Federal judge blocks HUD plan to limit permanent housing funding

A federal judge has blocked an attempt by the U.S. Department of Housing and Urban Development (HUD) to restructure and limit funding for permanent supportive housing programs. U.S. District Judge Mary S. McElroy ruled in favor of a multistate lawsuit involving a coalition of attorneys general and governors, including Illinois Attorney General Kwame Raoul.

The ruling prevents HUD from enforcing a $1.3 billion set-aside intended to prioritize alternative models, such as transitional housing, over the long-standing ‘Housing First’ approach. This policy, which has been utilized for over two decades, focuses on placing unhoused individuals into stable, permanent housing without preconditions like mandatory sobriety or minimum income thresholds.

Advocates and state officials argued that the proposed funding shift would have reduced available grants for existing permanent housing developments, potentially threatening the housing stability of approximately 97,000 residents nationwide. The court's decision blocks HUD from making these changes to the program’s fiscal 2026 funding.