A federal judge has delivered President Trump's Department of Housing and Urban Development (HUD) its third courtroom defeat this year over attempts to restructure how billions of dollars in homelessness funding are distributed across the United States.

U.S. District Judge Mary McElroy ruled Friday that HUD issued its latest funding notice for the $4 billion Continuum of Care (CoC) program in a "procedurally invalid manner," effectively blocking the agency's most recent effort to overhaul the program, as reported by Politico. Federal agencies are generally required under the Administrative Procedure Act to follow notice-and-comment procedures and provide reasoned justification when altering established program rules.

The CoC program is HUD's largest competitive grant initiative dedicated to addressing homelessness, distributing funds to local and regional organizations that provide housing and support services to individuals and families experiencing homelessness. The program funds roughly 7,000 projects across all 50 states, Puerto Rico, and Guam, according to HUD data.

HUD Secretary Scott Turner has repeatedly criticized the existing framework for prioritizing "Housing First" policies, which place individuals into permanent housing without requiring sobriety, employment, or participation in treatment programs as preconditions. The Housing First approach has been the prevailing federal policy guidance for homelessness programs for over a decade, adopted under both Republican and Democratic administrations as an evidence-based standard supported by multiple federal studies linking stable housing to improved outcomes.

"We are stopping the Biden-era slush fund that fueled the homelessness crisis," Turner previously stated in defense of the planned changes. Turner's stance reflects a broader policy shift within the Trump administration toward linking public assistance to behavioral requirements.

Advocacy groups, however, argue that the series of legal rulings reveals a broader problem with the agency's approach.

Mary Frances Kenion, chief equity officer for the National Alliance to End Homelessness, noted that this marks the second occasion her organization has been compelled to sue HUD over an unlawful funding notice.

"What that tells us is that [HUD has] a pattern of not following the law, just based on the decisions that have been handed down by the court to date," Kenion told Politico.

The legal dispute dates to November 2025, when HUD first attempted to rescind a Biden-era funding notice and replace it with revised rules. The proposed changes would have reduced funding for permanent supportive housing while promoting transitional shelter models that require work participation or addiction treatment as conditions for assistance.

A December 2025 court order temporarily enjoined those changes, compelling HUD to reinstate the original funding terms in January 2026.

Advocacy organizations estimated that the abandoned overhaul would have placed approximately 170,000 people — including families, seniors, veterans, and individuals with disabilities — at risk of losing housing assistance entirely. With three rulings now stacked against the agency, HUD faces the choice of issuing a fourth revised funding notice that satisfies procedural requirements or pursuing an appeal to a higher court.