On August 7, 2026, a federal judge issued a ruling on the lawsuit challenging the Fiscal Year (FY) 2026 Continuum of Care (CoC) Competition and Youth Homelessness Demonstration Program (YHDP) Grants Notice of Funding Opportunity (NOFO). The judge ruled that the U.S. Department of Housing and Urban Development (HUD) acted unlawfully when it included a $1.3 billion set-aside for new Transitional Housing (TH) and Supportive Services Only (SSO) projects, thus negating the entire NOFO. HUD has yet to release a new NOFO or announce next steps.
What Was the Lawsuit Challenging?
On June 1, 2026, HUD released the FY 2026 CoC/YHDP NOFO. The NOFO provided $4.04 billion in funding for CoCs and for renewals, replacements, or reallocations of current YHDPs.
On June 22, 2026, national homelessness advocates issued a challenge to the NOFO, arguing that (among other things):
- The $1.3 billion set-aside was unfounded and would cause too many existing projects to lose funding.
- Many of the selection criteria provisions were unlawful, such as requirements to follow Executive Orders, strong incentives for mandatory treatment, and restrictions on diversity, equity, and inclusion activities.
What Did the Judge Decide?
On August 7, 2026, the federal judge ruled that the $1.3 million set-aside for new TH/SSO projects was unlawful because:
- According to CoC law (42 U.S. Code § 11386b(d)(2)(c)), HUD can offer bonuses or incentives for “other activities” (which the judge determined to include the set-aside), but to do so, HUD must:
- Base its decision on research.
- Issue a public notice stating its intent.
- Solicit public comment.
- HUD did not issue a notice or solicit public comment.
- Therefore, HUD was in violation of the Administrative Procedures Act.
Because of this, the judge ruled that the whole NOFO is no longer valid. The judge also denied to issue a ruling on the lawsuit’s other complaints, such as the selection criteria provisions. This means that the similar or identical provisions that appear in the Youth Homelessness NOFO for FY2024 and FY2025 (which funds new YHDP and Youth Homelessness System Improvement grants) are not affected. It also means that, if these provisions appear in a future NOFO, they will need to be challenged again with a new lawsuit.
What Will Happen Next?
In an email on August 10, 2026, HUD stated that they are currently “evaluating the order and considering all legal options, including appeal.” They acknowledged that in the meantime, the submission deadline is no longer in force. At this time, there is no further information from HUD.
