Court Clears Housing Department’s Changes to Programs for Homeless

The Department of Housing and Urban Development (HUD) can proceed with changes to funding for programs for homeless people, a federal appeals court ruled on Wednesday.

HUD has been shifting funding from placing homeless people in permanent housing with no conditions, which it says has failed to stem the rising number of homeless people, to other priorities, such as housing combined with support.

As part of that shift, HUD in June said it was setting aside $1.3 billion for services focused on transitional housing and supportive services.

Nonprofits and states, some of which were in danger of losing funding, sued, arguing the change violated federal law in part because the agency did not formally notify the public and accept public comments before finalizing the change.

U.S. District Judge Mary McElroy in Rhode Island agreed, ruling in August that the new tranche fell under a portion of federal law that mandated a notice-and-comment period.

The law, 42 U.S.C. § 11386b(d), governs “bonuses or other incentives” offered by HUD aimed at reducing homelessness.

HUD appealed to the U.S. Court of Appeals for the First Circuit, arguing the law did not apply because the new tranche was not a bonus or another incentive.

“After careful review of the parties’ briefs and supplemental submissions, we conclude that HUD has met its burden to show its entitlement to a stay pending appeal,” the court stated.

“HUD has made a strong showing that it is likely to succeed on the merits of its challenge to the district court’s holding that the set-aside in the [notice of funding opportunity] was subject to notice and comment requirements pursuant to 42 U.S.C. § 11386b(d).

“That holding turned on the district court’s determination that the set-aside constitutes a ‘bonus or other incentive[]’ under that provision. We conclude that HUD is likely to succeed on the argument that the set-aside is not a ‘bonus or other incentive[]’ as that term is used in § 11386b(d).”

Absent court action, judges also said, HUD would suffer injury that could not be repaired, since it has until Dec. 1 to award money to applicants for the funds in question.

“Although HUD is likely to succeed on the merits, it would be unable to implement the [notice] in a timely manner—thereby creating funding gaps—unless a stay enters. Accordingly, the motion for stay pending appeal is granted,” the court said.

That means McElroy’s order is paused, pending a final ruling of the government’s appeal.

The plaintiffs did not respond to requests for comment by publication time.

“This is a step in the right direction to deliver real and lasting results that serve our most vulnerable — not a failed ideology and those who profit from it,” HUD Secretary Scott Turner said in a Sept. 16 post on X.