HUD says homeless services program overhaul on pause after federal injunction

The U.S. Department of Housing and Urban Development is shelving a major overhaul to a key federal homeless services program after a federal court blocked the changes, telling providers in Oregon and other states that it will reinstate previous grant applications submitted under Biden administration rules. 

The move comes nearly two months after the Trump administration announced new criteria for grant recipients through the $3.9 billion Continuum of Care program — the largest homeless services program HUD oversees. The changes sought to upend federal support for the longstanding model known as “Housing First,” which aims to quickly connect people to housing by removing preconditions like sobriety that can make it harder to access. 

The full-scale shift in federal policy prompted a wave of concern among Oregon service providers, who told InvestigateWest the new demands would put them at odds with requirements for state dollars aligned with the “Housing First” model, potentially forcing them to choose between state or federal dollars. 

A Rhode Island federal judge issued a preliminary injunction barring the changes from taking hold in December in response to a lawsuit filed by Oregon, Washington and 19 other states challenging the new requirements.

HUD informed service providers on Thursday that it would begin processing funding requests submitted under the previous application criteria, as the injunction required. But according to a notice posted on the agency’s website, the Trump administration will reinstate its version if the court order “is no longer in effect.”

In a statement to InvestigateWest on Monday, a spokesperson for HUD said the agency stands by its “objective to overhaul America’s failed homelessness system” and will continue these efforts moving forward, “consistent with governing law.”

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HUD first announced the overhaul to the Continuum of Care program in mid-November, arguing the “Housing First” model has inadequately addressed what it views as the “root causes” of homelessness: mental illness and substance abuse. The agency scrapped existing grant applications submitted for the 2025-26 fiscal year and told providers to apply again under the new criteria.

The program supports an array of local services, from permanent and transitional housing to data collection and case management.

Under the revised eligibility criteria, federal officials would have assessed projects based on whether providers condition access to housing on participation in behavioral health treatment, acknowledge sex only as “binary,” and operate in areas that enforce anti-camping bans, among other requirements.

HUD also wanted to place a 30% funding cap on spending for permanent supportive housing — or long-term accommodations for chronically unhoused people with disabilities. This form of housing currently accounts for about 90% of Continuum of Care program spending. 

Providers in Oregon said the policy changes would mean a significant downsizing in services and the potential displacement of thousands of formerly homeless Oregonians, since providers need both state and federal funds to stay afloat.

The court’s intervention blocks these changes — and staves off any financial upheaval for providers — until the states’ lawsuit is resolved. With the reinstatement of the previous Continuum of Care grant application, HUD says it anticipates announcing awards by May.

It is unclear if federal housing officials will revisit the challenged criteria for future rounds of funding, as HUD officials have reiterated such policy changes remain necessary to curb rising homelessness. The application period for 2027 funding is set to open this summer.