Housing First Just Lost in Court: HUD Can Redirect $1.3 Billion

The money can move before the case is finished

A federal appeals court just gave the Department of Housing and Urban Development room to move $1.3 billion away from the permanent-housing side of a federal homelessness program.

That does not mean HUD won the whole case. It means the court put the lower judge’s order on hold while the appeal continues. In government, though, “temporary” can still move real money and change real lives.

The First Circuit’s September 16 order lets HUD proceed with a plan to set aside $1.3 billion for transitional housing and “supportive service only” projects under the Continuum of Care program. That program has more than $4 billion in federal funding and has long helped states, cities and nonprofits pay for housing and services for people experiencing homelessness.

HUD says it needs to make awards by December 1. The appeals court agreed that blocking the plan in the meantime could create funding gaps. The judges also said HUD is likely to win its argument that this particular set-aside did not require the formal notice-and-comment process the lower court demanded.

That is the legal answer. It is not the whole human answer.

“Housing first” was the point

For years, much of the Continuum of Care system has followed a housing-first model: get people into stable housing without first demanding sobriety, employment or some other proof that they deserve a key.

The logic is not complicated. It is hard to keep a job, manage medication, protect your children or rebuild your life while sleeping in a car, shelter or doorway. Permanent housing is not the prize at the end of recovery. It is often the floor recovery stands on.

HUD’s new approach would reserve more money for transitional housing and services. Those things can matter. The fight is about what gets squeezed when the money is redirected. The states and housing groups challenging the plan say tens of thousands of formerly homeless people could lose stable housing. Their coalition warns as many as 100,000 people could be pushed back into homelessness. That number is the plaintiffs’ estimate, not a final court finding.

Black folks know how “temporary” becomes permanent

This is not a race-neutral pain in practice. Federal homelessness data has repeatedly shown Black Americans dramatically overrepresented among people without housing. HUD’s 2022 national count found that 37% of people experiencing homelessness identified as Black, African American or African.

That did not happen because Black people forgot how to budget. It grew out of redlining, segregation, wage gaps, eviction disparities and a housing market that has treated Black stability like an optional feature.

So when permanent housing loses ground, Black communities are not watching an abstract policy debate. We are watching the safety net get rewoven with thinner thread.

The federal government has funded homelessness assistance since the late 1980s, when Congress passed the McKinney-Vento Homeless Assistance Act. Decades later, the question is still painfully familiar: will the system invest in a home, or keep paying to manage the emergency around not having one?

What happens next

The appeal continues. The First Circuit has not issued a final ruling on every part of the dispute, and the plaintiffs say they are reviewing their next steps.

But unless another court intervenes, HUD can move forward with the $1.3 billion set-aside now.

That is why this matters today. The paperwork is still arguing. The money already has permission to move.

Sources: First Circuit order, September 16, 2026; Reuters report on the ruling; HUD 2022 Annual Homelessness Assessment Report; HUD homelessness assistance programs