A federal judge issued a stay on July 2 blocking the United States Department of Housing and Urban Development from suspending funds for homelessness services distributed to the Los Angeles Homeless Services Authority.

LAHSA sued the federal government on June 29 after HUD suspended the funding on June 11 over a “lack of financial management, internal controls and safeguards against conflicts of interest.” HUD Secretary Scott Turner said hundreds of millions of taxpayer dollars were funneled to LAHSA while homelessness skyrocketed in Los Angeles.

U.S. District Court Judge David O. Carter granted a stay on July 2, meaning the funding will continue until the matter is ultimately resolved in court, and set a new hearing on the lawsuit for Aug. 6. The ruling brought relief for many who worried that a suspension would result in fewer people receiving services to move off the streets and stay in housing.

“[This] ruling is encouraging. We appreciate that the court is taking this matter seriously and giving it the attention it deserves. This order lowers the anxieties of thousands of families, veterans and seniors in the L.A. region who rely on federal funding for rental assistance,” LAHSA interim CEO Gita O’Neill said. “By issuing a stay on HUD’s unjustified action, Judge Carter has ensured that LAHSA can continue its vital work as the core of our continuum of care and as our region’s lead applicant for federal funding. We look forward to our day in court on Aug. 6, when we will have the opportunity to argue for a definitive ruling.”

Los Angeles city leaders decried the suspension of federal funding without alternatives to fill in the gaps.

“It is cruel, reckless and bad economics for the federal government to put over 11,000 Angelenos (nearly 2,000 of whom are children) at risk of homelessness,” L.A. City Council President Marqueece Harris-Dawson, 8th District, said in a statement. “I fully support LAHSA’s bid to take legal action against the administration and protect our most vulnerable communities. We will stand together against Trump’s attacks on our city and work to make L.A. an affordable place to call home.”

LAHSA claimed the finding suspension would impact 11,000 people across the county.

“The people who will be harmed by this decision are not bureaucrats,” O’Neill added. “They are families, veterans, seniors and formerly homeless Angelenos who rely on these resources to remain housed.”

The department outlined what it called a “clear pattern of fraud” by LAHSA in a June 11 press release. HUD alleged that LAHSA failed to provide documentation for 2,300 housing sites in 2025; that LAHSA could not determine whether it used funding to pay for empty hotel rooms because it failed to record when individuals exited transitional motel housing; and that LAHSA’s former CEO resigned after the agency violated federal conflict-of-interest rules. HUD did not respond to a request for a comment on the judge’s ruling by press time.

LAHSA refuted the allegations, stating that HUD used “inaccuracies and misrepresentations” in justifying the funding cuts in its notification letter to the homelessness agency and the public press release.

LAHSA, a joint-powers agency that receives federal, state and city funds, has also come under scrutiny from the county and city. The county of Los Angeles voted last year to pull $300 million in funding from LAHSA and start its own Department of Homelessness Services and Housing. The city of Los Angeles is also currently exploring options for potentially creating its own housing department, but in light of the federal announcement to defund LAHSA, the Los Angeles City Council approved a motion on June 16 opposing the cuts. Many worry that stopping federal funding abruptly would reverse progress on ending homelessness in L.A.

“A stay is the right move,” said Leo Daube, a spokesman for Councilwoman Katy Yaroslavsky, 5th District. “This funding is especially important as the city grapples with the next steps now that the county has pulled out of LAHSA. While we do that, the last thing we need is the federal government further complicating it.”

HUD issued a statement regarding the ruling.

“HUD fully stands by our objective to reform and restore America’s failed homelessness system, which has relied almost exclusively on permanently warehousing the homeless at exorbitant taxpayer cost while ignoring root causes. The data is clear: Housing First has failed. HUD is making the paradigm shift to ensure recovery and self-sufficiency. Through our 2026 NOFO, we are opening the doors to competition and a balance of approaches, so we fund results, not just the status quo,” read the statement attributed to a HUD spokesperson.