The Trump administration suddenly withdrew its federal policy change reducing funding for permanent supportive housing on Monday, Dec. 8, 2025. (Photo by Nadia Engenheiro, Half Street Group)

An hour before a scheduled court hearing on two federal lawsuits over recent changes to a key federal homelessness and housing funding program, the Trump administration withdrew the funding notice that prompted the litigation.

The move came as a surprise to the attorneys for plaintiffs who were initially scheduled to make their case for a temporary restraining order before Rhode Island Judge Mary S. McElroy. 

“It feels like intentional chaos,” McElroy said.

In a message to Continuum of Care networks, the U.S. Department of Housing and Urban Development (HUD) announced Monday afternoon that officials rescinded its Nov. 13 Notice of Funding Opportunity for federal fiscal 2025 grants to “make appropriate revisions.” The notice had set Jan. 14 as the deadline for applications for Continuum of Care funds, which address homelessness.

Rhode Island’s Continuum of Care gave the state’s homeless care a deadline of Dec. 12 to get their applications done to give to HUD, according to one of the lawsuits.

“We received notice first through our providers and [electronic filing], not through opposing counsel,” Zane Muller, assistant attorney general for the state of Washington, said during the 25-minute virtual hearing that began at 3:30 p.m.

HUD’s policy rescission too was news for McElroy, who called it a “haphazard approach to administrative law.” 

“There’s a process and procedure that’s laid out,” said McElroy, a first-term Trump appointee. “It’s not by tweets or by last-minute orders or last-minute withdrawals.”

Pardis Gheibi, a U.S. Department of Justice attorney representing HUD, told McElroy the notice was filed with the court as soon as it was published. She did not have the answer when McElroy wanted to know who at HUD made the decision to rescind the funding notice and when.

“We didn’t have the chance to confer with plaintiffs’ counsel — but the rescission happened this afternoon,” Gheibi said.

The Trump administration had planned to slash the amount of grant funds that can be spent on permanent housing — subsidized units that provide a stable residence for formerly homeless people, often those who have experienced mental illness or spent years on the streets — and instead focus on transitional housing.

Grant rules also would have eliminated funding 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.

HUD wrote in its update that it still intends to make changes to the policy for awarding funds for addressing homelessness.

A coalition of states co-led by Rhode Island Attorney General Peter Neronha filed suit over HUD’s latest Notice of Funding Opportunity on Nov. 25. On Dec. 1, a group of cities and nonprofits led by the National Alliance to End Homelessness and the National Low Income Housing Coalition filed a separate 85-page lawsuit.

Both complaints had similar requests for the court to declare the new conditions unlawful and reinstate language from prior funding notices, which is why McElroy opted to combine them into one hearing.

But with the funding notice now withdrawn, Gheibi argued there was no need for immediate relief.

Kristin Bateman, an attorney representing local communities and nonprofits and a senior counsel with Democracy Forward, argued court action is still needed. She said HUD’s rescission still leaves a critical funding gap for homeless services starting early next year since most federal fiscal 2024 grants start to expire in January.

“Those gaps in funding mean that they will not have the money to continue supporting the permanent housing that they fund for people to live in,” Bateman said. “People are going to be displaced, put back into homelessness in the middle of winter and face all the harms that come with that.”

McElroy scheduled the next hearing for 10 a.m. Friday, Dec. 19. She also tasked HUD with producing the administrative record on the grant funding policy, ideally within a week — though Gheibi had asked if it could wait until after the holidays.

McElroy said if the administration could work quickly to rescind the funding notice, they can work quickly to give the court the documents she requested.

“People can work overtime if they need to,” McElroy said. “I do, they do, I’m sure you do.”

The U.S. Department of Housing and Urban Development headquarters. (Photo by HUD Office of Public Affairs)

Update: On Monday, Dec. 8, the federal government withdrew the funding notice cutting Continuum of Care funds.

A proposed budget from the U.S. Department of Housing and Urban Development (HUD) that cuts funds which have meant the difference between shelter and homelessness for about 170,000 people nationwide has left communities scrambling. In Wisconsin, the cuts are projected to cause the loss of permanent housing for 2,379 people according to a report by the National Alliance to End Homelessness. The loss of funds would hit early in the new year, leaving local governments to absorb the fallout in the middle of winter. 

Korey Lundin, senior staff attorney at the National Housing Law Project and former staff attorney with Legal Action of Wisconsin, told the Wisconsin Examiner that the grants that HUD cut —  known as Continuum of Care (CoC) funds — “help thousands of people. That includes folks who have been recently unhoused.” In Wisconsin, 52% of permanent housing funding is covered by the CoC program. 

