Facing a federal funding freeze, LA's homeless agency moves to fight HUD in court

The L.A. region’s lead homelessness agency is moving to take the Trump administration to court over a recent suspension that has potentially frozen up to $150 million in federal homelessness funds and complicated how millions more will flow to Los Angeles County.

The U.S. Department of Housing and Urban Development suspended the Los Angeles Homeless Services Agency from federal grant activity in a June 11 letter pending an investigation into alleged mismanagement at the agency.

On Monday, LAHSA's governing body, the LAHSA Commission, voted unanimously to authorize legal action challenging that suspension. The agency has not said what a lawsuit would specifically target or when it might be filed.

LAHSA officials were initially unclear which funds the suspension reached — money already under contract with HUD, federal grants awarded but not yet signed, or the coming year's application for regional homelessness grants.

“ The wording in this initial letter was quite vague and left a lot of uncertainty about which funds would be impacted by suspension,” Gita O’Neill, LAHSA’s interim CEO, said at Monday’s commission meeting.

LAHSA officials estimated about $115 million in grants awarded for fiscal year 2025 are awaiting HUD's final signature and in limbo.

O'Neill put the agency's broader exposure higher, warning of “$150 million in award funding at risk if HUD chooses to restrict LAHSA from distributing current funds from grants that have been awarded but not yet executed.”

The larger figure includes executed and unexecuted contracts spanning fiscal years 2022 through 2025, LAHSA’s deputy chief financial officer said.

HUD looks to bypass LAHSA

Following LAHSA’s request for clarity, according O’Neill, HUD sent another letter on June 18 explaining that as a result of the suspension, LAHSA would be barred from performing one of its key functions: applying to HUD on behalf of the entire region in the federal housing agency’s main homelessness grant competition.

The biggest pot of federal homelessness dollars flow to regions like Los Angeles through HUD’s Continuum of Care grant program.

In 2024, HUD awarded more than $220 million to the Los Angeles Continuum of Care, including more than $77 million to LAHSA directly. HUD has awarded $944 million to the L.A. Continuum of Care since 2021, according to the federal agency.

In each region, a lead agency applies for those funds as what HUD calls a “collaborative applicant” and passes them along to local providers. In Los Angeles, that agency is LAHSA.

In HUD’s June 18 letter, Ronald Kurtz, assistant secretary for community planning and development, wrote that LAHSA is “no longer eligible” to fulfill that role.

HUD may “designate another body as a collaborative applicant or permit eligible entities to apply directly for grants,” Kurtz wrote.

Absent a different decision based on LAHSA's response, the letter said HUD has determined “it would be in the public interest to allow eligible entities to submit their grant requests directly to HUD.”

Allowing individual shelter and housing operators to seek federal money on their own rather than through LAHSA would be a major structural change.

HUD did not respond to repeated inquiries about the June 18 letter.

The application for the next round of Continuum of Care funding, covering fiscal year 2026, is due Aug. 26. LAHSA officials estimate about $241 million is at stake for the L.A. region in that funding cycle.

President Donald Trump greets Secretary of Housing and Urban Development Scott Turner during the congressional picnic on the South Lawn of the White House on May 19 in Washington, D.C.

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Heather Diehl

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LAHSA's problems

LAHSA is a joint-powers authority created by the city of Los Angeles and Los Angeles County, which elected leaders appointed to coordinate the region's response to homelessness.

It administers a mix of federal, state and local money — applying for the funds and passing them to the nonprofit and government agencies that run shelters and housing programs.

LAHSA's city, county and state funding — which makes up the majority of the agency's budget — is not affected by the federal suspension.

The June 18 letter gives LAHSA and the Continuum of Care 30 days to respond to its findings. HUD said that action is separate from the June 11 suspension, which carries its own 30-day window to contest.

LAHSA declined to comment on a potential lawsuit Thursday.

HUD’s suspension comes as LAHSA is under increased local scrutiny.

An L.A. County auditor-controller report in November 2024 found LAHSA paid contractors late and failed to secure repayment agreements for some. A March 2025 court-ordered review found Los Angeles failed to properly track billions in homelessness spending, largely because of dysfunction at LAHSA.

Last year, L.A. County officials voted to pull more than $300 million a year from LAHSA and manage its own homelessness dollars through a new homelessness department at the county.

HUD has cast its actions as overdue accountability.

“Taxpayers will no longer bankroll an organization that puts its own self-interests ahead of the Americans it was created to serve,” HUD Secretary Scott Turner said when announcing LAHSA’s suspension this month.

HUD has accused LAHSA of repeatedly certifying financial controls and conflict-of-interest safeguards it did not have.

The agency said it has hired accounting firm KPMG to overhaul its finances, with recommendations to be presented publicly in July, according to O’Neill.

Local leaders, including L.A. Mayor Karen Bass, have called HUD’s suspension counterproductive.