Court Challenges, Political Chaos, and Nationwide Confusion Leave Providers Unsure How to Keep People Housed
The Department of Housing and Urban Development withdrew its most recent Notice of Funding Opportunity (NOFO) for the Continuum of Care grant program on December 9, which included changes to homeless services funding that advocates had said presented as a “life-or-death” scenario.
CoC grants are the primary source of federal funding for governments and local nonprofits. The new rules HUD sought to institute made sweeping changes to grant awards, including capping the amount that can be spent on permanent supportive housing at 30% of the award and preventing awardees from promoting Housing First principles. Previous CoC grants allowed recipients to spend up to 90% of the award on permanent supportive housing.
The changes were swiftly challenged by 20 states and the District of Columbia, accusing President Donald Trump’s administration of trying to undercut Congress’s “constitutional power to control spending,” according to the lawsuit.
U.S. District Judge Mary McElroy appeared to be caught off guard by the government’s move to withdraw the NOFO, Politico reported. During a hearing on December 9, she ordered federal lawyers to submit new arguments addressing its decision by early next week, according to the outlet.
“You can change the policy all you want, but there’s a mechanism for doing so, and it’s not doing things an hour before court, and it’s not doing some of the things that have been done in these cases,” McElroy said.
‘Intentional Chaos’
HUD’s move to withdraw the NOFO temporarily pauses widespread funding changes that some have described as “life-or-death” for homeless service providers.
In all, the move put more than $4 billion of Congressionally approved grants on hold. That means state and local governments, as well as nonprofit partners, are being asked to continue their work without knowing whether they will be paid for it. The funding uncertainty also makes it difficult for these organizations to decide how to allocate their current budgets and create strategic plans to serve more people in the future.
“This is a life-or-death situation,” Nashville Mayor Freddie O’Connell told local station News Channel 5 Nashville. “We are taking them to court to stop it.”
This is happening at a time when homelessness continues to grow nationwide. Last year, 771,000 people were homeless in America, an 18% increase from 2023. Meanwhile, the rising cost of living is threatening the housing stability of many low-income households.
“It feels like intentional chaos,” McElroy added, according to a NOTUS report.
Uncertainty Remains
Some advocates warned that HUD’s withdrawal of its NOFO doesn’t entirely solve the problems that the homeless services sector faces. HUD could reissue the changes at a later date, or continue prodding around until it finds a way to permanently cancel the funding altogether.
The only certainty created by the move is that uncertainty remains.
“In the face of our lawsuit, HUD recognized today it could not defend the indefensible; the 2025 CoC NOFO is contrary to law,” Nashville’s Legal Director Wally Dietz told local news station Channel 5 Nashville in a statement. “By trying to withdraw the NOFO minutes before a hearing on a temporary restraining order, HUD admitted defeat, at least temporarily. The open question is whether HUD is just retreating to fight another day or is planning to reinstate the funding that was promised.”
Advocates warned that the changes HUD sought to implement would cause about 170,000 people to immediately become homeless. That would be on top of the number of people that are expected to experience homelessness for the first time in 2026 as the rising cost of living displaces low-income households.
Local service providers would be completely overwhelmed if such an increase were to occur. Local advocates like Nicole Newhouse, executive director of the Arizona Housing Coalition, worry that a lack of federal funding could cripple their service system.
Arizona received about $890 million in federal funding from HUD in 2024, according to the Arizona Housing Coalition. Newhouse warned there may be “unintended consequences” if the funding is not restored.
“Arizona’s housing and homelessness system depends on federal dollars, and when those priorities shift suddenly, without time to plan, the ripple effects can push more strain onto local governments, hospitals, schools, and law enforcement,” Newhouse said. “A predictable, coordinated transition is essential to keep people housed and communities stable.”
As we have seen over the last several years, cities across the nation have responded to increases in homelessness with increasing laws criminalizing acts associated with homelessness.
Research has shown that criminalizing homelessness is a waste of taxpayer dollars, and enforcement mechanisms like homeless sweeps do not make communities safer. Instead, criminalizing homelessness further traumatizes people experiencing homelessness, which can lead to an increase in overdose deaths among people with substance abuse challenges, and makes it more difficult for unhoused folks to access housing and get jobs.
Laws that criminalize homelessness also contribute to the violence that people who are homeless experience, according to Will Knight of the National Homelessness Law Center.
“The political rhetoric that goes along with criminalization, especially right now during our current political climate, contributes to a cultural view of homeless people as less than or other, or both,” Knight told Invisible People. “This contributes to a view that homeless people are dangerous, which is incorrect. It also contributes to a view of homeless people as disposable, which, in turn, increases violence against them.”
Why We Must Act: Housing Is a Human Right
Now is not the time to be silent about homelessness in the United States or anywhere else. Unhoused people deserve safe and sanitary housing just as much as those who can afford rent or a mortgage.
Poverty and homelessness are both policy choices, not personal failures. That’s why we need you to contact your officials and tell them you support legislation that:
- Streamlines the development of affordable housing
- Reduces barriers for people experiencing homelessness to enter permanent housing
- Bolsters government response to homelessness
Together, we can end homelessness.