The people the CoC program serves, Ludin said, include “families, children, seniors, veterans, those who are survivors of domestic violence,” and others who are “not just the stereotypical image that people get when they think of a homeless person.”

In Milwaukee County, over $12 million in CoC funds covers direct rent payments to help provide housing for vulnerable county residents. The investments help support thousands of people across more than 20 housing programs. 

CoC funding in Milwaukee County supports housing for:

• over 770 children;
• 154 young adults between 18 and 24 years old, 
• 560 working-age residents from 25 to 44 years old, 
• 590 people between the ages of 45 to 64,
• 826 people with no income at all, 
• 347 who earn only $500-$1000 a month,
• 1,049 people diagnosed with mental health disorders,
• 321 people with physical disabilities,
• 123 with co-occurring substance use disorders,
• 549 people who’ve remained in housing for over five years,
• and 610 people who’ve maintained housing for 1 to 2 years. 

HUD has also proposed capping permanent housing support at 30%. In Milwaukee County 89% of CoC funds are dedicated to permanent housing beds. The picture isn’t much different for Dane County (where 78% of CoC funding goes to permanent beds), or Racine County (where 80% of CoC funding supports permanent beds). 

HUD announced the cuts saying they will help fulfill President Donald Trump’s “Ending Crime and Disorder on America’s Streets” executive order. HUD claimed that cutting support for permanent housing beds across the country will restore “accountability to homelessness programs” while promoting “self-sufficiency among vulnerable Americans.” 

The Trump administration has been criticized for policies that essentially criminalize homelessness, jailing and displacing unhoused people in an effort to beautify cities. Lundin sees the HUD cuts as part of that effort. He told the Wisconsin Examiner, “They want to round up and warehouse the unhoused. They want to incarcerate the unhoused. The solutions they’re talking about are solutions that exacerbate homelessness.”

HUD Secretary Scott Turner has said that restricting and cutting permanent bed funding is “ending the status quo that perpetuated homelessness through a self-sustaining slush fund.” In a press release announcing the cuts, HUD criticized “the failed ‘Housing First’ ideology, which encourages dependence on endless government handouts while neglecting to address the root causes of homelessness, including illicit drugs and mental illnesses.”

Housing First is an approach to addressing homelessness that prioritizes placing individuals in permanent and stable housing. One 2022 study — which noted that chronic homelessness in the U.S. costs up to $3.4 billion — found that the economic benefits of implementing Housing First programs outweigh the costs of the programs. In 2023, the U.S. Department of Veterans Affairs published a research brief highlighting that “strong evidence exists that the Housing First model leads to quicker exits from homelessness and greater housing stability over time compared with treatment as usual.” It also stated that studies on the Housing First Model — four of which were reviewed to compile the research brief — show that the model “results in greater improvements in housing outcomes for homeless adult populations in North America.” 

Milwaukee County Executive David Crowley, who credits the county’s Housing First approach for a sharp reduction in homelessness, told the Examiner, “I am deeply concerned about the Trump administration’s move to slash permanent housing funding. This decision will destabilize housing for people across the country and it threatens the real progress we have made in Milwaukee County through our Housing First program.” Crowley noted that Milwaukee County has been recognized for having the lowest number of unsheltered homeless residents count per capita in the country, “and we are looked at as a national leader in this space. As someone who knows what housing insecurity feels like, I will pull every lever I can to protect working families and expand access to permanent housing so we can keep our state moving forward.” 

Especially in the winter, the HUD cuts could have troubling consequences. “We don’t have any state protection that prohibits people from being evicted in winter,” said Lundin, who lives in Wisconsin. “If this goes through it would be happening in the worst time here in Wisconsin in the middle of the winter.” 

Lawsuits are already being filed by cities, states and nonprofits. Lundin also said that Congress could intervene by appropriating funding for the HUD programs the administration plans to cut in 2026. In a statement to the Examiner, U.S. Rep. Gwen Moore (D-Milwaukee) called CoC funding and homeless programs “vital to many organizations in Wisconsin and in Milwaukee who help the unhoused and keep people housed.” 

Moore said in the statement, “as per usual with this administration, it is the most vulnerable, like domestic violence survivors and LGBTQ youth, who would be hit the hardest. The Trump Administration’s proposal disregards Congress’s intent and would be catastrophic, putting 170,000 Americans at risk of homelessness. I am pleased to have joined my colleagues on several letters opposing these changes. House and Senate Members on both sides of the aisle have also pushed back because they recognize what it would do: Move us backward in the fight to end homelessness.”

Advocates are urging members of Congress to support a final HUD spending bill that increases funding for housing vouchers and protects CoC funds for permanent housing. The House and Senate version of a bill to fund HUD’s affordable housing, community development, and homelessness services programs differ by billions of dollars as the two chambers work to hammer out a year-end spending deal.