A coalition of 20 states and the District of Columbia filed a lawsuit Tuesday challenging the US Department of Housing and Urban Development (HUD) over its restructuring of the $3.6 billion Continuum of Care program (COC), arguing that the changes violate federal law and constitutional separation of powers principles.
The lawsuit, filed in the US District Court for the District of Rhode Island, targets HUD’s November Notice of Funding Opportunity (NFO) for the fiscal year 2025, which reduces the share of renewal funds for permanent housing to 30 percent of the Annual Renewal Demand, down from the approximately 87 percent of current funds supporting permanent housing. The new NFO also imposes conditions requiring grant recipients to certify they do not “rely on or otherwise use a definition of sex other than as binary in humans.”
The states assert multiple violations of the Administrative Procedure Act, arguing that HUD exceeded its statutory authority under the McKinney-Vento Homeless Assistance Act, which expressly directs the agency to incentivize permanent supportive housing and rapid rehousing. The complaint argues HUD failed to provide a reasoned explanation for abandoning its 20-year Housing First policy and imposed substantive rules without required notice-and-comment procedures under 24 C.F.R. § 10.1.
On constitutional grounds, the states argue the conditions violate separation of powers by implementing executive policy preferences which Congress never authorized. They further argue that the gender identity and geographic enforcement conditions violate Spending Clause limits established in South Dakota v. Dole by imposing requirements unrelated to the statutory purpose of addressing homelessness.
The complaint indicates that these changes could displace up to 170,000 formerly homeless individuals and destabilize state-funded housing programs structured around federal COC commitments. The states request declaratory and injunctive relief reinstating the prior funding framework. This follows a series of successful challenges to similar HUD funding conditions filed this year, including King County v. Turner and City of Seattle v. Trump.
