On Wednesday, the US Department of Housing and Urban Development (HUD) failed to appeal a court order that is blocking the agency from dramatically reducing grant funding for permanent housing.
The appeal is connected to two separate federal lawsuits in which states, local governments and nonprofits alleged HUD efforts to cancel and dramatically reduce Continuum of Care funding for permanent housing, among other changes, violated the Administrative Procedure Act and Constitution.
The Continuum of Care program helps communities across the country fight homelessness, and in 2025, it funded nearly 7,000 projects, 87% of which were for permanent housing.
In November, HUD rescinded Continuum of Care grants previously set for renewal in the 2025 fiscal year and issued a new notice of funding opportunity with different eligibility criteria for the grants. The notice reduced the program’s funding available for permanent housing, setting a 30% cap on support for permanent housing across all grants, down from 90% from previous grant program guidelines.
After 21 states, the District of Columbia, seven local governments and four nonprofits sued HUD in two different lawsuits over the grant changes, the agency withdrew its notice of funding opportunity but issued another in December that maintained the 30% cap on permanent housing. The December notice also would result in funding gaps for grant recipients, forcing them to cut back or shut down programs, according to the lawsuits.
A federal judge in Rhode Island issued a preliminary injunction in December that ordered HUD to follow the guidelines from its original 2024-2025 notice of funding opportunity for the program and process eligible renewals for 2025 funding.
In February, HUD asked the court to throw out the preliminary injunction, which the court denied, and in March, the agency appealed that decision in the First Circuit of the US Court of Appeals.
Yesterday, the circuit court rejected the appeal, with Circuit Court Judge Julie Rikelman writing that granting it “would have immediate and devastating impacts on the plaintiffs and the people they serve.” Her opinion noted that if HUD rescinded its 2025 Continuum of Care funding and sought applications under the December notice of funding opportunity, multiple organizations connected to the lawsuits would be unable to add new participants or would need to end their programs.
“The record here is replete with evidence that dissolving the injunctions would result in wide-ranging and severe consequences as the litigation plays out,” Rikelman wrote. “And those harms would not be readily curable after the fact; indeed, a final judgment in the plaintiffs’ favor would offer little solace to those residents who may be forced into homelessness in the interim.”
The Trump administration opposes permanent housing and other “housing first” approaches to homelessness, arguing unsheltered people should become sober, address mental illnesses and receive wraparound services before receiving housing.
Contact Streetlight editor Mollie Bryant at 405-990-0988 or bryant@streetlightnews.org. Follow her reporting on Bluesky or by joining our newsletter.
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