States Sue HUD to Block $1.3 Billion Permanent Housing Cuts

A broad coalition of states and territories filed multiple federal lawsuits on July 8 and 9, 2026, to block the U.S. Department of Housing and Urban Development (HUD) from implementing new funding restrictions on the Continuum of Care (CoC) program. The legal challenges target a June 1 notice that diverts $1.3 billion toward time-limited transitional housing, effectively reducing the federal funding available for permanent supportive housing from 90 percent to approximately 68 percent.

State attorneys general, including those from Wisconsin, Rhode Island, Massachusetts, Connecticut, and Washington, argue that these changes unlawfully abandon the Housing First strategy—which provides stable housing without sobriety or income requirements—and violate the Administrative Procedure Act by bypassing required rulemaking. The National Alliance to End Homelessness estimates the shift threatens housing for at least 97,000 residents nationwide. In Washington state alone, the cuts could reduce funding by over $37 million and jeopardize housing for nearly 3,000 people, primarily in King County.

HUD Secretary Scott Turner defended the policy, stating that billions in taxpayer dollars were spent while homelessness reached record levels. However, state officials noted that this follows a previous court victory against HUD for imposing illegal conditions on CoC funding. Attorneys general characterized the move as an arbitrary and cruel attack on vulnerable populations that would cause tens of thousands of people to lose their homes.