Rhode Island court ruling protects permanent housing funds from federal shift

Court blocks federal housing funding shift

A Rhode Island federal court set aside the fiscal 2026 Continuum of Care funding notice from the United States Department of Housing and Urban Development, blocking the challenged framework.

United States District Judge Mary S. McElroy found HUD changed grant priorities without completing the required public notice-and-comment process before broad program revisions could legally take effect.

How Housing First works

Housing First prioritizes permanent housing without mandatory service participation or other preconditions, allowing residents to choose support for health, employment, benefits, education, and personal needs through voluntary services.

Permanent supportive housing combines long-term rental assistance with ongoing services for people needing extra support, while Housing First does not require participation as a condition of receiving a home.

HUD changed grant priorities

The U.S. Department of Housing and Urban Development issued its fiscal 2026 Continuum of Care funding notice on June 1, making $4.04 billion available through the federal grant competition for eligible organizations seeking program support.

The notice reserved $1.3 billion for new projects and prioritized transitional housing plus supportive services, reducing the amount potentially available for existing permanent housing programs through the competition.

Court finds procedure violation

Judge McElroy found HUD violated the Administrative Procedure Act by issuing new grant priorities without completing the legally required public notice and comment process before implementing those changes.

The court therefore set aside the fiscal 2026 notice in full, rather than restoring a separate earlier competition or guaranteeing any specific replacement funding arrangement for affected applicants.

Earlier notices faced legal challenges

HUD issued new Continuum of Care funding terms in November 2025, followed by another version in December, prompting legal challenges from states, local governments, and nonprofit housing organizations.

HUD released its fiscal 2026 notice while litigation over the earlier policies continued, and Judge McElroy later vacated both 2025 notices after finding violations of federal procedural requirements.

Two cases targeted the 2026 notice

One lawsuit came from a multistate coalition, while another involved local governments, housing organizations, and national nonprofits challenging HUD’s revised Continuum of Care grant terms in federal court.

Both cases reached the United States District Court for the District of Rhode Island, where plaintiffs sought an order setting aside HUD’s fiscal 2026 funding notice in its entirety.

Fun fact: The U.S. Department of Housing and Urban Development became a Cabinet agency in 1965, giving national housing policy its own department.

Rhode Island faced projected losses

National Alliance to End Homelessness projected Rhode Island could lose millions of dollars in federal permanent housing support under HUD’s challenged fiscal 2026 framework if implemented as proposed.

The organization also projected that hundreds of Rhode Island residents could face housing instability if money previously available for permanent placements shifted under the proposed federal grant structure.

Little-known fact: Homelessness in the USA exceeded 770,000 in January 2024, while the national count excluded some stays with friends or family.

National estimate showed wider risk

National Alliance to End Homelessness estimated HUD’s proposed 2026 funding changes could place at least 97,000 people in permanent supportive housing at risk of losing stable homes across communities.

The 97,000 figure remained only an advocacy and plaintiff estimate, not a court finding or confirmed count, so it represented a projected consequence instead of an established outcome.

The 2026 competition was halted

Judge McElroy set aside the fiscal 2026 funding notice in full, preventing HUD from continuing the affected Continuum of Care competition under those challenged federal grant terms as written.

The notice and application deadline were no longer in force, while HUD was evaluating the ruling and considering available legal and administrative options before deciding its next steps.

Permanent ban was not granted

The court declined to issue a permanent injunction that would prevent HUD from pursuing a similar funding change in future grant cycles through a lawful federal administrative process.

Judge McElroy found that the request was too broad because it depended on possible future agency actions rather than only the fiscal 2026 notice already before the federal district court.

Neronha helped lead the state case

Rhode Island Attorney General Peter F. Neronha helped lead the challenge with 20 other attorneys general and two governors, collectively representing 22 states and the District of Columbia.

The coalition argued that HUD could not alter the challenged housing grant framework without following procedures required under federal administrative and homelessness law before implementing those proposed changes.

Coalition included national and local groups

The case included the National Alliance to End Homelessness, National Low Income Housing Coalition, Crossroads Rhode Island, local governments, and additional nonprofit plaintiffs challenging HUD’s funding notice together.

Legal representation included Democracy Forward, ACLU Foundation of Rhode Island, National Homelessness Law Center, Public Rights Project, and Lawyers’ Committee for Rhode Island across different participating plaintiff organizations.

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HUD may revise future grant rules

The ruling prevents HUD from using the challenged fiscal 2026 grant notice while applicants await updated official guidance on competition procedures, deadlines, and future federal housing funding requirements.

The decision blocks that particular funding framework, but it does not prevent HUD from pursuing later policy changes after completing required procedures or seeking further federal judicial review.

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Do you think Rhode Island’s court ruling will better protect permanent housing funds, or could future HUD policy changes still put funding at risk? Share your thoughts.

This slideshow was made with AI assistance and human editing.

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