Efforts by the U.S. Department of Housing and Urban Development to add new conditions to homelessness funding were rejected by a federal appeals court on Wednesday, upholding an earlier injunction against the federal housing agency.
Last November, HUD Secretary Scott Turner moved to overhaul the $4 billion Continuum of Care (CoC) grant program, launched by Congress in 1987, by shifting funds from permanent housing to transitional programs that would condition funds on sobriety and mental health treatment, among other considerations.
Plaintiffs including 21 states, Washington, D.C., and a broad coalition of nonprofit groups were granted injunctive relief in December. They had argued that the recission of funding and uncertain timeline for future disbursements could push up to 170,000 grant recipients back into homelessness — in the middle of winter — and force homelessness assistance programs nationwide to shutter.
HUD requested a stay against the injunction, which the U.S. Court of Appeals for the First Circuit ultimately denied in its Wednesday decision.
“In sum, the record paints a disturbing picture of the harms that would flow to the plaintiffs, their constituents, and the public from issuing a stay,” wrote the panel of three judges, maintaining the injunction as the case plays out in district court in Rhode Island.
HUD Secretary Scott Turner has framed the proposed funding overhaul as addressing what he and the Trump administration call a “homelessness industrial complex.” HUD did not respond to a request for comment on the appeals court decision by the time of publication.
In a statement released Thursday, David Chiu, city attorney for San Francisco, which is a plaintiff in the lawsuit, described the decision as “a victory not only for the rule of law, but also against this federal administration’s attempts to defund permanent housing programs and jeopardize the stability of thousands of Bay Area families.”
Congress endowed the CoC program with a “special emphasis” to shelter veterans, family with children, older people, disabled persons and Native Americans. Court documents indicate that as of 2025, CoC grants funded almost 7,000 projects, with roughly 87% of funding committed to permanent housing.
The National Alliance to End Homelessness, part of the coalition of nonprofits that sued HUD, said in a statement released Wednesday that it was “relieved that the appeals court has left the order we earned late last year in place,” adding that the CoC overhaul represents “yet another instance of the Trump administration prioritizing its political agenda above the needs of our most vulnerable community members.”
