Attorney General Ellison sues HUD to block new changes to funding addressing homelessness
HUD actions threaten housing for over 2,000 Minnesotans
July 7, 2026 (SAINT PAUL) — The U.S. Department of Housing and Urban Development (HUD) is attempting yet again to unlawfully cap funding for permanent housing projects, in a move that would result in tens of thousands of people losing their homes, Attorney General Ellison and a multistate coalition argued in a lawsuit filed today in federal court.
Just over a week ago, Attorney General Ellison 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. To ensure housing provided by CoC programs is stable, Congress prioritized stability in the way the funds are allocated. Traditionally, the vast majority of CoC funds have supported permanent housing and other projects that have been shown to work.
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 back to the streets, with states and local governments left to pick up the pieces.
“I cannot sit by and let the Trump administration violate the law and jeopardize housing funding for over 2,000 of our neighbors who are struggling financially,” said Attorney General Ellison. “The Trump administration’s plan to cut funding for evidence-based strategies to reduce homelessness is unlawful and cruel, so I’m challenging it in court. Trump will not evict Minnesotans on my watch.”
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. The idea behind the Housing First model is that it is easier for people experiencing homelessness to achieve conditions like sobriety after they have stable housing, so stable housing is prioritized and supportive services are offered after housing is secured.
But the current federal administration has rejected the commitment to the Housing First model and undermined the CoC program. Last year, HUD published grant application forms, called notices of funding opportunities, 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. That shift threatens housing for at least 97,000 residents of CoC-funded permanent housing across the country, including over 2,000 in Minnesota, according to a low-end estimate provided by the National Alliance to End Homelessness.
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 Ellison in filing the lawsuit are the attorneys general of Arizona, California, Colorado, Connecticut, the District of Columbia, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Washington, and Wisconsin, and the governors of Kentucky and Pennsylvania.
