Judge Blocks HUD Changes that Would Have Left Thousands Without Housing

LANSING – A federal judge today ordered the U.S. Department of Housing and Urban Development (HUD) to preliminarily halt changes to its Continuum of Care grant program — the largest resource for federal homelessness assistance funding — after Michigan Attorney General Dana Nessel and a coalition of 21 states and the District of Columbia argued that the changes were illegal and would leave tens of thousands of people around the country without a place to live. In her order orally granting a preliminary injunction, U.S. District Court Judge Mary McElroy barred HUD from implementing its proposed changes to the Continuum of Care program and directed HUD to process applications under the terms that existed prior to its unlawful program changes.

The coalition sued HUD in November for illegally upending support for people experiencing housing insecurity or homelessness by abruptly rescinding a necessary program notice, replacing it with another that limited access to long-term housing and other services. The lawsuit says HUD drastically changed its Continuum of Care grant program in violation of congressional intent by sharply reducing funding for permanent housing and putting unlawful conditions on access to the funding. 

The illegal conditions include penalizing housing providers that recognize gender identity and diversity and mandating that residents agree to additional conditions to obtain housing. HUD also added illegal conditions to punish providers in localities that do not enforce strict anti-homeless laws and disadvantage programs that address mental disabilities and substance use disorder. Those conditions go against HUD’s previous guidance and were not authorized by Congress. The program notice was also issued well after HUD’s congressionally-mandated deadline for making program changes, virtually guaranteeing gaps in funding. 

Last year, Michigan received more than $100 million through the Continuum of Care grant program. The illegal terms listed in the 2025 notice of funding opportunity would have adversely impacted Michigan residents – putting an estimated 7,000 total households, including approximately 2,000 families with children, at risk of losing their housing.  

“Thousands of Michigan families would have been forced onto the streets if the Trump Administration had been allowed to illegally upend support for those experiencing homelessness,” Nessel said. “I am relieved that the Court stepped in to prevent HUD from unlawfully attaching conditions to critical grant funding at the expense of vulnerable Americans.” 

In their complaint, 20 attorneys general and two governors argued that HUD’s actions were arbitrary and capricious, as HUD made no effort to explain the abandonment of its own longstanding policies, and failed to reckon with the obvious consequences of abruptly terminating funding for housing occupied by formerly homeless families and individuals. The case further alleged that HUD violated the law by not following the timeline Congress set for this program and not receiving congressional authorization for these new conditions. The plaintiffs also argued HUD violated its own regulations by not engaging in rulemaking before issuing the changes.  

Joining Attorney General Nessel in this lawsuit are the attorneys general of Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Wisconsin, and Washington, and the governors of Kentucky and Pennsylvania.