A federal housing program that helps thousands avoid homelessness is at the center of a major legal fight.
More than 20 states are suing the U.S. Department of Housing and Urban Development (HUD), claiming the agency’s new rules will gut funding for permanent housing and discriminate against transgender people.
The lawsuit targets abrupt policy changes
The complaint, filed in Rhode Island federal court, says the Trump Administration quietly rewrote rules for the Continuum of Care (CoC) Program—the federal government’s main homelessness funding program.
States say HUD’s new funding notice breaks federal law in three big ways:
- It slashes housing support. HUD now limits how much funding can go to permanent housing—from 90% down to just 30%. This shift, the lawsuit argues, could force tens of thousands of formerly homeless people back onto the streets.
- It blocks support for transgender people. The new rules bar funding for any group that “acknowledges” more than two genders. States argue that violates federal regulations and discriminates against a group already at higher risk of homelessness.
- It punishes cities with different policies. Under the new system, areas that don’t enforce bans on public camping lose points when applying for grants. The plaintiffs say that unfairly targets cities with more supportive homelessness policies.
Housing First, now Housing Last?
For years, HUD has backed a model called Housing First—helping people get stable housing before requiring treatment or job programs. It’s backed by decades of data and was a bipartisan priority as recently as 2024.
Now, the new HUD rules reward programs that force people to enroll in mental health or addiction services before they can get help. The plaintiffs say this turns Housing First on its head—and violates how Congress told HUD to run the program.
The transgender funding ban is sweeping
The states also challenge a clause that bars funding for any group that uses “a definition of sex other than binary.” The policy appears to allow HUD to cut off funding for shelters that serve transgender people, or even those that acknowledge their existence in planning documents.
States call the changes illegal and dangerous
The lawsuit argues HUD broke multiple federal laws by issuing the changes without public input, violating agency regulations, and ignoring congressional intent. It also says the rules are “arbitrary and capricious,” offering no explanation for the drastic reversals.
One part of the suit points out that HUD still hasn’t repealed its official rules requiring equal access for LGBTQ+ individuals—even as the new policy ignores them.
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