By Greg Childress
NC Newsline
A coalition of municipal and nonprofit organizations has taken legal action to thwart the Trump administration’s move to restrict the amount of federal grant money nonprofits can spend on permanent housing and subsidized rents for formerly homeless people.
The lawsuit was filed in the U.S. District Court for the District of Rhode Island. It names the U.S. Department of Housing and Urban Development (HUD) and HUD Secretary Scott Turner as defendants.
The plaintiffs seek a preliminary injunction to stop what they claim are “unlawful restrictions” before they take effect. They contend the Trump administration announced the changes without substantive advanced notice and on a “highly compressed timeline.”
At issue are federal Continuum of Care (CoC) grants, which is the largest federal grant program specifically for assisting people experiencing homelessness. HUD announced last month that it would shift two thirds of the $3.9 billion program to transitional housing and other short-term interventions for people experiencing homelessness.
The competitive grants are awarded on a two-year cycle. The second year of funding was expected on Jan. 1, 2026. But HUD is now requiring a new competition one year into the funding cycle. The deadline for letters of intent to reapply for the grants was in November, with formal applications due Jan. 14.
“Communities were given almost no time to adapt before the funding cycle began, creating widespread confusion and threatening critical housing programs at the peak of winter,” the plaintiffs said in a news release.
The plaintiffs said the restrictions could force more than 170,000 people into homelessness. Last week, the National Alliance to End Homelessness, a lead plaintiff in the lawsuit, told NC Newsline that nearly 3,000 people in North Carolina could be pushed into homelessness under the changes to the program. The state could lose $24 million in funding, the alliance said.
“At a time when we should all be focused on scaling up and improving our most effective programs, this administration is instead focused on tearing them down,” said Ann Oliva, CEO of the alliance. “These sudden decisions will cause programs to be totally defunded or go without federal funds for at least five months, and likely longer.”
“We know that conservatively, best case, we will not see awards in our state until the end of May,” Liz Carbone with the NC Coalition to End Homelessness told NC Newsline. “The funding delay alone is going to be so deeply painful for our state.”
Nonprofits in North Carolina may have to ask state and local governments to step in to fill the gaps. That’s likely to be challenging, since the state is currently operating without a new budget, and local governments have long since finalized their budgets for the fiscal year.
As NC Newsline previously reported, the controversial program changes come as HUD breaks from the long-favored “Housing First” approach, which prioritizes providing immediate access to permanent housing without prerequisites. HUD is moving to a transitional housing approach that includes work and sobriety requirements.
