AG, state officials sue over 2nd federal attempt to cut permanent housing funds

By the Editorial Team · Thursday, July 9, 2026

Illinois Attorney General Kwame Raoul and officials from 20 states plus Washington, D.C. have filed a lawsuit against the Trump administration's attempt to redirect $1.3 billion from permanent supportive housing to temporary housing programs. This legal challenge aims to protect critical funding that supports housing stability for tens of thousands, including about 1,300 homeless individuals in Chicago, as courts have previously ruled that such reallocations exceed federal authority.

Illinois Attorney General Kwame Raoul, joined by officials from 20 states and Washington, D.C., has filed a lawsuit challenging the Trump administration’s second effort to restrict federal funding for permanent supportive housing programs aimed at addressing homelessness. The legal action responds to a June 1 directive by the U.S. Department of Housing and Urban Development (HUD) that sought to reallocate $1.3 billion from permanent housing funding streams to temporary housing programs.

The coalition argues that the administration’s move exceeds its legal authority and contravenes federal law, potentially jeopardizing housing stability for tens of thousands of individuals. According to the lawsuit, Illinois stands to lose approximately $60 million in funding under this new policy, imperiling housing assistance for many vulnerable residents.

This latest challenge follows a previous attempt by the Trump administration in November 2025 to significantly reduce grant allocations for permanent supportive housing by $3.9 billion. That earlier proposal included eliminating funding for organizations that acknowledge transgender identities and cutting programs serving individuals with mental health-related disabilities. At the time, Raoul and a coalition of more than a dozen state officials sued, contending that the reductions would risk homelessness for around 170,000 people nationwide and impact approximately 7,500 individuals in Illinois through threatened funding losses of $182 million.

A federal judge ruled on June 30, 2026, in favor of the coalition, finding that the administration had overstepped its authority in reallocating funds designated by Congress. Similar legal challenges by Raoul and allied state officials have resulted in court orders restoring billions in federal funding, including $2 billion for disaster relief, $2 billion for transportation projects, and millions for public health research. Another court blocked the administration from limiting federal funds to healthcare providers offering gender-affirming care to patients under 19.

The 1,300 individuals experiencing homelessness daily in Chicago have been a focal point of these contested funding policies. HUD did not immediately respond to requests for comment regarding the current lawsuit. The ongoing legal battles reflect broader tensions over federal housing priorities and the administration’s approach to managing homeless support programs.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.