Two separate federal lawsuits challenging U.S. Department of Housing and Urban Development actions could reshape up to $241 million in Los Angeles homelessness grants and force a major shift away from the region’s “housing first” strategy. The legal battles involve a federal suspension of the Los Angeles Homeless Services Authority and new regulations capping permanent housing spending, creating high-stakes deadlines for local officials and service providers as court dates approach in August.
Legal Battle Over L.A.’s Lead Homelessness Agency Suspension
The first lawsuit centers on HUD’s national Continuum of Care grant competition, which represents the largest source of federal homelessness dollars flowing to L.A. annually. Since the 1990s, HUD has required metropolitan areas like L.A. County to submit a single regional application through the L.A. Homeless Services Authority, known as LAHSA. That process shifted in June when HUD suspended LAHSA from federal grant activity pending an investigation into alleged financial mismanagement, according to federal officials. LAHSA sued to overturn the suspension and is proceeding with its application while awaiting court guidance. U.S. District Judge David O. Carter scheduled a hearing for Aug. 6 on LAHSA’s motion for a preliminary injunction. HUD subsequently invited homeless service providers to apply directly for the funds, bypassing LAHSA, while the L.A. County Development Authority offered to apply for the region if necessary ahead of HUD’s Aug. 26 application deadline.
Clash Over Permanent Housing and ‘Housing First’ Regulations
A second lawsuit between HUD and local officials focuses on spending restrictions within the L.A. Continuum of Care, which historically allocates about 90% of its more than $200 million federal funding toward permanent housing interventions like rent subsidies, according to LAHSA. This approach follows a “housing first” strategy that provides unhoused individuals with stable housing before addressing employment, addiction, or mental health issues. The Trump administration has moved to pivot away from this model, initially proposing rules that capped permanent housing at 30% of local spending. After the city of L.A. and other municipalities challenged the guidance, Judge Mary McElroy struck down the proposed rules in June while denying a permanent injunction. HUD then issued new regulations capping permanent housing at no more than 60% of local spending plans, prompting nearly two dozen states including California to file a new lawsuit in July asking McElroy to throw out the latest rules.
Potential Consequences and Next Steps for Local Service Providers
The National Alliance to End Homelessness projects that the proposed federal funding restrictions put more than 5,000 Angelenos at risk of homelessness. If HUD prevails, local officials warn the policy could impact a quarter of LAHSA’s annual budget and disrupt one of the region’s largest funding sources for permanent supportive housing. In court filings, HUD stated it intends to delay final action against the L.A. Continuum of Care until Aug. 10 or until the court rules on LAHSA’s preliminary injunction. Meanwhile, local nonprofits are preparing for multiple outcomes. More than 100 service providers have already submitted individual applications to LAHSA, while organizations like Hope the Mission are prepared to submit applications directly to HUD if required. Judge Carter also ordered parties in a separate legal settlement stemming from a lawsuit by the L.A. Alliance for Human Rights to appear at the Aug. 6 hearing.
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