HUD: Ninth Circuit Hears LAHSA Funding Appeal After Injunction

• HUD has asked the Ninth Circuit to allow it to cut $239 million in funding for the Los Angeles Homeless Services Authority (LAHSA).
• This request seeks to overturn a preliminary injunction issued by Judge David O. Carter, which halted HUD's suspension of LAHSA over alleged financial mismanagement.
• Judge Carter warned that HUD's funding cut could lead to deaths and displace over 11,000 unhoused individuals in Los Angeles.
• The Ninth Circuit panel questioned if HUD gave the LA Continuum of Care adequate opportunity to find an alternative to LAHSA for federal funding applications.
• LAHSA alleges HUD's reasons are a pretext, claiming the Trump administration seeks to dismantle the regional Continuum of Care program, despite bipartisan support for its approach.

Judge Carter acknowledged that "LAHSA may be dysfunctional," but underscored that "thousands of unhoused individuals rely on these services," concluding that while transitioning away from LAHSA might be an appropriate policy decision, it falls outside the purview of his court to make such a determination.

The U.S. Department of Housing and Urban Development (HUD) recently petitioned the Ninth Circuit Court of Appeals to permit the cessation of $239 million in federal funding allocated to the Los Angeles Homeless Services Authority (LAHSA). This request from HUD seeks a stay pending appeal of a preliminary injunction that was issued by U.S. District Judge David O. Carter. Judge Carter's injunction, granted last month, temporarily halted HUD's decision from June to suspend LAHSA, which serves as the primary coordinator for federal, state, and local funding directed at addressing homelessness across Los Angeles County.

HUD's initial suspension of LAHSA was predicated on allegations of the agency's purported financial mismanagement. However, Judge Carter, in his ruling, expressed concern that HUD's abrupt action would severely disrupt hundreds of service providers and imperil the thousands of unhoused individuals who depend on these critical services. The appellate panel in San Francisco, during its review, delved less into the specific legal foundations of Judge Carter's decision and more into the practical ramifications, including the intricate process for local homeless service providers to secure federal funding from HUD and the pressing deadlines involved.

A central point of contention for the appellate panel revolved around whether HUD had afforded the Los Angeles Continuum of Care (LA CoC) sufficient opportunity to identify an alternative entity to LAHSA. The LA CoC is a coalition federally mandated to oversee and prioritize the region's response to homelessness, including preparing a single, consolidated application for federal funding on behalf of numerous service providers throughout Los Angeles County.

During the Ninth Circuit hearing, U.S. Circuit Judge Roopali Desai, a Joe Biden appointee, voiced significant apprehension regarding what she characterized as a "gotcha" argument from HUD. Judge Desai highlighted an apparent inconsistency: HUD allegedly indicated in June that service providers should apply directly to HUD, while simultaneously disregarding the LA CoC's request to find an alternative collaborative applicant. Subsequently, HUD faulted the LA CoC at the hearing for failing to secure a new collaborative applicant by a September 30 deadline. Judge Desai pointedly questioned whether HUD was "in search of a solution to the problem of its own making," suggesting a potential lack of good faith in the federal agency's actions.

LAHSA initiated legal action against HUD following its suspension, contending that the stated justifications for cutting funding—allegations of "waste, fraud and abuse"—were merely a pretext. LAHSA's lawsuit asserts that the Trump administration's true objective is to dismantle the regional Continuum of Care (CoC) Program, a framework established by Congress that grants local authorities discretion over projects submitted for federal funding. LAHSA emphasized that bipartisan legislation has consistently funded and reaffirmed the CoC Program's regional approach across five presidential administrations, with support extending as recently as January 2025.

Furthermore, LAHSA's legal challenge claims that the Trump administration has explicitly signaled its intent to abandon the CoC program entirely in favor of a homelessness policy that prioritizes criminal enforcement, drug treatment, institutionalization, and the civil commitment of individuals with mental illness. While U.S. District Judge David O. Carter, a Bill Clinton appointee and Vietnam veteran known for his efforts to compel Los Angeles city and county to address the homelessness crisis, is not an advocate for LAHSA, he issued a stark warning in August. He cautioned that HUD's hasty suspension of the agency could lead to fatalities among the homeless population and the displacement of over 11,000 unhoused individuals onto the streets and into neighborhoods across Los Angeles. Judge Carter acknowledged that "LAHSA may be dysfunctional," but underscored that "thousands of unhoused individuals rely on these services," concluding that while transitioning away from LAHSA might be an appropriate policy decision, it falls outside the purview of his court to make such a determination.

The Ninth Circuit's decision regarding the HUD LAHSA funding Ninth Circuit appeal carries profound implications for the stability of critical homelessness services in Los Angeles. A ruling in favor of HUD would immediately cut $239 million in federal funding, potentially displacing over 11,000 unhoused individuals and severely disrupting the network of service providers. This case highlights the precarious balance between federal oversight and local autonomy in addressing complex social issues, particularly concerning the Los Angeles Homeless Services Authority funding cut and its immediate human impact.

For legal professionals advising social service agencies or local government entities involved in federal homelessness funding in Los Angeles, this case sets a crucial precedent. The outcome will not only determine the immediate fate of LAHSA and its ability to continue coordinating federal funding but also could redefine the scope of federal agencies' power to unilaterally cut funding and the legal avenues available to challenge such decisions. The dispute, involving a US Department of Housing and Urban Development injunction and a Ninth Circuit stay pending appeal HUD, underscores the intricate legal and practical challenges inherent in the LA Continuum of Care federal funding dispute, making it a pivotal case for the future of homelessness initiatives.

Lawyers advising social service agencies or local government entities involved in federal homelessness funding in Los Angeles should closely monitor the Ninth Circuit's decision. This case will determine the immediate stability of critical funding for LAHSA and could establish important precedents regarding federal agencies' ability to cut funding and the legal avenues for challenging such decisions.

Source: Original reporting via Courthouse News Service