A partnership of twenty states and the District of Columbia (D.C.) has launched a sweeping legal challenge against the Trump administration over a major policy that would reshape how the federal government funds support of homeless populations. Filed in federal court, the suit looks to halt the new rules governing the Department of Housing and Urban Development’s Continuum of Care program, which is the largest housing grant for homeless populations in the country.
State representatives argue that the administration’s policy shift would drastically reduce support for permanent housing programs and impose new ideological and operational conditions on service providers. They contend the changes exceed executive authority, violate longstanding federal law and threaten the stability of tens of thousands of people currently housed through federally supported programs.
The lawsuit represents one of the most significant state pushbacks yet against the administration’s broader effort to reorient national homelessness strategy away from the long-standing “housing-first” framework.
Dramatic overhaul of federal homelessness strategy
At the center of the dispute is the Continuum of Care program, which distributes billions in competitive grants each year to cities, counties and nonprofit organizations working to house people experiencing homelessness. For years, federal policy has allowed the overwhelming majority of those funds to be used for permanent supportive housing with funding going to long-term and non-conditional housing paired with services such as case management, mental-health support and treatment options to help keep as many people as possible off the streets.
The new legislation would cap funding for permanent supportive housing at roughly one-third of all program dollars. The remaining funds would be redirected to temporary shelters, transitional housing programs and service models that tie housing access to behavioral conditions, employment participation or program compliance. The administration argues that this shift encourages self-sufficiency, while critics frame it as a forced return to outdated and less effective models.
States also challenge the introduction of new eligibility constraints placed on local providers which under the revised criteria, some organizations could lose access to funding based on how they classify and house transgender and nonbinary individuals, or based on whether local anti-discrimination protections conflict with the administration’s policy preferences. The lawsuit claims these conditions impose unlawful political and ideological requirements unrelated to housing outcomes and look to strip these organizations to make them follow more in line ideologies with the president and his administration.
Projected impacts
State officials warn the Trump administration that the consequences of the policy change would be immediate and severe. By shifting billions of dollars away from permanent housing supports, they argue, many individuals and families could lose their current placements. Their filings estimate that as many as 170,000 people nationwide could be destabilized or forced back into shelters or street homelessness if long-term contracts and service programs abruptly lose federal backing.
Legal claims and constitutional stakes
The coalition’s lawsuit rests heavily on claims that the administration violated the Administrative Procedure Act, bypassing the legally required process for adopting major federal policy changes. States argue the administration introduced sweeping new requirements without the mandated notice-and-comment period, denying the public an opportunity to weigh in.
The suit also contends the new rules amount to an unconstitutional attempt to redirect federal funds without congressional authorization. By limiting how states and localities may use funds that Congress has already appropriated, the administration is accused of infringing on legislative authority.
If the states prevail, the ruling could reassert strict limits on how far federal agencies may go in reinterpreting long-standing grant programs. If the administration wins, its model could become the blueprint for a national restructuring of homelessness services.
National flashpoint in homelessness policy
The case highlights a deeper philosophical clash over homelessness policy in the United States. States leading the lawsuit overwhelmingly favor housing-first strategies backed by years of research and federal support. In contrast, the Trump administration is seeking a return to a model that places greater emphasis on behavioral conditions and transitional placements that frame housing as a reward rather than a right.
With homelessness rising in many major cities, such as New York and Los Angeles, the outcome of this legal fight may determine not only how federal money flows, but also which vision of homelessness policy will dominate the country for years to come and how we combat this crisis as time goes on.
