MINNEAPOLIMEDIA NEWS | Federal Court Sides With Minnesota in Landmark Homelessness Funding Case, Preserving More Than $3 Billion for Housing Programs

ST. PAUL, MN (July 2, 2026) A federal court has delivered a sweeping victory to Minnesota Attorney General Keith Ellison and a coalition of states challenging the Trump administration's attempt to reshape the nation's largest homelessness assistance program, preserving more than $3 billion in annual federal housing funding while reaffirming Congress' authority over how those dollars are spent.

The ruling by the United States District Court for the District of Rhode Island grants significant portions of the coalition's motion for summary judgment, declaring key provisions of the U.S. Department of Housing and Urban Development's revised funding requirements unlawful and preventing the agency from enforcing them. The decision marks the culmination of months of litigation that began in November 2025 and represents one of the most consequential legal setbacks to date for the administration's effort to overhaul federal homelessness policy.

For Minnesota, where Continuum of Care grants support housing providers serving veterans, people with disabilities, families experiencing homelessness and survivors of domestic violence, the decision protects a critical funding stream that local agencies say underpins the state's homelessness response system. Across the country, the ruling preserves funding relied upon by thousands of community organizations operating permanent supportive housing, rapid rehousing programs, emergency shelters, street outreach and coordinated entry systems.

A Challenge to the Nation's Largest Homelessness Program

At the center of the lawsuit is HUD's Continuum of Care (CoC) Program, the federal government's principal homelessness assistance initiative established under the U.S. Department of Housing and Urban Development and authorized through the McKinney-Vento Homeless Assistance Act.

The program provides competitive grants each year to local Continuums of Care, regional coalitions of governments, nonprofit organizations and housing providers that coordinate services for people experiencing homelessness. Funding supports permanent supportive housing, rapid rehousing, transitional housing, rental assistance, coordinated entry systems and other evidence-based interventions intended to move individuals and families into stable housing.

For more than a decade, the program has largely operated under a Housing First framework, an approach emphasizing immediate access to permanent housing without requiring sobriety, employment or participation in treatment as prerequisites. Supportive services are then offered to help residents maintain housing stability.

Housing researchers, federal agencies and many local providers have long argued that Housing First improves long-term housing retention while reducing chronic homelessness among people with complex medical, behavioral health and economic challenges.

The Rules That Sparked the Lawsuit

The legal dispute began in November 2025, when HUD issued a revised Notice of Funding Opportunity (NOFO) governing the Fiscal Year 2025 Continuum of Care competition.

According to the coalition of states, the revised grant application imposed sweeping new funding conditions that Congress had never authorized.

Among the most significant changes was a cap on the amount of Continuum of Care funding that could be devoted to permanent supportive housing. Attorneys general argued that the restriction would have reduced available funding for permanent supportive housing projects by roughly two-thirds, threatening the long-term viability of thousands of housing units nationwide. They estimated that approximately 170,000 people could have been placed at risk of losing stable housing if the changes had taken effect.

The coalition also challenged provisions that would have prevented Continuum of Care funding from flowing to organizations that acknowledge transgender or nonbinary individuals or that provide services for people with certain mental health or substance use disorders. The plaintiffs argued those restrictions conflicted with federal law governing the program and exceeded HUD's statutory authority.

Courts Repeatedly Rejected HUD's Position

The June ruling follows a series of court decisions favoring the coalition.

In December 2025, the Rhode Island federal court issued a preliminary injunction after concluding that allowing HUD to implement the new funding conditions while litigation continued would likely cause irreparable harm to housing providers and the people they serve.

HUD later asked the United States Court of Appeals for the First Circuit to suspend that injunction.

In April 2026, a three-judge appellate panel refused, concluding that the record demonstrated the proposed funding changes could produce consequences that would be "immediately destabilizing and disastrous" for housing providers and the vulnerable populations relying on them. The appeals court found HUD had failed to demonstrate a sufficient legal basis for lifting the injunction while the case proceeded.

The latest summary judgment now goes substantially further, permanently vacating the challenged funding conditions that the court determined violated the Administrative Procedure Act, effectively preventing HUD from enforcing those provisions in the challenged funding notice.

Ellison: "We've Once Again Protected Vulnerable Americans"

Ellison, who joined attorneys general from 18 other states, the District of Columbia, and the governors of Kentucky and Pennsylvania in bringing the lawsuit, called the ruling an important victory for both vulnerable residents and the rule of law.

"With the court's ruling, we've once again protected vulnerable Americans from more gratuitous cruelty and the rule of law from another blatant assault," Ellison said following the decision. "I cannot think of anything more heartless than to pull the rug out from under people who are doing everything they can to get their lives back on track."

He also criticized the administration's broader housing policy, arguing that stable housing remains one of the most effective tools for helping individuals rebuild their lives and reduce long-term dependence on emergency services.

What the Decision Means for Minnesota

The ruling carries particular significance for Minnesota, where Continuum of Care funding supports permanent supportive housing developments, rental assistance programs, coordinated entry systems and homelessness prevention efforts across urban, suburban and rural communities.

Court filings submitted during the litigation indicated that at least 52 permanent supportive housing properties in Minnesota rely on Continuum of Care funding to continue operating. State housing officials warned that eliminating or substantially reducing that funding could have triggered evictions, forced providers to close housing units and disrupted services for some of the state's most vulnerable residents. They also estimated that at least 34 Minnesota housing sites could have experienced funding gaps under the revised federal framework.

The Continuum of Care program also provides critical support for local organizations serving veterans, survivors of domestic violence, individuals with disabilities and families experiencing homelessness, many of whom require long-term supportive housing to remain stably housed.

A Broader Debate Over Federal Housing Policy

The litigation reflects a larger national debate over homelessness policy and the federal government's role in addressing it.

Supporters of the Housing First model argue that permanent housing provides the foundation necessary for individuals to address mental health challenges, substance use disorders, employment and other barriers to long-term stability.

The Trump administration, by contrast, argued that HUD should move away from that model by placing greater emphasis on transitional housing, behavioral expectations and different funding priorities. HUD has defended its proposed changes as an effort to reform what department officials described as an ineffective approach to homelessness.

The federal court did not decide which housing philosophy is preferable. Instead, it concluded that HUD lacked legal authority to impose many of the challenged conditions through the funding notice and failed to comply with procedural requirements established under federal administrative law.

For now, the decision preserves the existing Continuum of Care funding framework while ensuring that billions of dollars in congressionally appropriated homelessness assistance continue flowing under longstanding rules.

For Minnesota communities, nonprofit housing providers and the thousands of residents who depend on those programs, the ruling provides something often in short supply within the nation's homelessness response system: certainty. It ensures that, at least for the foreseeable future, the federal resources supporting permanent housing and critical services will remain available under the framework Congress established, even as the broader debate over national homelessness policy continues.

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