Michigan – Michigan Attorney General Dana Nessel is leading a multistate effort to fight what she deems an illegal change in federal housing policy. She says this move could put thousands of people back on the streets. Nessel and 20 other states are suing the U.S. Department of Housing and Urban Development over new restrictions that are part of the Continuum of Care funding program, which is the main way that the country fights homelessness.
The complaint is against recent policy changes that will cut financing for long-term housing significantly and change the process for renewing grants that service providers need to keep people housed. The lawsuit says that HUD has put in place a lot of new rules that would limit permanent housing support, mess up existing programs, and make providers change their services in ways that go against long-standing government guidance. These guidelines also say that organizations must use restrictive definitions of gender, that people must use programs before they can get housing, and that communities would be punished if they don’t implement strict anti-homeless legislation.
Critics say that the unexpected change goes against decades of accepted practice. For years, HUD pushed for a Housing First model, which is a system that provides housing without any constraints. This model has been found to increase stability and lower long-term public expenses. Starting in 2026, the new policy will change that by lowering the amount of money that may be spent on permanent housing from nearly 90% to one-third. It also cuts renewal protection rates from about 90% to just 30%, which makes long-term housing projects much more likely to lose funding.
“The Continuum of Care grant program is the backbone of efforts to combat homelessness across Michigan and throughout the country,” Nessel said.
“Restricting funding and imposing illegal conditions on these grants violates HUD’s mission to create strong, sustainable, inclusive communities for all. If permitted to take effect, these changes will displace thousands of Michigan families. I am committed to ensuring residents are protected from these unlawful conditions meant to force Michiganders out of their homes and into the streets just as winter approaches.”
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Michigan will be hit hard. Last year, the state got more than $100 million in Continuum of Care funding. This money helped thousands of families, including those with kids. According to HUD’s new notice of funding opportunity, up to 7,000 homes, including around 2,000 families, are likely to be in danger. Service providers warn that the consequences will not be abstract.
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The Michigan Coalition Against Homelessness, which speaks for more than 90 groups across the state, says the new program rules could undo years of progress. Advocates say that the change in policy is based on a misunderstanding of homelessness at its core. They refer to growing housing costs, stagnant wages, and a lack of more than 290,000 affordable apartments across Michigan as evidence. They are worried that the adjustments will put too much strain on providers and speed up displacement as winter gets closer.
The case, which was filed in federal court in Rhode Island, says that HUD did certain actions without following the rules and without getting permission from Congress. It further says that the agency stopped following its own advice without admitting—much less dealing with—the predicted consequences. Along with Michigan, states from coast to coast have signed on to the complaint.
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Nessel says that the goal is clear: block the federal government from doing things that will make life harder for people who are already disadvantaged. She thinks that the new funding scheme would not only take away housing assistance, but it would also force individuals out of safe housing and back onto the streets.