BOSTON, April 1 - A federal appeals panel on Wednesday refused to permit the Trump administration to impose new conditions on billions of dollars in grant funding that supports permanent housing and services for people experiencing homelessness.
The three-judge panel of the Boston-based 1st U.S. Circuit Court of Appeals declined to stay the injunction issued by U.S. District Judge Mary McElroy in Providence, Rhode Island. McElroy's order had blocked the U.S. Department of Housing and Urban Development from changing the distribution criteria for grants awarded under the Continuum of Care program.
U.S. Circuit Judge Julie Rikelman - who, like the other appellate judges on the panel, was appointed by President Joe Biden - wrote that granting the government's request would be "destabilizing and disastrous" for recipients of the funding. In her opinion she warned that lifting the injunction could lead to the closure of housing organizations and to people losing their housing.
"In sum, the record paints a disturbing picture of the harms that would flow to the plaintiffs, their constituents, and the public from issuing a stay," she wrote.
HUD did not immediately respond to a request for comment.
The litigation was brought by Democratic officials from 20 states, local governments and nonprofit organizations, who argued the department's revisions to the grant criteria would undermine statutory priorities for stable, permanent housing. Lawyers for some plaintiffs said the administration's approach risked subjecting more than $2 billion in grants - which support about 4,000 local housing coalitions - to the department's new rules.
Jill Habig, head of the legal group the Public Rights Project, said in a statement that because the appeals court denied the government's motion to stay the injunction pending appeal, "almost 200,000 people - many living with disabilities - will not be displaced from stable housing."
At the center of the dispute is the Continuum of Care program, a federal initiative established in 1987 that provides funding to states, local governments and nonprofit organizations to help veterans, families and people with disabilities experiencing homelessness. The program emphasizes a "housing-first" model that prioritizes moving people into permanent housing without imposing preconditions such as sobriety or employment.
Continuum of Care grants are used not only for housing placements but also to fund child care, job training, mental health counseling and transportation services that support recipients in maintaining housing stability.
The Trump administration has criticized the housing-first model and in November announced an overhaul of the Continuum of Care grant program. HUD said its revisions would shift emphasis toward transitional housing initiatives and include work requirements and other conditions.
In December, Judge McElroy concluded that HUD's changes conflicted with the mandates of the federal law that provides funding for homeless shelter programs, pointing to Congress' prioritization of stable and permanent housing. Following that ruling, Congress passed a spending bill in February that directed HUD to renew Continuum of Care projects and to issue new grant awards.
After Congress enacted the spending legislation, the administration asked McElroy to lift her injunction so that some of the roughly $4 billion allocated to the program could be made subject to HUD's revised rules. McElroy declined, citing the need to shield funding recipients from "upheaval and service gaps." The administration then appealed that decision to the First Circuit, which on Wednesday refused to set aside the lower court's injunction.
The appeals court decision leaves in place the status quo for program funding while the legal challenge proceeds. The dispute highlights a direct clash between HUD’s policy priorities under the administration and the statutory language and congressional directives cited by the plaintiffs and the district court.
For now, organizations that administer Continuum of Care projects and the people they serve will continue to operate under the program’s existing criteria, without the additional requirements HUD had proposed.