In a bold move that’s sending shockwaves through the nation’s housing advocacy circles, a coalition of 20 mostly Democratic-led states and Washington, D.C., has filed a high-stakes lawsuit against the Trump administration to halt sweeping restrictions on homelessness funding. Announced on November 25, 2025, the legal challenge targets the U.S. Department of Housing and Urban Development’s (HUD) controversial overhaul of the Continuum of Care (CoC) program—a lifeline that’s poured over $3 billion annually into permanent housing for the homeless since 1987.
As homelessness surges nationwide—with over 650,000 Americans affected in 2025 alone—these Trump homelessness funding cuts could displace up to 170,000 people from stable homes, critics warn, exacerbating a crisis that’s already straining cities from Los Angeles to New York.
If you’re a state official, nonprofit leader, or concerned citizen searching for the latest on states suing Trump over homelessness funding, this deep dive unpacks the lawsuit’s origins, the devastating impacts of HUD’s policy shift, and what it means for vulnerable populations like veterans,
, and LGBTQ+ individuals. From the “housing first” model’s defense to potential court timelines, here’s everything you need to know about this escalating battle over federal homelessness grants 2026.
The Lawsuit: 20 States Unite Against Trump’s HUD Overhaul
Led by New York Attorney General Letitia James, the bipartisan-yet-Democratic-heavy coalition—including heavyweights like California, Illinois, Pennsylvania, and Rhode Island—filed the suit in U.S. District Court in Providence, Rhode Island. Joined by governors from New York and Pennsylvania, the 19 attorneys general argue that HUD’s mid-November 2025 rule changes violate the Administrative Procedure Act, the Constitution’s Spending Clause, and the McKinney-Vento Homeless Assistance Act by imposing “illegal new conditions” on congressionally mandated funds.
The plaintiffs seek an emergency injunction to freeze the restrictions before they upend 2026 grant cycles, potentially forcing nonprofits to scramble for alternative funding amid an “impossible timeline.” “These funds help keep tens of thousands of people from sleeping on the streets every night,” James declared in a statement, emphasizing how the changes “punch down” on the most vulnerable. Pennsylvania Gov. Josh Shapiro echoed this, noting the cuts could swell foster care rolls by thousands, as over 1,100 kids entered the system last year due to family homelessness. This marks the 47th lawsuit from some of these states against Trump policies, highlighting a deepening federal-state rift over social services.
What Are the Controversial Restrictions on Homelessness Funding?
At the heart of the states suing Trump over homelessness funding is HUD’s dramatic pivot away from the proven “housing first” approach, which prioritizes immediate permanent supportive housing without preconditions like sobriety or employment. Under the new rules, announced by HUD Secretary Scott Turner earlier this month:
- Funding Caps and Shifts: No more than 30% of CoC grants—totaling $3.9 billion for 2026—can go toward permanent housing, with over half redirected to temporary transitional housing tied to work requirements, treatment mandates, or service obligations.
- Ideological Bans: Recipients are barred from using funds for diversity, equity, and inclusion (DEI) initiatives, “gender ideology” programs (impacting LGBTQ+ services), elective abortions, or anything clashing with immigration enforcement.
- Scoring Penalties: Grant applications lose points if local policies—like opposition to encampment sweeps—don’t align with Trump’s July 2025 executive order on “Ending Crime and Disorder on America’s Streets,” which pushes for clearing camps and routing people to treatment facilities.
Turner defends the overhaul as dismantling a “homeless industrial complex” that ignores root causes like addiction and mental health, arguing transitional models foster self-sufficiency. But states counter that data shows “housing first” reduces chronic homelessness by 88% and saves taxpayers $1.44 for every dollar spent—flipping the script on efficiency claims.
Which States Are Leading the Charge Against Trump’s Homelessness Cuts?
The 20-state bloc represents diverse regions hit hard by the crisis, from coastal hubs to heartland outposts. Key players include:
- California: AG Rob Bonta warns the changes will “worsen the homelessness crisis” in a state sheltering 181,000 unhoused residents.
- New York: AG James spearheads, citing risks to 140,000 New Yorkers in supportive housing.
- Illinois and Pennsylvania: Joined by Gov. Shapiro, focusing on family and veteran impacts.
- Arizona, Rhode Island, and D.C.: Highlighting discrimination against LGBTQ+ and disabled communities.
- Others: Colorado, Connecticut, Delaware, Hawaii, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Vermont, and Washington.
These states argue the restrictions aren’t just fiscally reckless—they’re politically motivated, punishing progressive policies on encampments and DEI.
Potential Impacts: 170,000 at Risk from Homelessness Funding Restrictions
If upheld, these Trump homelessness funding cuts could trigger a domino effect. Internal HUD memos, leaked to Politico, project 170,000 evictions from permanent housing by mid-2026, overwhelming shelters and spiking emergency room visits by 25%. Vulnerable groups face outsized hits:
- LGBTQ+ and Disabled Individuals: Bans on “gender ideology” and mental health services without preconditions could slash access, with Rhode Island AG Peter Neronha calling it “punching down on the vulnerable.”
- Families and Veterans: Reduced permanent slots mean more kids in foster care (1,100+ in PA alone last year) and vets back on streets, despite CoC’s veteran focus.
- Nonprofits and Local Budgets: Thousands of projects face cancellation, shifting billions in costs to states—California alone could lose $500 million, per estimates.
Sen. Elizabeth Warren blasted the moves as “draconian,” urging Congress to intervene and extend expiring grants. Echoing earlier suits by cities like Boston and San Francisco—where judges issued temporary blocks—this case could set precedents for federal overreach in social spending.
What’s Next: Timeline and Broader Implications for Homeless Aid
The Rhode Island court could rule on the injunction within weeks, with full arguments eyed for early 2026—potentially aligning with midterm pressures. A win for states would restore “housing first” primacy and shield CoC from ideological strings, bolstering a model that’s housed 1.2 million since 2009. Defeat? It greenlights Trump’s vision, possibly inspiring similar tweaks to Medicaid or food stamps.
Advocates like the National Alliance to End Homelessness decry the chaos, warning of a “humanitarian crisis” as encampments swell. On X, #SaveCoC trends with stories from affected families, while Trump allies tout “accountability.”
Bottom Line: A Pivotal Fight for America’s Homeless Future
This 20 states sue Trump showdown isn’t just legalese—it’s a referendum on compassion versus conditionality in tackling America’s homelessness epidemic. With $3.9 billion in federal homelessness grants hanging in the balance, the outcome could shelter or strand 170,000 souls, reshaping urban landscapes from Seattle to Miami. As James put it, “We will not let this administration hold these funds—and the people they help—hostage.”
Stay informed: Follow court dockets and HUD alerts for updates on Trump restrictions on homelessness funding. How might this ripple to your community? Share in the comments—we’ll keep this states suing over homelessness funding post current as the case unfolds.