AG Rayfield Sues HUD to Block New Changes to Homelessness Funding

Attorney General Dan Rayfield and a multistate coalition sued the U.S. Department of Housing and Urban Development (HUD) in federal court today, arguing the agency is attempting to once again unlawfully cap funding for permanent housing projects. This move would push tens of thousands of people out of their homes.

"Housing is the foundation everything else gets built on - a job, a recovery, a family staying together," said Attorney General Rayfield. "When you take that foundation away, you don't just hurt the person who loses their home, you hurt the whole community that has to pick up the pieces."

Just last month, the states won a separate case against HUD in federal court regarding the agency's decision last year to impose illegal conditions on billions of dollars in funding for the Continuum of Care (CoC) program, which supports housing and other services for people experiencing housing instability or homelessness. Congress has prioritized stability in the way the funds are allocated, and the vast majority of CoC funds have traditionally supported permanent housing and other successful projects.

On June 1, HUD sought again to re-implement a cap on funding for permanent housing and set other unlawful conditions on the funds. Without action by the court, HUD's actions mean CoC-funded permanent housing projects will lose funding or see it reduced, resulting in tens of thousands of people being evicted, with states and local governments left to pick up the pieces.

For more than two decades, HUD has embraced a commitment to permanent housing programs and the so-called Housing First model, which prioritizes rapid placement in permanent housing without requiring people to first meet conditions such as sobriety or a minimum income threshold.

But the current federal administration has rejected the commitment to the Housing First model and undermined the CoC program. First, HUD published notices of funding opportunities last year that set a 30% cap on CoC funding that were subsequently found unlawful.

Now, HUD has issued the June 1 notice of funding opportunity that creates a $1.3 billion set-aside for new projects prioritizing such things as transitional housing, which results in a de facto cap on permanent housing. The $1.3 billion set-aside in 2026 - much like the funding cap in 2025 - would significantly reduce the resources available for permanent housing in Oregon, destabilizing thousands of vulnerable Oregonians who rely on these resources to remain housed.

The states argue that HUD's actions violate the Administrative Procedure Act for, among other things, failing to proceed with notice-and-comment rulemaking and being arbitrary and capricious. They ask the court to declare that the challenged conditions are illegal and block HUD from implementing them.

Joining Attorney General in filing the lawsuit are the attorneys general of Arizona, California, Colorado, Connecticut, the District of Columbia, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, New York, Rhode Island, Vermont, Washington, and Wisconsin, and the governors of Kentucky and Pennsylvania.