20 states sue HUD over cuts slashing permanent housing funds from 90% to 30%

On Nov. 26, 2025, a coalition of 20 states led by 🗽New York Attorney General Letitia James filed lawsuits in multiple federal courts challenging HUD's restructuring of the Continuum of Care program. The states include New York, 🌴California, 🌵Arizona, 🏔️Colorado, 🦞Connecticut, 🐔Delaware, 🌽Illinois, 🦞Maine, 🦀Maryland, 🏛️Massachusetts, 🚗Michigan, 🦆Minnesota, 🎰Nevada, 🏖️New Jersey, 🌲Oregon, ⚓Rhode Island, 🌲Washington, 🧀Wisconsin, 🍁Vermont, and the 🏛️District of Columbia. The lawsuits argue HUD exceeded its statutory authority and violated the Administrative Procedure Act by imposing substantive rules without required notice-and-comment procedures.

HUD's Nov. 15 Notice of Funding Opportunity for fiscal year 2025 reduces permanent housing funds to 30% of the Annual Renewal Demand, down from approximately 87% of current funds supporting permanent housing. This shifts more than half of the $3.6 billion program toward temporary housing with work and service requirements. The McKinney-Vento Homeless Assistance Act expressly directs HUD to incentivize permanent supportive housing and rapid rehousing, which the states argue HUD is now abandoning.

HUD Secretary STScott Turner criticized the Housing First model on Fox Business, calling the CoC program a 'Biden-era slush fund' and claiming 90% of awards supported 'failed' Housing First policies that 'encourage dependence on endless government handouts while neglecting to address the root causes of homelessness, including illicit drugs and mental health.' Turner said the new philosophy defines success 'not by dollars spent or housing units filled, but by how many people achieve long-term self-sufficiency and recovery.'

The new funding notice imposes conditions requiring grant recipients to certify they don't 'rely on or otherwise use a definition of sex other than as binary in humans.' The states argue this violates federal regulations and discriminates against transgender people, who face disproportionately high rates of homelessness. HUD also barred funding for activities promoting diversity, equity, and inclusion, elective abortions, or 'gender ideology,' and for interfering with immigration enforcement.

Internal HUD documents previously obtained by Politico warn the cuts could force an estimated 170,000 people out of permanent housing and back into homelessness. For states grappling with soaring rental costs and limited shelter capacity, the financial strain could be catastrophic. Major cities including Boston, San Francisco, and Santa Clara filed similar lawsuits earlier in 2025 after their CoC funds were threatened.

The lawsuit filed in U.S. District Court for ⚓Rhode Island asserts HUD failed to provide a reasoned explanation for abandoning its 20-year Housing First policy. Housing First prioritizes stable, permanent housing before requiring employment, treatment, or other conditions. The policy has been backed by decades of research and was a bipartisan priority as recently as 2024. The states argue HUD's reversal violates the statute's directive to incentivize permanent housing.

HUD spokesman responded that the department 'is dismayed that the plaintiffs have chosen to misuse the Courts and pursue this delaying tactic to serve their own personal political agenda at the expense of the homeless individuals, youth and families now living on our Nation's streets.' The statement claimed the lawsuit 'seeks to prevent nearly $4 billion of aid to flow nationwide to assist those in need' and pledged to 'mount a vigorous defense to this meritless legal action.'

The case was filed in U.S. District Court for ⚓Rhode Island and will be decided by Judge MSMary S. McElroy, who was appointed by President Trump in 2019 but first nominated by President Obama. McElroy has blocked other recent funding cuts and freezes by the Trump administration. House and Senate Democrats have urged HUD to rescind the policy change in letters citing the threat to 170,000 people. Senate Banking ranking member EWElizabeth Warren called the changes 'draconian' and said 'Congress, state leaders, all of us should be pushing back.'