Some homeless people in Sheffield have told a council they are better off begging on the streets than being placed in accommodation.
The Housing First scheme works with single homeless people to provide housing and other support.
Sheffield City Council said funding would be pulled because of a lack of suitable single accommodation.
One man told of earning up to £300 a day from begging, and said many people immediately spent the money on drugs.
The Local Democracy Reporting Service said Housing First, a national project set up in Sheffield in November, aimed to help homeless people with "multiple and complex needs" find and stay in tenancies.
Its objective is to improve people's health and well-being, and reduce rough sleeping.
Sheffield's pilot scheme works with 10 people at a time and was due to run until 2020 at a cost to the city council of more than £300,000.
But council officer Emma Hickman said the service faced "a number of challenges", and would be withdrawn in April.
These included "non-engagement" by some clients who were not able to take on tenancy responsibilities.
Councillor Jim Steinke, council member for homelessness, said despite the early end of the contract there would be "minimum negative impact" on clients.
He said some Housing First funding would still be used to support homeless people.
Advice on begging and homelessness can be found at Help Us Help, which encourages people to give to charity rather than giving directly to beggars.