Federal Judge Vacates HUD’s 2026 Homelessness Grant Notice Over Lack of Public Comment 

A federal judge has set aside the U.S. Department of Housing and Urban Development’s 2026 homelessness funding notice, ruling that the agency improperly changed funding priorities without first using the public notice-and-comment process required by federal law.

In an Aug. 7 order, U.S. District Judge Mary S. McElroy found that HUD’s 2026 Notice of Funding Opportunity, or NOFO, violated the Administrative Procedure Act because the agency did not seek formal public input before creating a $1.3 billion funding set-aside favoring transitional housing and supportive-service programs over the longstanding “Housing First” model.

The decision affects two related lawsuits brought by states, local governments, and nonprofit organizations, including the National Alliance to End Homelessness. The plaintiffs challenged HUD’s attempt to move away from Housing First, an approach that prioritizes placing people experiencing homelessness into permanent housing without first requiring sobriety, treatment participation, employment, or other conditions. Plaintiffs had argued that the funding change would redirect money previously available for permanent housing and could leave roughly 97,000 people experiencing homelessness. 

HUD argued that its $1.3 billion set-aside was not a “bonus or incentive” governed by the McKinney-Vento Homeless Assistance Act’s public-comment requirement. The court disagreed.

McElroy wrote that reserving more than $1 billion for projects aligned with HUD’s new priorities would plainly encourage grant applicants to reshape their Continuum of Care programs to compete for that money. The court concluded the set-aside was therefore an incentive under the statute.

The McKinney-Vento Act expressly identifies permanent supportive housing and certain rapid-rehousing services as proven strategies. For “any other activity” HUD determines is effective, however, the law requires the agency to rely on research and conduct notice and comment with the public before creating funding incentives.

Because HUD acknowledged its shift away from Housing First did not fit within the statute’s two specified permanent-housing categories, the court ruled that the new funding priorities fell under the provision requiring public participation.

The court vacated the 2026 NOFO in its entirety, meaning it cannot proceed in its current form. Although the judge vacated the funding notice, she denied plaintiffs’ request for a permanent injunction that would have barred HUD from implementing the disputed conditions in the future.