A pair of federal court rulings has dealt a setback to the Donald Trump administration’s efforts to overhaul housing grant criteria tied to federal funding, a move with significant implications for construction and affordable housing development across the United States.
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The decisions, issued in late March and early April, block proposed changes to the Continuum of Care (CoC) grant program administered by the U.S. Department of Housing and Urban Development, which supports the construction and rehabilitation of permanent supportive housing.
A Rhode Island federal judge ruled March 31 that the administration acted unlawfully when it imposed new grant requirements just days before application deadlines. The policy changes required applicants to certify that they do not operate safe injection sites or support transgender-inclusive policies.
U.S. District Judge Mary McElroy sharply criticized the timing and substance of the policy shift, calling it a “slapdash imposition of political whims on CoC Builds grants.” She determined that the administration violated the Administrative Procedure Act by introducing major changes without proper process.
“Once again, this Court is faced with a case in which an executive agency has made a last-minute decision to make major, disruptive changes to grants within its purview, all for the express purpose of accomplishing the current administration’s policy objectives,” McElroy wrote.
While the judge declined to issue a permanent injunction on future policy revisions, the ruling effectively blocks the challenged changes for the current funding cycle.
In a separate but related decision, the U.S. Court of Appeals for the First Circuit upheld a lower court order preventing the administration from rescinding an existing funding notice and redirecting grant money away from permanent supportive housing.
“In sum, the record paints a disturbing picture of the harms that would flow to the plaintiffs, their constituents, and the public from issuing a stay,” the appeals court stated.
The rulings preserve access to approximately $75 million in federal funding earmarked for housing construction and rehabilitation projects serving vulnerable populations. Industry stakeholders say the decisions provide short-term stability for developers and contractors engaged in affordable housing and supportive housing projects.
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Advocacy groups argued that the proposed changes could have jeopardized housing assistance for as many as 200,000 individuals. Ann Oliva, CEO of the National Alliance to End Homelessness, welcomed the ruling.
She called the decision “a victory for people across this nation who have overcome homelessness and stabilized in HUD’s permanent housing programs.”
Despite the legal setbacks, the administration has indicated it will continue pursuing policy changes aimed at reshaping federal housing priorities. A spokesperson for HUD said the agency intends to move away from “housing first” approaches, arguing such policies have “rewarded activists” while failing to address broader systemic challenges.
For construction firms, the outcome underscores the importance of federal funding programs in shaping project pipelines, particularly in the affordable housing sector. With legal uncertainty still surrounding future policy efforts, developers may continue to face shifting regulatory conditions tied to public funding streams.
Originally reported by Ryan Kushner, Editor in Smart Cities Dive.
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