A battle is unfolding across the United States as 20 states and Washington, D.C. have come together to stop a controversial Trump administration initiative to restrict federal funding for homelessness programs. This dispute centers on sweeping changes proposed for the Continuum of Care program—a decades-old backbone of support for the country’s most vulnerable.
Lawsuit Overview and State Involvement
On November 25, 2025, attorneys general and governors from 20 predominantly Democratic states, along with Washington, D.C., filed a lawsuit against the administration’s Department of Housing and Urban Development (HUD). The suit is an urgent attempt to block new conditions and cuts on more than $3 billion in grants that help provide permanent housing and services for people experiencing homelessness. Plaintiffs argue that the new stipulations are both unlawful and discriminatory, disproportionately harming programs that serve marginalized communities, particularly LGBTQ individuals.
The Proposed Federal Restrictions
President Trump’s policy proposes several dramatic funding changes. The most significant is a cap on grant money for permanent housing, redirecting a majority of funds away from long-term supports to transitional shelters and short-term interventions. Additionally, organizations focusing on transgender and nonbinary people face new barriers, as the rules require federal grantees to recognize only two genders or risk losing support. Other provisions include new mandates for work or treatment as a condition for receiving housing.
Immediate Impact on Homelessness Programs
According to the lawsuit, the administration’s changes could force more than 170,000 people out of permanent homes and affect services nationwide. States say that these new rules put communities in a crisis, scrambling to restructure programs or risk massive housing loss. In Rochester, New York alone, 440 units—and over 2,000 apartments—are likely at risk, potentially resulting in widespread eviction. Beyond housing, cutbacks hit services for the elderly, disabled, and those living with mental illness or substance-use issues.
Data Snapshot: Selected States and At-Risk Housing
State
Grant Funds at Risk ($M)
At-Risk Housing Units
California
475
22,300
New York
310
13,200
Pennsylvania
144
6,350
Illinois
135
5,800
Arizona
96
4,710
These figures highlight just a sample of the potential impact on affordable housing if the restrictions are not rolled back. The actual number of affected people nationwide exceeds 170,000, with an even broader reach when counting lost social services.
Legal and Constitutional Arguments
The states contend that the administration’s actions violate federal law and the Constitution. Their lawsuit argues that the President cannot change the terms of congressionally appropriated funding, especially when new requirements are unconnected to housing need. By tying dollars to policy compliance—such as limitations on gender recognition and services for marginalized groups—states argue that the changes overstep executive authority and flout both statutory and constitutional guidelines governing federal grants.
Voices from the Ground
Advocates and state officials emphasize the real-life consequences of the proposed rules. According to New York Attorney General Letitia James, the policy shift abandons the mission of helping the most vulnerable, instead punishing people based on identity or poverty. Housing organizations in impacted areas worry that funds for permanent supportive housing could evaporate, driving up homelessness rates and destabilizing communities.
Federal Response and Ongoing Uncertainty
Officials from HUD have yet to comment extensively on the suit, but President Trump and his administration have defended the policy as an effort to revamp ineffective homelessness spending and promote “personal responsibility.” Meanwhile, a federal judge temporarily halted certain enforcement actions tied to previous iterations of the policy earlier this year, highlighting the ongoing friction between state and federal governments over social safety net programs.
As the case proceeds, the outcome will influence not just immediate funding—but the overarching rules for how social safety net programs operate nationwide. For now, states, advocates, and people experiencing homelessness are grappling with uncertainty, while courts weigh whether the new federal strategy constitutes much-needed reform or unlawful overreach.
