A federal appeals court on Thursday ordered the U.S. Department of Housing and Urban Development to release $239 million in approved but withheld homelessness funding to Los Angeles service organizations after rejecting the Trump administration’s attempt to bypass the Los Angeles Homeless Services Authority.
The 9th U.S. Circuit Court of Appeals ruled 2-1 that HUD’s June suspension of LAHSA was unlawful, restoring the agency’s authority to apply for the funds on behalf of dozens of homeless service providers. The decision also frees up the previously approved but unallocated federal dollars, which had been intended for the 2026-27 funding cycle.
Immediate Impact of the Ruling
The appeals court’s decision denies HUD’s request for a stay, meaning the agency must now comply with a lower court’s preliminary injunction issued in August. That injunction, issued by U.S. District Judge David O. Carter, had found HUD’s suspension of LAHSA to be arbitrary and capricious and ordered the agency to reinstate the agency’s role as the primary applicant for the funds.
The funding, originally scheduled for distribution by the end of August, had been held up after HUD removed LAHSA as the applicant, citing allegations of mismanagement. The agency directed individual organizations to apply directly for the grants instead.
Court Rejects HUD’s Justification for Suspension
In its ruling, the appeals panel criticized HUD’s timing and rationale, stating that suspending LAHSA at such a late stage would leave Los Angeles “particularly vulnerable” and disrupt critical services for homeless populations. The court wrote that HUD’s plan was “likely unworkable” and that implementing it at this stage would be “extremely difficult, if not virtually impossible.”
The decision underscores the court’s skepticism of HUD’s justification for the suspension, which had not been fully litigated at the time of the appeal. A trial on the merits of LAHSA’s lawsuit is scheduled for February 2025.
LAHSA and Advocates Respond
Stephanie Graves, chair of the LAHSA Commission, praised the ruling, stating that it ensures continuity for homeless services in Los Angeles. “For the thousands of people experiencing homelessness or at risk of losing housing, today’s decision is a critical step toward stability,” Graves said in a statement.
Homelessness advocates and local officials had warned that removing LAHSA as the applicant would create delays and confusion, potentially leaving millions in federal aid unspent during a worsening crisis. Los Angeles County Supervisor Lindsey Horvath, who oversees homelessness policy, called the ruling a victory for evidence-based solutions and criticized HUD’s approach as politically motivated.
HUD’s Stance and Next Steps
HUD has not yet indicated whether it will seek further review of the decision, such as a rehearing en banc or an appeal to the U.S. Supreme Court. An agency spokesperson declined to comment on the ruling, stating only that HUD is reviewing the decision.
The case highlights ongoing tensions between federal homelessness policy and local governance, particularly in large urban areas facing severe housing shortages. The ruling does not resolve the underlying allegations of mismanagement at LAHSA but temporarily reinstates the agency’s role in the funding process while litigation continues.