Judge blocks HUD's homelessness funding overhaul

Key facts

• A federal judge has blocked HUD's plan to shift funding for homelessness programs.
• The proposed policy change would have prioritized temporary housing and services over permanent housing.
• HUD stated its goal was to promote self-sufficiency rather than 'warehousing the homeless'.
• The policy change could have impacted an estimated 97,000 individuals.
• The judge ruled that HUD's funding set-asides incentivize grantees to align with agency goals.

A federal judge has once again blocked the Department of Housing and Urban Development's (HUD) proposed overhaul of its homelessness funding, which aimed to shift resources from permanent housing to temporary solutions and services. HUD had announced that for fiscal year 2026, it would allocate $4.04 billion, with over 30 percent earmarked for new transitional housing or supportive service-only projects, a significant departure from the typical 90% allocation to permanent housing.

HUD Secretary Turner stated in June that the agency would evaluate projects based on merit and outcomes, defining success by the number of Americans achieving self-sufficiency rather than by dollars spent or units built. Proponents of the shift expressed concern that the delays in funding disbursement would continue, potentially impacting an estimated 97,000 individuals if the 2026 policy changes were enacted. Kenion criticized HUD for its inability to issue a lawful and timely notice of funding opportunity.

In her ruling, Judge McElroy noted that HUD's decision to set aside a substantial amount of grant funding likely incentivized grantees to align their programs with the agency's goals. Although the judge denied a permanent injunction, she blocked the implementation of the policy change for fiscal 2026, leaving HUD with the possibility of attempting similar changes for fiscal 2027 funding.