The Trump administration finds itself on the wrong side of a lawsuit yet again. A coalition of 19 attorneys general and two governors on Tuesday sued the Trump administration over policy changes that would place new conditions on and significantly cut funding for permanent housing for people experiencing homelessness.
The lawsuit alleges that the administration unlawfully reduced the proportion of federal grant funding that can go toward permanent housing, from roughly 90% to as low as 30%, and imposed new conditions on eligibility.
The coalition, led by New York Attorney General Letitia James, is seeking a court order blocking the “administration’s cuts and illegal new conditions” on the Department of Housing and Urban Development’s (HUD) Continuum of Care program funding.
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“Communities across the country depend on Continuum of Care funds to provide housing and other resources to our most vulnerable neighbors,” said James in a press release. “These funds help keep tens of thousands of people from sleeping on the streets every night. I will not allow this administration to cut off these funds and put vital housing and support services at risk.”
More than half of the 2026 funding for HUD’s Continuum of Care program, which partners with local organizations to connect people experiencing homelessness to housing and resources, will be cut for permanent housing assistance and moved to temporary transitional housing assistance with some work or service requirements. The policy change was first reported by POLITICO.
A HUD spokesperson said “HUD stands by its FY2025 Continuum of Care reforms.”
“HUD 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. Their use of the courts for political means seeks to prevent nearly $4 billion of aid to flow nationwide to assist those in need. HUD intends to mount a vigorous defense to this meritless legal action,” the spokesperson said in a statement.
Permanent housing programs are designed to provide long-term stability without requiring participation in work programs or other services, allowing residents to focus on maintaining their housing and rebuilding their lives. Critics of the administration’s policy argue that shifting funds to transitional housing or imposing service requirements could destabilize existing residents, forcing some back into homelessness or reliance on emergency shelters. Supporters of the policy, however, contend that linking services or work expectations to funding can promote self-sufficiency and ensure that resources are used efficiently, highlighting the tension between immediate stability and longer-term social outcomes.
At the national level, the outcome of this lawsuit could set a precedent for how federal housing funds are allocated and regulated. It underscores the role of courts, state governments, and federal agencies in defining policy priorities and protecting vulnerable populations.
Beyond the legal battle, the dispute draws attention to the ongoing challenges in addressing homelessness, the importance of stable housing for social and economic well-being, and the complexities of implementing programs that serve diverse communities with varying needs.