Federal Court Stays HUD Restrictions on Homelessness Assistance Funding

LANSING, Mich. — Michigan Attorney General Dana Nessel secured a federal appeals court ruling on April 2 that blocks the Trump administration from imposing new restrictions on Continuum of Care grants, a critical source of federal funding for homelessness assistance programs across the state.

The ruling preserves nearly $100 million in grant funding that Michigan received through the Continuum of Care program last year, protecting an estimated 7,000 households from losing their housing, including approximately 2,000 families with children.

The Legal Battle

Nessel and a multistate coalition of 19 other states plus Washington, D.C., sued the U.S. Department of Housing and Urban Development in November 2025 after HUD abruptly changed its Continuum of Care program guidelines. The changes would have dramatically reduced the amount of grant funds available for permanent housing and project renewals.

In addition to cutting funding for permanent housing, the new HUD guidelines would have imposed new conditions on recipients, including requiring providers to only recognize two genders — a change that would have had a major impact on transgender and gender-nonconforming homeless individuals.

U.S. District Court Judge Mary McElroy sided with the states in December 2025, ruling that HUD's actions would cause irreparable harm to homeless individuals and service providers across the country. She issued a preliminary injunction barring HUD from implementing the restrictions.

On April 1, the 1st U.S. Circuit Court of Appeals rejected HUD's request to temporarily allow the restrictions to go into effect while the case is appealed. The appeals court determined that plaintiffs had provided ample evidence that if HUD moved ahead with its planned restrictions, the results would be "immediately destabilizing and disastrous" for their constituents.

Michigan's Stake in the Case

Michigan received over $100 million through the Continuum of Care grant program last year, funding homeless services that support families with children, veterans, seniors, people with disabilities, and survivors of domestic violence.

Under the proposed changes, approximately 7,000 total households in Michigan would have faced losing their housing, including 2,000 families with children.

"This is a victory for vulnerable Michiganders and for the rule of law," Nessel said in a statement. "I will continue to defend those who are most at risk from heartless, unlawful conditions that weaponize federal funding and pull the rug out from under them."

The Coalition

The lawsuit was led by the attorneys general of Washington, New York, and Rhode Island, and was filed in the federal District of Rhode Island. The coalition included attorneys general from Arizona, California, Colorado, Connecticut, Delaware, Illinois, Massachusetts, Maryland, Michigan, Minnesota, New Jersey, Oregon, Vermont, and Wisconsin, as well as the governors of Kentucky and Pennsylvania.

The legal group Public Rights Project represented the coalition in the case. Jill Habig, head of the Public Rights Project, noted that if the administration had prevailed, more than $2 billion worth of grant funding supporting approximately 4,000 local housing coalitions nationwide could have become subject to HUD's new rules.

"This is about protecting the housing stability of hundreds of thousands of Americans who are already struggling to meet basic needs," Habig said.

What's Next

The case is now pending further appeal. HUD may choose to appeal to the U.S. Supreme Court, but the Continuum of Care grants remain unchanged for now.

The Continuum of Care program, which has provided resources since 1987, supports local housing coalitions that deliver support services to homeless people with a focus on veterans, families, and people with disabilities. The program has been a critical resource for homeless services nationwide.

Attorney General Nessel's Broader Federal Advocacy

This ruling represents another victory in Attorney General Nessel's broader effort to defend state interests against federal overreach. In recent months, Nessel's office has won court rulings in several cases involving federal funding restrictions, including:

  • A March 2026 ruling requiring the Trump administration to restore billions in disaster mitigation funding
  • A victory protecting a housing assistance program from federal cuts
  • An earlier success defending against restrictions on homelessness funding

Nessel has positioned her office as a key defender of state interests in legal battles with the federal government, taking on cases that involve everything from federal funding to voting rights to environmental protections.

The Political Context

The case comes amid ongoing tensions between the Biden-Harris administration and the Trump administration, with both sides vying for control of federal agencies and funding priorities. The Continuum of Care program, originally established under President Clinton, has seen multiple funding cycles and policy changes over the years.

The Trump administration's attempt to alter the program's guidelines reflected broader efforts to reshape federal programs and redirect funding priorities. However, the courts have pushed back on several of these efforts, citing constitutional concerns and the importance of protecting vulnerable populations.

Impact on Michigan Communities

For Michigan communities that rely on Continuum of Care funding, the court ruling ensures stability in homeless services. The grants support shelter operations, case management, housing placement services, and other critical support systems that help formerly homeless people maintain housing and achieve independence.

Local service providers in cities like Detroit, Grand Rapids, Lansing, and Saginaw have depended on these grants to deliver essential services to homeless individuals and families. The uncertainty created by HUD's proposed changes would have disrupted these critical services and potentially pushed thousands of vulnerable people back onto the streets.

As the legal process continues, the ruling ensures that Michigan and other states can continue to provide stable housing support to those who need it most.