LA needs federal funding to fight homelessness. Courts will help decide what the region gets

A pair of federal court battles unfolding in the coming weeks could reshape the future of homelessness funding across the Los Angeles region.

Two separate lawsuits challenging recent actions by the U.S. Department of Housing and Urban Development (HUD) will help determine whether L.A.’s embattled lead homelessness agency can compete for up to $241 million in federal grants this year and how that money can be spent.

Both legal challenges reflect a broader fight over the Trump administration's efforts to remake federal homelessness policy and crack down on perceived misspending by local governments overseeing federal assistance programs.

Will lead L.A. agency stay suspended?

The lawsuits center on HUD’s national Continuum of Care grant competition, the largest source of federal homelessness dollars flowing to L.A. each year.

Since the 1990s, HUD has required metropolitan areas like L.A. County to submit one single application for the region’s entire chunk of annual funding. The L.A. Homeless Services Authority, known as LAHSA, has been responsible for submitting that application on behalf of the region.

That changed in June, when HUD suspended LAHSA from federal grant activity pending a federal investigation into alleged financial mismanagement. The federal agency said LAHSA’s suspension meant it was not allowed to apply for this year’s grants, even though the agency has been working on an application.

LAHSA sued to overturn the suspension and is moving forward with its application while awaiting guidance from the court. U.S. District Judge David O. Carter has scheduled a hearing for Aug. 6 on LAHSA’s motion for a preliminary injunction.

HUD has since formally invited homeless service providers to apply directly for the federal homelessness money, bypassing LAHSA entirely.

Meanwhile, the L.A. County Development Authority has offered to apply for the region instead of LAHSA, if necessary.

HUD’s application deadline is Aug. 26. That’s when LAHSA, or an alternative applicant, would submit its final application to the federal government.

Shift away from permanent housing

The second lawsuit between HUD and local officials focuses on how federal homelessness dollars can be spent.

The L.A. Continuum of Care historically spends about 90% of its more than $200 million federal funding allocation on permanent housing interventions — including subsidies to help cover people’s rent, according to LAHSA.

That approach is part of a philosophy and strategy known as “housing first,” which prioritizes providing unhoused people with a stable place to live as the first step towards recovery from life on the streets. Additional issues, like unemployment, addiction, mental illness or other health problems, are typically addressed only after first moving someone indoors.

But that approach is now under fire from the Trump Administration, which has made multiple attempts to remake the federal Continuum of Care program to fund fewer permanent housing beds and focus more on drug treatment, recovery and enforcement.

As the Trump administration geared up to pivot away from the “housing first” model, HUD initially proposed rules limiting permanent housing to 30% of local spending. Last year, the city of L.A. and other municipalities joined litigation challenging the HUD guidance.

This June, Judge Mary McElroy struck down the proposed HUD rules, but denied cities’ request for a permanent injunction.

HUD had already issued new grant regulations, this time capping permanent housing at no more than 60% of local spending plans, forcing the states to start over with a new legal complaint assigned to the same federal judge.

U.S. President Donald Trump greets United States Secretary of Housing and Urban Development Scott Turner during the congressional picnic on the South Lawn of the White House on May 19, 2026 in Washington, DC.

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Heather Diehl

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States push back

Last month, nearly two dozen states, including California, sued HUD over those regulations, asking McElroy to again throw out HUD’s new funding rules.

The proposed rules put more than 5,000 Angelenos at risk for homelessness, according to projections by the National Alliance to End Homelessness, a nonprofit research and advocacy group.

The states hope for a ruling by Aug. 10, so that regions like L.A. have time to align their applications. The lawsuit argues the restrictions conflict with federal law and undermine the federal government's long-standing “housing first” strategy.

The Trump administration says the new rules are intended to move federal policy toward approaches emphasizing mental health treatment, addiction recovery and personal accountability.

If HUD prevails, local officials warn the consequences could ripple across L.A. County, affecting one of the region’s largest sources of funding for permanent supportive housing and other homelessness programs.

The federal funding at stake has been roughly a quarter of LAHSA’s annual budget in recent years and is among the largest single sources of money for the region’s homelessness programs, which are also funded by the state, county and city.

The story behind the Trump admin’s LAHSA fight

HUD imposed the suspension earlier this year amid mounting scrutiny of LAHSA's financial oversight and operations. Auditors and local officials have raised longstanding concerns about the agency’s internal controls, contract monitoring and oversight of homelessness funds.

LAHSA argues HUD's suspension is unlawful and could jeopardize the region's ability to secure funding.

On July 2, Carter directed HUD and LAHSA to propose an order to temporarily keep the current funding process in place while the case moves forward. The two sides couldn't agree on the terms.

LAHSA sent an email to service providers last week urging them to continue with the current process.

“Please do not let this notice disrupt your current application preparation,” the letter said. “We strongly urge all service providers to stay the course.”

Other regional homelessness officials clarified they’re moving forward with the consolidated application and working to protect existing program funding.

Sarah Mahin, director of L.A. County’s new Department of Homelessness and Housing, said the county expects to receive more direction from the court before or at the August 6 hearing. Until then, Mahin said, “The existing competition process and LAHSA’s role as collaborative applicant should remain undisturbed while the court considers the preliminary injunction motion.”

U.S. District Judge David O. Carter walks on a tour of the VA's West LA facilities on Wednesday, Aug. 21, 2024 in West Los Angeles, CA.

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Brian van der Brug / Los Angeles Times via Getty Images

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Los Angeles Times

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How the feds are planning for court decisions

In a July 21 court filing, HUD said it intends to delay any final action against the L.A. Continuum of Care until Aug. 10, or whenever the court rules on LAHSA’s request for a preliminary injunction.

HUD also said that if the suspension holds and LAHSA and the court determine local applicants must apply directly, the federal agency will give providers an additional 30 days to submit their applications.

Carter is also overseeing a major L.A. legal settlement stemming from a lawsuit by the L.A. Alliance for Human Rights over the city and county’s response to the homelessness crisis. Carter ordered all of the parties in the Alliance settlement to also appear at the Aug. 6 hearing in the case between LAHSA and HUD.

How service providers are preparing

Homeless service providers, caught in the middle of HUD’s legal battles with LAHSA and with states, say they want to make sure services aren’t disrupted.

LAHSA’s own deadline for local homeless service providers to submit their individual applications as part of the collaborative application process was last week. More than 100 local nonprofit service providers have already submitted theirs.

Several organizations told LAist they’re prepared to submit applications directly to HUD, including Hope the Mission, a large homeless services provider operating primarily in the San Fernando Valley.

“While larger organizations have the administrative capacity to pivot quickly, we are concerned about smaller, specialized community providers who may struggle to navigate a direct HUD submission without localized technical assistance,” said Ivet Samvelyan, a vice president at Hope the Mission.

Service providers told LAist they’re watching the two court cases closely, and awaiting clearer guidance from local officials about what to do next.

“Our concern is less about the application process itself and more about the policy direction it represents, which is an attempt to take funding away from evidence-based practices such as permanent supportive housing and instead fund programs that require sobriety and compliance,” said Tian Martinez, a spokesperson at Union Station Homeless Services.