A federal appeals court has rejected the U.S. Department of Housing and Urban Development’s request to lift a lower court order that has blocked HUD from stripping approved grant funding from fair housing nonprofits nationwide.

In a case concerning the Trump administration’s broad efforts to overhaul the nation’s longstanding approach to fair housing access and enforcement, a panel of three judges for the 1st U.S. Circuit Court of Appeals said the lower court did not exceed its authority when putting the hold in place in late August.

The National Fair Housing Alliance and Massachusetts Fair Housing Center sued HUD and Secretary Scott Turner in July after the department unveiled dramatic “organizational changes” to the Fair Housing Initiatives Program (FHIP), which investigates claims of fair housing discrimination on behalf of consumers.

Enacted by Congress in 1987, FHIP handles nearly three-quarters of those complaints made nationwide in a year. Democratic senators wrote a letter in August urging HUD leadership to rescind its proposal and restore millions of dollars in grants appropriated for FHIP in 2025, which the department was attempting to redirect.

Much of the fair housing supervision and enforcement that a Cabinet-level department like HUD might need to perform in-house to ensure compliance with the nation’s fair housing laws is ultimately performed by national and local fair housing nonprofits reliant on federal grants.

The impact of HUD’s proposed overhaul would irreparably harm this apparatus, advocacy groups caution, arguing that unilateral efforts by HUD to reshape FHIP violate its congressionally authorized mission.

HUD did not immediately respond to a request for comment on the ruling, or on whether it planned to appeal the matter further.