Santa Clara County housing funds safe after federal court ruling

Efforts to upend federal grants for permanent housing to address homelessness have been blocked in court — marking a win for Santa Clara County in challenging President Donald Trump’s administration.

A federal appeals court in Boston on Wednesday rejected an attempt by the U.S. Department of Housing and Urban Development (HUD) to rewrite the rules of Continuum of Care grants — the largest source of federal funding for solutions to homelessness. The Trump administration wanted to cap permanent housing funds at 30% and shift the rest to temporary housing.

Santa Clara County leaders, who filed the lawsuit against HUD last December, are hailing the decision as a win for families struggling to remain housed. The administration may choose to appeal to the U.S. Supreme Court, but Continuum of Care grants remain unchanged for now.

“That’s a victory for the rule of law and prevents further harm while this case continues,” County Counsel Tony LoPresti told San José Spotlight. “This support keeps more than 2,500 people in Santa Clara County stably housed, which is why HUD’s sudden move to change course and defund proven housing solutions is so alarming. It would quite literally pull the rug out from under people who have only recently found stability.”

HUD rescinded its grant funding notice — an announcement of funds that invites providers to apply — and issued new guidelines Nov. 13, 2025. In addition to capping funds that have traditionally been set aside for permanent housing, it also attempted to create a new point system for rewarding the grants. Projects aligned with Trump’s agenda would be ranked higher and others that didn’t meet certain requirements would be rejected.

The lawsuit by the county and multiple other governments and nonprofits alleged these actions were illegal — and so far, federal courts have agreed. In December, a federal judge placed a temporary injunction halting Trump’s actions, and the administration appealed.

U.S. Court of Appeals Judge Julie Rikelman said HUD’s actions “created chaos.”

“The November (notice of funding opportunity) led Continuums and state officials to anticipate alarming increases in homelessness in the coming months,” Rikelman wrote in the April 1 ruling.

The upheaval of Continuum of Care grants is part of Trump’s efforts to reverse a longstanding strategy to reduce homelessness. Last summer, Trump issued an executive order calling for the end of “housing first,” which prioritizes placing people in permanent housing with no job or sobriety requirements. It operates on the idea that once someone has stable housing, they can make progress in other areas of their lives.

Studies show getting people into permanent housing decreases homelessness by 88%, and allows more people to remain housed than the “treatment first” model, which requires sobriety in order to obtain permanent housing.

Santa Clara County receives nearly $48 million annually in Continuum of Care grants to provide rental subsidies and supportive services to vulnerable populations, keeping more than 2,500 people housed. Nationwide, these grants help nearly 200,000 people remain in permanent housing.

“Because of the Continuum of Care program, thousands of formerly unhoused San Jose residents are in safe and stable housing,” Jennifer Hark Deitz, CEO of nonprofit People Assisting the Homeless (PATH), told San José Spotlight. “Every day, PATH and other organizations bring more people indoors. Maintaining this program is essential, as we continue to invest in what we know works to end homelessness.”

Contact Joyce Chu at [email protected] or @joyce_speaks on X.