Michigan Attorney General Dana Nessel, along with attorneys general from 20 other states, has filed a lawsuit against the U.S. Department of Housing and Urban Development (HUD) over recent changes to the Continuum of Care (COC) grant program. The coalition argues that these changes could limit access to long-term housing and essential services for tens of thousands of Americans experiencing homelessness or housing insecurity.
The lawsuit claims HUD is reducing the amount of grant funds available for permanent housing and project renewals, while also introducing new conditions on funding access. These include requiring providers to recognize only two genders, mandating resident participation in services as a precondition for housing, and penalizing providers in areas that do not enforce strict anti-homeless laws. The coalition contends these requirements conflict with previous HUD guidance and federal law.
According to the Michigan Attorney General’s office, past changes to COC grant conditions have been incremental so as not to disrupt service providers’ ability to plan and budget. The current wholesale changes are expected to create administrative difficulties and could result in thousands losing their homes.
“The Continuum of Care grant program is the backbone of efforts to combat homelessness across Michigan and throughout the country,” said Nessel. “Restricting funding and imposing illegal conditions on these grants violates HUD’s mission to create strong, sustainable, inclusive communities for all. If permitted to take effect, these changes will displace thousands of Michigan families. I am committed to ensuring residents are protected from these unlawful conditions meant to force Michiganders out of their homes and into the streets just as winter approaches.”
For decades, COC grants have supported local coalitions planning housing solutions for people experiencing homelessness. Providers rely on this funding’s predictability for continuity in services.
HUD has traditionally promoted a “Housing First” model—providing stable housing without preconditions such as sobriety or minimum income—which research shows improves stability and reduces costs associated with homelessness.
In 2024, Michigan received over $100 million through the COC program. State officials estimate that under HUD’s new terms outlined in its 2025 notice of funding opportunity (NOFO), about 7,000 households—including approximately 2,000 families with children—could lose their housing if the policy takes effect.
Sarah Rennie, Senior Director of Advocacy at the Michigan Coalition Against Homelessness (MCAH), expressed concern: “Over our 35 years of operation and expertise, MCAH has never encountered a threat as devastating and extreme to persons in poverty as the 2025 COC NOFO. Not only will this application fracture the homeless service delivery infrastructure, which has taken decades to build, but lives will be lost.” She added that rising homeless rates are due more to an affordable housing shortage than failures within existing systems; estimates indicate Michigan lacks over 290,000 affordable units while wages remain stagnant amid inflation.
Historically about 90% of COC funds have gone toward permanent housing support; under HUD’s new rule—unauthorized by Congress—that figure would drop by two-thirds starting in 2026. Renewal protections would also decrease from around 90% annually down to just 30%, raising concerns that many formerly homeless individuals may face eviction when projects lose funding.
The complaint further alleges that HUD failed to follow required rulemaking procedures or secure congressional approval before implementing these policy shifts—some allegedly contradicting both federal statutes and HUD regulations—and did not provide adequate justification for abandoning established policies like Housing First or considering impacts on vulnerable populations.
The legal challenge was filed in federal court in Rhode Island. States joining Michigan include Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Rhode Island, Vermont Washington Wisconsin; governors from Kentucky and Pennsylvania also joined.
