A US appeals court on Wednesday rejected an initiative proposed by the Trump administration that would have cut millions of dollars from permanent housing funds for the homeless and shifted them to transitional programs requiring sobriety checks and mental health treatment. The Department of Housing and Urban Development (HUD) has not announced whether it will appeal the decision.

The US Appeals Court for the First Circuit upheld the lower court’s decision to block the initiative, and denied HUD’s request for stay pending appeal, stating:

[T]he plaintiffs submitted ample evidence that any implementation of the [new spending initiative] would be immediately destabilizing and disastrous for their constituents. One CoC-funded program in Massachusetts that administers housing for nearly 600 formerly homeless households reported that it would “not continue running [its] program” if HUD proceeded with the December NOFO [Notice of Funding Opportunity] “due to the [funding] uncertainty” that it threatens.

HUD argues that the current “Housing First” approach is flawed, and the new proposed use of funds would nudge the homeless towards self-sufficiency. HUD Secretary Scott Turner stated for the last two-decades, this “Housing First” approach has only “funded the self-serving homeless industrial complex, rewarded activists, and ignored solutions.” 

The change proposed by HUD would uproot the standing system, called the Continuum of Care (CoC) program. The current function of this program is to distribute over $4 billion in funds to state and local entities who then use that money to provide housing for millions of residents, including children, the elderly, and domestic-violence survivors. Since 2009, the CoC has followed the “Housing First” approach to combat homelessness. This approach prioritizes access to support services and permanent housing without the constraints of requirements like sobriety and mental health checks.

The challenge to this proposed shifting-of-funds initiative was brought by a group of states who argued that this shift in how the Department of Housing and Urban Development (HUD) spends their budget relating to homelessness would send 170,000 people from permanent housing back to homelessness.