HUD halts federal homeless dollars to LA-area's lead agency, citing mismanagement

U.S. officials said they were suspending funding for the Los Angeles region’s lead homelessness agency pending an investigation into whether it broke the law when handling federal grant money, according to a letter released Thursday.

The U.S. Department of Housing and Urban Development sent the letter to the Los Angeles Homeless Services Authority, or LAHSA, both agencies confirmed.

The move could jeopardize tens of millions in federal dollars that flow from HUD to LAHSA each year. It’s a major escalation in a conflict between federal and L.A.-area officials over the region’s approach to the homelessness crisis.

LAHSA has received $944 million in HUD funding since 2021, according to HUD.

HUD claims it has adequate evidence to suspect LAHSA violated its contracts with the federal agency — in part by repeatedly certifying it had adequate financial controls and conflict-of-interest safeguards when it did not.

“HUD cannot ignore LAHSA’s wanton management of public funds,” wrote Andrew Hughes, a deputy secretary at the federal agency.

“LAHSA’s repeated false statements and its irresponsible actions and failures, including its lack of financial management, internal controls and safeguards against conflicts of interest, pose a threat to HUD, the public, and those living on the streets of Los Angeles,” he added.

LAHSA said HUD’s action could result in thousands of formerly homeless people landing back on the street.

“This appears to be a blatant attempt to pull yet more resources from Los Angeles, a city they have targeted time and again, when it is clear that LAHSA has either corrected or is in the process of correcting nearly all of the issues raised,” LAHSA spokesperson Ahmad Chapman told LAist in a statement.

The agency can contest the suspension by requesting a hearing within 30 days, according to the letter. If LAHSA fails to respond to the suspension notice, the action will be final.

Details from HUD

The letter called LAHSA’s failures “severe and pervasive,” pointing to systemic accountability and compliance failures dating back decades.

HUD cited a November 2024 L.A. County Auditor-Controller report that found LAHSA paid contractors late and failed to secure repayment agreements with some providers. The letter also cites a March 2025 court-ordered review that found the city of Los Angeles failed to properly track billions in homelessness spending, largely because of problems at LAHSA.

Following those reports, 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.

The HUD letter also noted other recent documented issues scandals at LAHSA, including continued payment delays, legal settlements over misconduct allegations, and conflict of interest concerns around LAHSA voting to allow its former CEO to authorize more than $2 million to her husband's employer without disclosing it to HUD.

Though it is not mentioned in the letter, funding through LAHSA also has been at the center of a fraud case against one of its contractors. In January, federal and L.A. County prosecutors charged Alexander Soofer, the director of a South L.A. charity hired by LAHSA, with stealing $10 million of the $23 million he obtained in homeless funds.

“LAHSA's lack of financial management and internal controls violates HUD's requirements, violates the terms of LAHSA's agreements with HUD, undermines the integrity of HUD programs, and exposes taxpayer funds to heightened risk of fraud and abuse,” Hughes wrote.

LAHSA is making changes, agency says

LAHSA said it is already making changes to put a stop to many of the issues HUD raised, including working with the firm KPMG to modernize its payment systems.

“If HUD’s Inspector General actually conducts a fair review of LAHSA’s current and future practices, they will clearly see how our systems now allow us to clearly track the work and investments that have resulted in LA outperforming the nation by reducing homelessness over the last two years,” Chapman told LAist.

L.A. city and county officials have been worried about the possibility of HUD cutting off homelessness funding for at least a year.

Last summer, President Donald Trump signed an executive order aimed to reduce federal support for “housing-first” policies. That same week, HUD officials told local homelessness officials the agency was considering pulling more homelessness funding from L.A.

The federal housing agency’s investigation into LAHSA is in coordination with the White House Task Force to Eliminate Fraud, according to HUD.

“While hundreds of millions of taxpayer dollars were funneled to LAHSA with little accountability, homelessness skyrocketed,” HUD Secretary Scott Turner posted on X Thursday. “Taxpayers will not bankroll LA’s fraud-filled homelessness industrial complex.”

While HUD’s review continues, LAHSA said it will explore all available options to ensure that federal funds continue to keep thousands of Angelenos housed. 

In response to the suspension letter, L.A. Mayor Karen Bass' office put out a statement urging HUD to work with the city to fund homelessness programs.

"Threatening federal funds does nothing to house people and jeopardizes the progress Mayor Bass has led to reduce homelessness for two years in a row," the Mayor's Office said.

LAist correspondent Nick Gerda contributed to this story.