundreds of people could be put at risk if Powys council votes to cut its funding.
The council donates Ł34,000 a year to Shelter, but it is looking at making extensive savings.
The charity claimed a funding reduction would force it to cut its advice service in the county, and this would place people at risk.
Powys council said a decision had not been made, but it had to make savings.
The local authority is looking at making cutbacks in a number of areas following a "challenging" budget settlement from the Welsh Assembly Government.
Many of the cost-cutting plans have proved unpopular, including the council's street light switch-off which has seen thousands of lamps blacked-out across the county.
However, some lights are being switched back on for part of the night following a review.
Shelter Cymru provides free specialist advice, advocacy and legal representation for people in mortgage arrears across Wales, but it could be forced to reduce this specialist help in Powys by one-third.
Director of Shelter Cymru John Puzey said: "This potential decision stands to leave hundreds of people at risk of homelessness without specialist help.
"Whilst we fully appreciate the financial challenges faced by local government, it seems very short-sighted to propose such a cut at this time of increasing mortgage repossessions, a time when most authorities are considering how they can build up their local response to the affordability crisis."
The charity's head of services JJ Costello added: "Specialist housing advice plays an important role in the prevention of homelessness. This decision will result in increased demand upon already over-stretched statutory services."
The council has funded Shelter since 2001.
During 2007-08, the charity helped 611 people in Powys, dealing with 982 housing problems and opening 321 cases.
The charity said 57% of those households were facing homelessness, and a third were at an imminent risk of homelessness as they faced possession actions from either a mortgage lender or a landlord.
A Powys council spokesman said cuts had to be made.
He added: "The disappointing financial allocation from the Welsh Assembly Government for 2009-2010 for Powys County Council means that a number of efficiencies/cuts have to be made in a number of areas.
"One of the areas under consideration is the funding provided to Shelter Cymru to provide housing advice services in Powys, although it must be stressed that no final decision has been made by the council on this matter."