A Dublin city centre homeless shelter which opened three years ago at a cost of €9m has been told that its funding is to be withdrawn in the new year, the Sunday Tribune has learned.

Management at the YMCA shelter on Dublin's Aungier Street was informed of the plans by the government-run Homeless Agency earlier this month, and have expressed concern about the impact of the decision on its 38 current male and female residents.

The decision has been criticised by leading homeless campaigner Alice Leahy of Trust, who said it was another example of the agency's attempt to push homeless people "into a box they have designed for people" without really understanding their needs.

The purpose-built shelter was opened in 2006 at a cost of €9m. The majority of its clients are aged 23 or younger, and includes young women who have experienced domestic violence and others coming from a care setting or who are in recovery from addiction or mental-health issues.

Javier De las Heras, acting accommodation manager with the shelter, which receives around €700,000 a year in funding, confirmed it was notified of the Homeless Agency's plans to withdraw its support in early December.

He expressed concern that a significant number of its clientele will struggle once the funding is withdrawn as part of wider plans put forward by the agency to tackle homelessness. De las Heras said that more than half of its clients had successfully moved on to live independently in their own private accommodation, while others would require continued high support due to ongoing mental-health issues.

"These young people are really not ready to live on their own, they have no support, no families, nobody but us. But there will be no place like this now for them," he said.

A spokeswoman for the Homeless Agency declined to discuss its plans for the shelter as there was "still a level of consultation and negotiation taking place with the individual service provider".

However, she said homeless services were going through "a process of reconfiguration to ensure that we will be able to increase the number of people who can gain access to long-term housing with supports provided in their own home".

As part of its Pathway to Home implementation plan, it is also seeking to "minimise the time that people are staying in an emergency situation without access to appropriate support or housing options," she said.

But Trust's Alice Leahy criticised the decision to remove funding from the YMCA.

"The YMCA has built up a relationship with these people, which is often what they need most," she said. "The Homeless Agency thinks you can mould people to fit into a box they have designed for people... but if you don't fit into their definition, then you don't exist."

"The YMCA have credibility and are doing a good job. Instead of criticising agencies which are doing things differently, the homeless agency should be supporting them."