Who will manage LA’s federal homeless dollars after an embattled agency bows out?

The Los Angeles region’s troubled homeless services agency announced this month that it will no longer manage the region’s federal homelessness dollars, amid scrutiny from the Trump administration.

Now, a federal court must help determine who will manage roughly $240 million in annual federal funding after the L.A. Homeless Services Authority gives up that long-held job in the coming months.

At a hearing Wednesday, U.S. District Judge David O. Carter said most of his attention is on who will administer the round of federal money that will be awarded in December and distributed next year.

The only potential near-term successor discussed in court was L.A. County, which created a new homelessness department and applied for the role. County officials have promised much stronger accountability and transparency.

But the city of L.A., where most of the region’s unhoused people live, is also interested in taking over some of LAHSA’s duties. The city could eventually try to break off and form its own regional body to receive federal funds, Carter said.

“But that’s for the future,” Carter said. “For now, we have to focus on providing for people experiencing homelessness — and also fraud and corruption.”

‘The watchdog wasn’t watching’

LAHSA has been used as a punching bag, Carter said, but he blamed recent cases of alleged theft of taxpayer funds on a broader “failure of government” by both HUD and LAHSA.

“The watchdog wasn’t watching, and the money got distributed without accountability,” Carter said.

In the meantime, Carter said, LAHSA isn’t going anywhere. He said any transition must unfold gradually to avoid displacing people from housing and services.

“We’re going to have to live with LAHSA for at least some period of time,” Carter said. “The question might be how much?”

How soon could the county take over? 

Carter said he agreed with LAHSA’s decision to entrust another administrator to manage the money.

Attorneys for the U.S. Department of Housing and Urban Development (HUD) told Carter the next round of annual funding would be distributed over 2027.

Carter acknowledged HUD may be uneasy sending that money to LAHSA, the very agency it is investigating for fraud. Carter said he was struggling with the issue himself.

Carter signaled that he wants to see federal funding transferred to the county by January if it is chosen as LAHSA’s successor.

‘The devil is in the details’

At the hearing, federal prosecutor Bill Essayli said the Trump administration would rather reach an agreement than litigate. He said “the devil is in the details” when it comes to any transition away from LAHSA.

“We want assurances of anti-fraud measures,” Essayli said. “That way the money is never stolen again.”

Carter said he hoped a transition plan would keep the parties from spending millions of dollars on attorneys’ fees that could otherwise go toward housing and services.

How we got here

In June, the Trump administration suspended LAHSA from applying for federal funding, alleging years of financial mismanagement. LAHSA then sued, and Carter blocked the suspension in August. Carter’s decision has so far held up on appeal.

LAHSA’s governing commission voted this month to give up its federal roles next year, including managing federal homelessness dollars and conducting the region’s annual homeless count. Local officials have been taking applications from organizations that want to take over those duties in 2027.

Meanwhile, investigations into fraud have been widening. Prosecutors have so far charged six people connected to L.A. homeless service providers. LAHSA has said none of its staff are implicated.

When asked if LAHSA’s current or past leadership has been culpable, Essayli recently said, "It is not against federal law to be incompetent, unfortunately.”

Major shifts happening

For decades, county, city and federal dollars have been managed mainly by LAHSA. But those funding streams are now being redirected in the wake of repeated findings of mismanagement.

L.A. County pulled roughly $300 million of its annual homelessness funding in July and gave it to its new in-house Department of Homeless Services and Housing.

That leaves the city as LAHSA’s last major funder. The City Council has explored leaving, but hasn't reached a decision yet. City staff has estimated that building a city homeless services department would take up to two years.

On the campaign trail, Councilmember Nithya Raman has pledged to exit LAHSA within her first year if elected mayor, while incumbent Mayor Karen Bass has said it would take "a couple of years."

What’s next

Carter did not rule Wednesday on federal funding. He scheduled a hearing for Oct. 27 and described it as “our decision-making day on so many matters.”

Before then, local officials are expected to select a replacement to take over LAHSA’s federal administrative roles.