By Nate Raymond
BOSTON, Sept 16 (Reuters) – A US appeals court cleared the way on Wednesday for President Donald Trump’s administration to reshape a $4 billion homelessness program by shifting funding away from permanent housing assistance toward temporary housing and supportive services.
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A three-judge panel of the Boston-based 1st US Circuit Court of Appeals put on hold a Rhode Island judge’s ruling that barred the Department of Housing and Urban Development from imposing changes to grant funding awarded through the Continuum of Care program.
That program has provided resources since 1987 for states, local governments and nonprofits to deliver support services to homeless people, with a focus on veterans, families, and people with disabilities.
It has long operated under a housing-first model that prioritizes placing people in permanent housing without preconditions such as sobriety or employment. Grants also support services including childcare, job training, mental health counseling and transportation.
The administration has criticized the housing-first approach and sought to redirect funding, but US District Judge Mary McElroy in Providence blocked it from making changes in 2025 and again last month.
22 STATES FILED LAWSUITS
McElroy’s latest decision came in lawsuits brought by 22 mostly Democratic-led states, the District of Columbia and a coalition of homelessness and housing advocacy groups.
They challenged HUD’s plan to set aside $1.3 billion of the more than $4 billion that Congress appropriated for the program in the 2026 fiscal year for transitional housing and supportive service-only grants.
The plaintiffs argued the change would unlawfully reduce funding for permanent housing projects and put tens of thousands of formerly homeless people at risk of losing their housing.
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McElroy, a Trump appointee who was initially nominated by Democratic President Barack Obama, concluded the move violated the Administrative Procedure Act.
But the three-judge 1st Circuit panel said the administration was likely to succeed on appeal in establishing that its decision to set aside the $1.3 billion for those purposes was not subject to notice-and-comment requirements.
“We further conclude that HUD would suffer irreparable injury absent a stay, given that HUD only has until December 1, 2026 to make awards to applicants for Continuum of Care funds,” the panel ruled.
HUD Secretary Scott Turner called the ruling a “win for taxpayers.”
“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,” he said on X.
The 1st Circuit panel included two Democratic appointees, U.S. Circuit Judges Lara Montecalvo and Seth Aframe, and one Trump-appointed judge, Joshua Dunlap.
The advocacy groups that had sued over the policy, including National Alliance to End Homelessness, in a joint statement expressed disappointment in the ruling and said they are evaluating potential next steps.
“Despite our coalition’s repeated triumphs in the lower court, today’s decision will give new life to HUD’s attempt to radically upend this critical program by defunding permanent housing solutions, which threatens to push 100,000 Americans into homelessness,” the plaintiffs said.
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(Reporting by Nate Raymond in Boston; Editing by Rod Nickel and Lincoln Feast)
Copyright 2026 Thomson Reuters.
