Thousands of Arizonans at Risk of Losing Housing as States Sue HUD Over Funding Cuts

Tens of thousands of Americans, including nearly 1,800 in Arizona, could lose their housing under a new federal policy that Arizona Attorney General Kris Mayes is fighting to stop.

Mayes joined a 22-state coalition this week in filing a federal lawsuit against the U.S. Department of Housing and Urban Development (HUD), arguing the agency is once again illegally capping funding for permanent housing programs that serve some of the country's most vulnerable residents.

"After losing in court, the federal government is again violating the law and abandoning vulnerable Arizonans," Mayes said. "HUD has no legal authority to unilaterally rewrite the rules governing this critical housing funding, and my office will continue to fight to hold the federal government accountable and protect Arizonans."

At the center of the dispute is the Continuum of Care program, the federal government's primary source of funding for housing and services for people experiencing homelessness or housing instability.

Current Housing Approach

For more than two decades, the program has prioritized a Housing First approach, which focuses on rapidly placing people in permanent housing without requiring them to meet conditions such as sobriety or a minimum income.

The current administration has moved away from that model. Last year, HUD published funding rules that imposed a 30% cap on permanent housing projects, a move that a federal court in Rhode Island struck down just last month, with Arizona among the states that won that case.

Despite that ruling, HUD issued new funding guidelines on June 1 that critics say accomplish the same result through a different mechanism.

The new rules create a $1.3 billion set-aside for transitional housing projects, which effectively limits permanent housing funding to about 68% of available CoC dollars, down from more than 80% historically.

According to the National Alliance to End Homelessness, at least 97,000 people living in CoC-funded permanent housing nationwide are now at risk of losing their homes as a result.

The coalition argues HUD violated federal administrative law by making the changes without following required public comment procedures and without adequate justification.

They are asking the court to declare the new funding conditions unlawful and block them from taking effect.