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of Care networks, the U.S. Department of Housing and Urban Development (HUD) announced Monday afternoon that officials rescinded its Nov. 13 Notice of Funding Opportunity for federal fiscal 2025 grants to “make appropriate revisions.”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.”