A coalition of 20 U.S. states and Washington, D.C. filed a federal lawsuit on Tuesday, November 25, 2025, seeking to block the Trump administration from imposing new restrictions on more than $3 billion in federal grants used to fund permanent housing and related services for homeless individuals.
Filed in Rhode Island federal court, the lawsuit accuses the U.S. Department of Housing and Urban Development (HUD) of unlawfully altering its Continuum of Care program to align with the administration’s political agenda. State officials argue the changes violate federal law and unfairly target LGBTQ people and other vulnerable groups.
The lawsuit challenges HUD’s newly announced conditions on the grants, including a cap on funding for permanent housing and a ban on financing organizations that focus on transgender communities.
According to the complaint, these restrictions would force states and nonprofit service providers to overhaul existing programs or risk losing funding—potentially cutting off housing and essential services for thousands of people.
“Instead of investing in programs that help people stay safe and housed, the Trump Administration has embraced policies that risk trapping people in poverty and punishing them for being poor,” the states said in the lawsuit.
HUD did not immediately respond to a request for comment.
Program Background
The Continuum of Care program, established by Congress in 1987, provides grants to state and local governments and nonprofits to combat homelessness through a range of services, including childcare, job training, transportation, and mental health counseling. The program has long followed the “housing first” model, which prioritizes permanent housing without preconditions such as employment or sobriety.
However, the Trump administration has rejected the housing-first approach, arguing it fails to address root causes of homelessness such as substance abuse and unemployment. Earlier this month, HUD announced it would redirect funding toward transitional housing programs with work requirements and other conditions.
The department also barred recipients from using funds for diversity, equity, and inclusion initiatives, elective abortions, or programs that promote “gender ideology” or interfere with immigration enforcement.
President Donald Trump, a Republican, has repeatedly urged local governments to dismantle homeless encampments and redirect people to treatment facilities.
Reaction from States
New York Attorney General Letitia James, one of the lead plaintiffs, said the program is essential to keeping vulnerable Americans housed.
“These funds help keep tens of thousands of people from sleeping on the streets every night,” James said.
Other states joining the lawsuit include California, Illinois, and Arizona. The complaint estimates that the policy changes could cause more than 170,000 people to lose their housing.
The states argue that HUD cannot unilaterally impose new restrictions on federal funds that Congress explicitly directed to be distributed based on need, not ideology.
