A federal judge has dealt a major setback to the US Department of Housing and Urban Development’s (HUD) controversial bid to retool how it grants nearly $3.9 billion in Continuum of Care funds for homelessness services. In Atlanta, HUD’s new grant rules jeopardized funding for 844 formerly homeless households.
HUD capitulated earlier this month to a late-December order from US District Judge Mary McElroy in Providence, Rhode Island, requiring the agency to renew Continuum of Care grants for FY 2026 using the existing FY 2024-2025 criteria. As ordered, HUD complied on Jan. 12, “including processing eligible renewals,” it said, for FY 2026, which started Oct. 1.
The judge also instructed HUD to hold off on its radical overhaul of the grant criteria until the court decides on a combined lawsuit from 21 Democratic-led states, the District of Columbia, and the National Alliance to End Homelessness challenging the proposed changes, which is still in its early stages.
HUD in November stunned homeless services nonprofits nationwide when it issued last-minute new rules that prioritized short-term, treatment-based programs over permanent supportive housing for 2026 Continuum of Care grant awards, the largest federal funding source for homeless housing and services.
HUD’s sharp departure from longstanding policy significantly narrowed local governments and nonprofits’ eligibility for federal assistance. It also left them with very little time to retool their applications for grants that, in some cases, expire in February.
Housing advocates decried the changes as an attempt by the Trump administration to force unhoused people into substance use treatment or psychiatric facilities as a condition for housing assistance.
The coalition of Democrat-led states and nonprofits sued HUD last fall, alleging its abrupt overhaul of Continuum of Care grant criteria exceeded the agency’s statutory authority and violated federal funding procedures and requirements set by Congress.
Atlanta’s Continuum of Care program, led by nonprofit Partners for Home, and similar programs nationally now have until Feb. 9 to seek grant funding renewals for permanent supportive housing and related homelessness initiatives.
The federal ruling amounts to a significant, if temporary, reprieve for homelessness service providers that depend on predictable federal funding to keep people housed.
“Essentially, they are proceeding with the FY 2024 renewals, as the judge told them to do, which is good,” Partners for Home CEO Cathryn Vassell told Atlanta Civic Circle. “This basically gives us a one-year reprieve.”
Partners for Home had previously feared losing two significant local grants that were set to expire Feb. 28 — one worth $500,000 to subsidize rents and wraparound services for 24 Westside households, and another $800,000 grant that supports 40 households citywide. Without that money, those formerly homeless people could have been thrust back on the streets in early March, Vassell said.
Atlanta’s Continuum of Care program likely won’t get the grant renewal money until May for those households, Vassel added, due to the delay from HUD’s disarray and the subsequent legal battle.
But that’s a delay Partners for Home and its partner nonprofits can absorb, she said. “This is what we do every year the awards come late. The providers float the funds until the awards and renewals come, and they are retroactively [reimbursed].”