New York Attorney General Letitia James is leading a major multistate lawsuit aimed at blocking the federal administration from implementing sweeping cuts to vital homeless housing programs. These proposed reductions—part of a new federal policy—threaten to displace thousands of previously unhoused individuals nationwide, with more than 5,000 families in New York City alone expected to be severely affected. The lawsuit underscores the deep divide over homelessness policy and the immediate consequences for vulnerable populations.
Representing a coalition of more than a dozen states, Attorney General James filed the lawsuit in federal court, arguing that the administration’s new restrictions on $3.6 billion in grants could jeopardize housing for nearly 170,000 formerly homeless people. In a forceful statement, James declared: “These funds help keep tens of thousands of people from sleeping on the streets every night. I will not allow this administration to cut these funds and put critical housing and supportive services at risk.”
Alarming Impact of Federal Cuts on New York’s Housing Network
The lawsuit highlights what advocates see as a direct threat to essential services that provide stability for people transitioning out of homelessness. The federal administration, however, argues the policy shift is necessary to address what it identifies as the “root causes” of homelessness—namely mental illness and addiction—with the stated goal of increasing self-sufficiency.
Earlier this month, the U.S. Department of Housing and Urban Development announced it would drastically reduce two-thirds of funding for long-term housing programs, redirecting money toward temporary or “transitional” accommodations that often require employment or mandatory treatment.
New guidelines have sparked controversy by stating that officials may deny applicants who “use a definition of sex other than the human binary” or who “facilitate racial preference,” and the agency has previously banned what it called “gender ideology.”
The consequences for New York City are particularly alarming. The city typically receives $176 million in program and social-service funding through its Continuum of Care network—a system of nonprofits and government agencies that coordinates efforts to reduce homelessness. This funding supports housing for more than 10,000 individuals across 8,400 units.
But city leaders warn that the looming federal cuts mean New York will lose at least $109 million in housing grants. These funds primarily support supportive housing, a type of permanent housing essential for people who have experienced homelessness and who live with mental illness or other special needs. Services include counseling and case management. Officials fear the reductions will sharply increase street homelessness and strain shelter systems amid soaring living costs and near-zero vacancy rates in affordable housing.
Molly Wasow Park, Commissioner of the Department of Social Services, emphasized the severity of the moment, calling the policy shift “a giant step backward from what we know works.” She warned that the city and its nonprofit partners will struggle to compensate for the “enormous gap” left by the funding cuts.
Pascal Lione, executive director of the Supportive Housing Network, echoed these concerns, noting that providers may be forced to abandon buildings—leaving tenants in precarious situations. The lawsuit also argues that the new federal grant conditions are unlawful because they may exclude people with mental illnesses and disabilities, who are legally protected groups.
Advocates Warn of Deep Setbacks as Federal Housing Funds Shrink
Housing advocates and city leaders strongly reject the federal administration’s narrative, reaffirming that the “Housing First” model—which prioritizes safe, permanent housing as the foundation for stability—has proven highly effective. Research consistently shows that the lack of affordable housing is the primary driver of homelessness. Advocates also stress that supportive housing not only reduces homelessness but is more cost-effective than alternatives such as hospital stays, incarceration, or emergency shelters.
For example, sheltering a single adult costs about $145 per day, compared to $68 per day for supportive housing. The federal shift moves away from integrated social-service systems toward programs focused on addiction treatment, mental health intervention, cooperation with law enforcement to clear street encampments, and mandatory work requirements. HUD Secretary Scott Turner previously criticized the Housing First approach as “warehousing” and a “homeless industrial complex.”
But city officials argue that this perspective deliberately ignores broader economic realities, framing poverty as a “moral failing” rather than a systemic issue. A group of Republican members of Congress, aware of the potential disruption, had earlier urged the federal administration to extend existing grant contracts to implement reforms more gradually.
The lawsuit brings together a broad coalition, including attorneys general from Arizona, California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, Oregon, Rhode Island, Vermont, Washington, Wisconsin, and the District of Columbia, along with the governors of Kentucky and Pennsylvania—reflecting widespread opposition to the federal changes.