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California is fighting back after President Donald Trump’s administration instigated homeless housing cuts that local service providers said would be “devastating.”

Two recently filed lawsuits accuse the U.S. Department of Housing and Urban Development of illegally going over Congress’ head to make massive changes to the way federal homelessness funds are distributed.

“HUD’s new grant rules would effectively defund permanent supportive housing and rapid rehousing programs across the nation, eliminating proven tools that help residents exit homelessness sustainably,” Santa Clara County Counsel Tony LoPresti said in a statement. “This is another instance of the Trump administration prioritizing its political agenda above the needs of our most vulnerable community members.”

Santa Clara County and San Francisco sued the Trump administration this week, in conjunction with the National Alliance to End Homelessness and the National Low Income Housing Coalition. A separate lawsuit was filed last week by Gov. Gavin Newsom’s administration and a handful of other states. It marked the 47th time California sued the Trump administration in 44 weeks.

Now, homeless service providers are waiting anxiously to see how the litigation plays out and wondering if the impending legal battle will further delay the money they desperately need.

“It’s just the matter of how long it’s going to take that concerns me,” said Robert Ratner, director of Santa Cruz County’s Housing for Health, which coordinates the county’s homelessness response. “Because while we’re waiting for these issues to get resolved, we have programs that are going to run out of money to support people.”

The Department of Housing and Urban Development did not respond to a request for comment.

In a statement last month, HUD Secretary Scott Turner said the changes are aimed at “stopping the Biden-era slush fund that fueled the homelessness crisis, shut out faith-based providers simply because of their values, and incentivized never-ending government dependency.”

At issue are changes the Trump administration made to its funding policy last month. Jurisdictions applying for a piece of about $4 billion in federal homelessness funds now can’t spend more than 30% of that money on permanent housing — a significant decrease. Los Angeles County, for example, currently spends more than 80% on permanent housing. Instead, the federal government wants localities to prioritize emergency shelter and temporary housing programs that require participants to be sober or participate in treatment.

While shelters offer a temporary respite from the streets, permanent housing can end someone’s homelessness. For years, the federal government has prioritized funding permanent housing using the “housing first” method — a strategy that moves people into housing as quickly as possible, without requiring them to first get sober or agree to addiction treatment. Veering away from both of those principles marks a major policy shift.

Last year, California communities won more than $683 million in federal homelessness funds through what is called the Continuum of Care program. About 90% of that went to permanent housing projects, which currently house tens of thousands of Californians, according to Newsom. The new rule threatens to put those people back out onto the street, he said in a news release.

“While we’re waiting for these issues to get resolved, we have programs that are going to run out of money to support people.”
— Robert Ratner, director, Housing for Health

The new policy also prohibits the use of federal funds for diversity and inclusion efforts, support of transgender clients, and use of “harm reduction” strategies that seek to reduce overdose deaths by helping people in active addiction use drugs more safely. And it gives preference for projects in cities, counties and states that ban homeless encampments.

Both lawsuits allege that the Trump administration’s funding changes violate the Administrative Procedure Act and the Constitution by defying the rules Congress set out for distributing the funds. Congress authorized a two-year grant cycle in 2024, meaning local jurisdictions wouldn’t have to reapply for funds in 2025. The Trump administration flouted that decision when it suddenly forced jurisdictions to reapply, the lawsuits allege.

The lawsuits also claim the administration didn’t go through proper protocol before enacting the changes to its funding strategy, which would have included giving cities and counties more time to comply with the new rules, and allowing stakeholders to comment on the changes.

In Santa Cruz County, Ratner is of two minds about the lawsuits. On one hand, he believes the abrupt way the Trump administration rolled out the funding changes was “very inappropriate.” But he worries a lengthy court battle could tie up funds his county needs to pay people’s rents.

The National Alliance to End Homelessness sued the Trump administration over similar allegations tied to a smaller, $75 million pot of homelessness funding in September. A judge sided with the Alliance, and temporarily barred the federal government from distributing those funds. But now that money is frozen, unable to help unhoused residents as the case moves forward.

Ratner worries that could happen again in this case. Santa Cruz County is set to start hitting serious financial problems as soon as February, Ratner said. That’s when a $1.2 million supportive housing grant, which currently houses about 50 people in different apartments around the county, is set to expire.

The Trump administration doesn’t expect to start awarding Continuum of Care money until May. It’s unclear how the lawsuits will affect that timeline.

In the meantime, Ratner and other homeless service providers are trying to remain optimistic.

“At this point, we don’t know how long the litigation process will take, but we’re hopeful it leads to a more workable path forward,” Sacramento Steps Forward CEO Lisa Bates said in a statement. “Of course, any delay in federal funding would have real impacts on communities across the country, including ours, to operate shelters, rapid rehousing, permanent supportive housing, and essential system coordination.”