A US federal appeals court on Wednesday allowed the Trump administration to move forward for now with changes to a federal homelessness program, temporarily pausing a lower court ruling that had set aside the new funding plan.

The US Court of Appeals for the First Circuit granted the request by the Department of Housing and Urban Development (HUD) to put the lower court’s decision on hold while HUD appeals. The dispute centers on $1.3 billion that HUD set aside for transitional housing and projects that provide supportive services through its Continuum of Care program.

The Continuum of Care program provides federal funding to states, local governments and nonprofit organizations for housing and services for people experiencing homelessness. In June, HUD announced that more than $4 billion would be available under its 2026 funding plan. The department said the changes would place greater emphasis on treatment, recovery, transitional housing and self-sufficiency, shifting away from the “Housing First” approach.

HUD Secretary Scott Turner defended the policy when it was announced, saying that “housing alone will not solve” homelessness and that the administration was seeking to “put recovery first.”

The legal dispute concerns how HUD introduced those changes. In August, US District Judge Mary McElroy set aside the 2026 funding plan after finding that HUD had not followed the required public notice-and-comment process before issuing it. The process required the government to give the public an opportunity to provide feedback before taking certain actions.

McElroy found that the $1.3 billion set-aside acted as an incentive for applicants to adopt HUD’s preferred programs. She concluded that a federal homelessness law required HUD to seek public comment before offering incentives for additional strategies beyond those specifically identified in the law. The district court therefore set aside the entire 2026 funding notice, but declined to permanently prohibit HUD from implementing similar conditions in the future.

The First Circuit on Wednesday found that HUD had made a strong showing that it was likely to succeed in challenging that part of the district court’s decision. The appeals court said HUD was likely to succeed in arguing that the $1.3 billion that was set aside was not a “bonus or other incentive” covered by the public-comment requirement.

The appeals court also pointed to the timing of the federal funding. HUD has until December 1 to award the Continuum of Care money, and the court said that leaving the lower court’s order in place could prevent the department from implementing the funding plan in time and create gaps in funding. It therefore granted HUD’s request to pause the lower court ruling while the appeal continues.

The case follows an earlier dispute over changes to Continuum of Care funding, in which the First Circuit in April denied HUD’s request to pause another lower court ruling involving the homelessness program.

The case will now continue before the First Circuit, which has not yet issued a final decision on whether the district court was correct to set aside the plan for failing to use the required public-comment process.