Federal Judge Blocks HUD's Bid to Cap Long-Term Continuum of Care Grants

• Federal judge blocks Trump administration's attempt to cap long-term Continuum of Care grants.
• HUD violated Administrative Procedure Act by issuing notice without public comment.
• Ruling marks second time this year Judge Mary McElroy has rejected government's efforts to change grant funding.
• Continuum of Care program provides funding for permanent housing, rental assistance, and supportive service projects nationwide.
• States argue that capping long-term Continuum of Care funding would have disastrous consequences.

The court determines that HUD violated the APA’s requirement to observe proper procedures as required by law when it issued the 2026 NOFO without first engaging in the public notice and comment procedure.

A federal judge has blocked the Trump administration's attempt to cap long-term Continuum of Care grants, marking the second time this year that U.S. District Judge Mary McElroy has rejected the government's efforts to change grant funding. The ruling comes as a coalition of 24 states continues to push back against the Department of Housing and Urban Development's (HUD) attempts to shift federal homelessness funding away from permanent housing initiatives. This latest decision is a significant blow to the Trump administration's homelessness policy, which has been criticized for prioritizing short-term solutions over long-term stability. The Continuum of Care program, established in 1994, provides funding to state, local, and nonprofit providers to combat homelessness nationwide. Since its inception, the program has distributed billions of dollars in funding, with most going towards permanent housing, rental assistance, and supportive service projects.

Judge McElroy's ruling found that HUD violated the Administrative Procedure Act (APA) by issuing its 2026 Notice of Funding Opportunity without first engaging in the public notice and comment procedure. This is not the first time HUD has been accused of violating the APA; last year, McElroy ruled against the department in a similar case, blocking a cap on Continuum of Care funds for permanent housing projects at 30%. Despite this setback, HUD pressed on with its efforts to slash long-term Continuum of Care funding, publishing a notice in June that it was seeking to cap the permanent housing cap yet again – this time at 68%. The states argued that this move would have disastrous consequences and prompted the latest lawsuit.

The ruling may have significant implications for state and local governments, as well as nonprofit providers, related to Continuum of Care grant funding. Lawyers advising these entities should review their current funding structures and consider potential implications of this decision on future grant applications. The Trump administration's homelessness policy has been criticized for prioritizing short-term solutions over long-term stability, and this ruling may be a step towards reversing that trend. As one attorney general noted, 'Communities across this nation – in states both red and blue – rely on the federal government to support smart, strategic, lawful, and evidence-based funding opportunities to support their efforts to end homelessness.'

This ruling may impact the compliance obligations of state and local governments, as well as nonprofit providers, related to Continuum of Care grant funding. Lawyers advising these entities should review their current funding structures and consider potential implications of this decision on future grant applications.

Source: Original reporting via Courthouse News