Federal Court Restores LA Homelessness Funding, Reinstates LAHSA

Overview

A federal court blocked the U.S. Department of Housing and Urban Development (HUD) from disrupting the Los Angeles City and County Continuum of Care’s (CoC) fiscal year (FY) 2026 homelessness funding process after HUD suspended the Los Angeles Homeless Services Authority (LAHSA) from participating in federal programs. The ruling preserves the status quo for the FY 2026 funding cycle and the LA CoC’s local governance and decision-making.

Background

On June 11, 2026, HUD suspended LAHSA from participation in federal programs, citing alleged failures related to financial management, internal controls, conflicts of interest and grant oversight. HUD’s action would have prevented LAHSA from serving as the LA City and County CoC’s Collaborative Applicant—the entity designated by the CoC to submit its grant applications. LAHSA was suspended weeks before the submission deadline for the , putting into jeopardy approximately $241 million in federal homelessness funding for the Los Angeles region. A subsequent HUD Notice suggested that, rather than allow the CoC to designate an alternative Collaborative Applicant, HUD may instead open the door to a more direct application model for providers or designate its own Collaborative Applicant. HUD’s Notice also suggested that it was investigating and considering suspensions of other CoC Collaborative Applicants.

LAHSA to prevent disruption to the region’s federal homelessness resources and to preserve the CoC governance framework established under federal law. The agency argued that HUD’s suspension would interfere with the LA CoC’s ability to compete for FY 2026 funds, destabilize providers that rely on those funds and undermine the local planning process Congress designed CoCs to lead.

Additionally, HUD has provided notice of its intent to modify the FY 2026 CoC NOFO, which would include a direct-to-HUD application process for eligible applicants in geographic areas determined by HUD as not meeting CoC program requirements.

The Court Ruling

Judge David Carter of the U.S. District Court for the Central District of California granted in part a motion for preliminary injunction filed by LAHSA and the Los Angeles City and County CoC. The court's order blocks HUD’s actions in suspending LAHSA from serving as the LA CoC’s Collaborative Applicant and performing other key CoC functions at least through the end of the litigation in early 2027.

• HUD must proceed through the LA CoC process for FY 2026. The court ordered HUD to distribute FY 2026 LA CoC funding using the priorities established through the LA CoC’s Collaborative Application process, preserving the locally governed structure for the current funding cycle.
• LAHSA temporarily remains in key CoC roles. To avoid disruption, the court ordered LAHSA to remain the Collaborative Applicant, HMIS Lead, coordinated entry lead and Point-in-Time count administrator through the FY 2026 competition.
• The LA CoC retains its ability to select its own Collaborative Applicant. Noting that LAHSA has made improvements in its financial management, the court emphasized that its order is temporary and directed the LA CoC to review its lead designations for the FY 2027 funding round, subject to HUD review.

What Happens Next

The preliminary injunction remains in effect for the FY 2026 funding cycle, pending any appeal by HUD, while the litigation proceeds to a potential trial in February 2027. During the litigation, the court will also monitor the FY 2027 governance review process. Of note, HUD’s FY 2026 CoC Notice of Funding Opportunity has been invalidated by another federal court as discussed in a separate alert.

Although the order is temporary, it sends a broader signal: HUD may require accountability and reform, but abrupt changes to CoC governance and funding administration are vulnerable to challenge when the agency acts immediately without explanation and the changes threaten service continuity and depart from the locally driven framework Congress established for CoC funding.