Court Ruling Protects $66 Million In Federal Homelessness Funding For Seattle, King County

A federal court ruling has blocked changes to federal homelessness funding that King County officials said threatened housing and services for thousands of local residents, delivering a legal victory to King County and a coalition of local governments, states and nonprofit organizations challenging the Trump administration’s approach.

The Seattle/King County Continuum of Care receives approximately $66 million annually through the U.S. Department of Housing and Urban Development’s Continuum of Care program, supporting housing and homelessness services for more than 4,500 residents.

King County Executive Girmay Zahilay welcomed Friday’s decision, saying preserving the federal funding has been a priority for his administration.

“Protecting Continuum of Care funding is a top priority for my administration, and we’re pleased that the court blocked the Trump administration’s rushed, politicized, and unlawful attempt to rewrite the rules for federal homelessness funding,” Zahilay said. “This ruling protects the progress King County has made to stably house thousands of our most vulnerable neighbors.”

At the center of the case was HUD’s 2026 Notice of Funding Opportunity, or NOFO, which sought to shift federal homelessness policy away from the Housing First model and toward greater use of transitional housing and programs emphasizing participation in supportive services.

The changes included a $1.3 billion set-aside for new projects using transitional housing and emphasizing enrollment in supportive services. Plaintiffs argued that the change would divert substantial funding previously available for permanent housing programs.

U.S. District Judge Mary S. McElroy of the District of Rhode Island ruled Aug. 7 that HUD failed to follow a legally required public notice-and-comment process before making the changes. The court found that federal law requires HUD to seek public input before creating incentives for homelessness programs outside certain established permanent housing approaches.

HUD argued that public announcements and opportunities for feedback satisfied the requirement. The court rejected that argument, finding that federal notice-and-comment procedures require a formal process allowing interested parties to submit information, views and arguments.

Because HUD did not follow that process, the court set aside the agency’s 2026 funding notice in its entirety under the Administrative Procedure Act. The ruling follows an earlier June decision from the same court that vacated HUD’s November and December 2025 funding notices after finding problems with the administration’s previous efforts to move away from Housing First.

Housing First generally prioritizes moving people experiencing homelessness into permanent housing without first requiring them to meet conditions such as participation in treatment or other services. HUD’s 2026 proposal sought to place greater emphasis on interim housing and participation in supportive services.

For King County, the dispute carries significant financial and human consequences. Continuum of Care dollars help support housing and homelessness programs serving thousands of residents throughout Seattle and King County. County officials have argued that disrupting those resources could jeopardize efforts to move people from homelessness into stable housing.

Zahilay pointed to King County’s Health Through Housing initiative as an example of the county’s approach to providing housing alongside services. According to the county, the program has been associated with improved housing stability, fewer hospitalizations and emergency department visits, and reduced involvement with the criminal legal system.

“Making sustainable progress on reducing homelessness requires investment and partnership from all levels of government,” Zahilay said. “This is not the end of this legal fight, and we will continue to stand up for helping bring more people indoors so that they can access the support they need to live safe, healthy and stable lives.”

The decision, however, does not permanently prevent HUD from pursuing changes to its homelessness funding policies.

McElroy denied the plaintiffs’ request for a permanent injunction, finding that HUD could potentially issue another funding notice containing similar conditions if the agency first completes the required notice-and-comment process. Because the court found the 2026 notice procedurally invalid, it did not rule on several of the plaintiffs’ other challenges to HUD’s policies.

That distinction leaves the broader policy fight unresolved. For now, however, the ruling removes HUD’s 2026 funding notice and preserves a critical source of federal support for homelessness programs serving thousands of people across Seattle and King County.