Appeals court clears LAHSA to seek federal funds, rejecting Trump admin effort to sideline agency

A federal appeals court on Thursday rejected the Trump administration’s latest attempt to sideline the L.A. region’s lead homelessness agency from a $239 million federal funding process, clearing the way for the agency to complete an application due next month.

The three-judge Ninth Circuit panel denied the federal government's request for a stay pending appeal, which would have paused a lower court's order blocking its June suspension of LAHSA.

The decision Thursday allows LAHSA to continue to function and steer funding for local service providers who rely on that money to offer services and housing for unhoused people.

“This ruling provides greater stability at an important moment for Los Angeles,” Stephanie Graves, chair of LAHSA’s governing board, said in a statement. “Most importantly, it gives our region the opportunity to keep people housed, help more people find a path home, and give people hope,” her statement continued.

The judges wrote in the latest decision that the federal government failed to adequately explain why an immediate suspension of LAHSA in June was necessary to protect the public interest.

That suspension was put on hold in August by U.S. District Judge David O. Carter, who ordered the federal government to restore LAHSA’s role in the region’s federal homelessness funding process while the case plays out.

Carter's injunction on LAHSA’s suspension is currently set to expire on Oct. 27.

The question of whether HUD’s suspension of LAHSA was ultimately lawful is still headed for trial, with a hearing before Carter expected in February.

What’s this fight about?

The legal dispute, at this stage, has focused primarily on who gets to control some key decisions about how $239 million in federal U.S. Department of Housing and Urban Development grants are spent on housing and services for unhoused people in L.A.

The nationwide deadline to apply for that funding is next week, on Sept. 30, although HUD recently extended the deadline to Oct. 14 for L.A.-area applicants.

HUD’s rules require service providers and public agencies in places like L.A. County to form local geographic bodies called “continuums of care” and designate one agency to apply on behalf of the whole region for federal funds dedicated to solving homelessness.

L.A.’s regional body designated LAHSA as that one agency.

This year, LAHSA staff have been working since April with homeless service providers and other municipal partners to prepare a funding application according to HUD’s guidelines.

Then HUD’s June suspension of LAHSA stymied that process.

The appeals court said the timing of HUD’s suspension left the Los Angeles region in the lurch since the suspension came after a deadline to name another designated applicant had passed.

“HUD chose to suspend LAHSA at a time when it would leave the Los Angeles region particularly vulnerable,” the panel wrote.

Ben Kay works for a homeless services nonprofit and leads L.A.'s Continuum of Care Board. In a statement shared with LAist, Kay said "HUD’s attempts to impose its agenda on our community have created uncertainty and chaos in Los Angeles."

He said the Ninth Circuit ruling recognizes that there is a local legal right to set priorities for addressing homelessness.

Alternatives considered

HUD’s proposed alternative — allowing individual service providers to apply directly for federal funding — was “extremely difficult if not virtually impossible to implement,” the judges wrote.

That approach, according to HUD’s lawyers, would ignore much of LAHSA’s prior decisions about how to spend federal dollars.

“HUD, in the direct to HUD process, will not rely on any priorities set by LAHSA,” Weili Shaw, a U.S. Department of Justice attorney, said at a hearing in the case held Tuesday in San Francisco. “That's expressly what HUD wants, is not to have to rely on LAHSA’s allocation and prioritization decisions.”

Thursday’s court decision means that the direct-to-HUD process is off the table, at least for now.

On Wednesday, a regional homelessness body recommended that, in case LAHSA remained suspended, L.A. County departments could handle the region’s application instead. That body, the L.A. Continuum of Care, is also soliciting applications for organizations to take on LAHSA’s key federal roles beginning next year, including the annual federal funding application and the homeless count.

LAHSA has indicated it will not compete to keep those roles itself next year. Other local government agencies, including L.A. County’s Department of Homeless Services and Housing, have applied to take those roles sometime in 2027.

What LAHSA said in court

At Tuesday's hearing in San Francisco, the panel focused on the fast-approaching deadline.

Keri Curtis Axel, LAHSA's attorney, argued her client is the only entity actually prepared to make that deadline.

She also said dozens of local homeless service providers who rely on LAHSA to apply on their behalf wouldn't qualify to apply under HUD's alternative process, potentially cutting them out of guaranteed funding entirely.

Attorneys for the Los Angeles Continuum of Care, the regional body responsible for coordinating the application said that HUD never gave it a real opportunity to name a replacement for LAHSA for the process happening now.

Attorney Shayla Myers told the panel her client formally asked HUD whether it could designate a new collaborative applicant during a 30-day response window this summer. HUD never responded, she said, instead proceeding with plans for its own direct-to-HUD process.

The fight over LAHSA's suspension took on new urgency since the First Circuit Court of Appeals revived HUD’s controversial funding guidelines last week. That cleared the way for HUD to reopen this year's funding competition on a tight timeline.

Gita O’Neill, LAHSA’s interim CEO, said the agency “is moving full speed to finalize” the L.A. region’s federal funding application, due Oct. 14.

“Our priority has always been keeping frontline services running and ensuring that federal funding reaches our service providers,” O’Neill said in a statement.

LAHSA’s leader also said the agency will work with HUD to make sure that previously approved grant funding is promptly disbursed and will continue to prepare for January’s 2027 homeless count.

HUD has until Dec. 1 to announce this year's awards under a congressional deadline.

The U.S. Department of Housing and Urban Development said in a statement that it “stands by the lawfulness” of its suspension of LAHSA.

“The Department will comply with the Ninth Circuit's temporary order, which was made in part due to the quickly approaching deadline for CoC applications,” a department spokesperson said.

“HUD looks forward to seeing the Ninth Circuit's full resolution on the merits,” the statement continued.

A status conference in the original case — which will ultimately decide whether HUD’s suspension of LAHSA was legal — is currently scheduled for Sept. 30 in Judge Carter’s courtroom.

The Ninth Circuit is scheduled to hear oral arguments Oct. 19 on HUD's appeal of the preliminary injunction. The appeals court Thursday declined to pause the injunction while the case moves ahead, keeping it in effect. But the October hearing is where the judges will decide whether to uphold or overturn it.