HUD’s New Homelessness Funding Fight Reaches Kentucky

Kentucky Gov. Andy Beshear joined a federal lawsuit challenging HUD’s 2026 homelessness grant notice, which could change how local housing programs compete for federal money.

Jul 08, 2026

HUD headquarters in Washington, D.C. HUD’s 2026 Continuum of Care funding notice is now the subject of a federal lawsuit joined by Kentucky Gov. Andy Beshear. Photo by Laurent Fox, U.S. Department of Housing and Urban Development Photo Section, via National Archives / Wikimedia Commons.

On July 7, Kentucky Gov. Andy Beshear joined a multistate lawsuit in federal court against the U.S. Department of Housing and Urban Development and HUD Secretary Scott Turner.

The lawsuit challenges HUD’s Fiscal Year 2026 Continuum of Care funding notice, the federal document that tells states, local governments, and nonprofit housing providers how to compete for homelessness grants. HUD issued that notice on June 1 for about $4.04 billion in federal funding, with applications due August 26 at 8 p.m. Eastern.

The lawsuit was filed in the U.S. District Court for the District of Rhode Island. Kentucky appears as a plaintiff through the Office of the Governor, ex rel. Andy Beshear, in his official capacity as governor. The defendants are HUD and Secretary Turner.

The case has not stopped HUD’s 2026 funding competition.

It asks the court to set aside parts of the funding notice before the new rules affect grant awards.

Kentucky joins the federal court fight

HUD announced a new Fiscal Year 2026 Continuum of Care Notice of Funding Opportunity on June 1. The Continuum of Care program is the largest federal grant program for homelessness services and housing. It funds local efforts such as permanent supportive housing, rapid rehousing, transitional housing, coordinated entry, planning, and supportive services.

HUD described the new notice as a $4.04 billion overhaul of federal homelessness assistance. Secretary Turner said HUD was moving away from what he called a failed “housing first” approach and toward recovery, treatment, self-sufficiency, performance, and competition. HUD’s announcement says the notice includes a $1.3 billion investment in new projects, with priority for transitional housing and supportive service projects.

The states suing HUD describe the same funding notice differently. Their complaint says HUD is trying to recreate a cap on permanent housing by setting aside $1.3 billion for transitional housing and supportive-service-only grants. Because that money would not be available for permanent housing, the plaintiffs say the notice effectively limits permanent housing to about 68 percent of total Continuum of Care funds.

The lawsuit also challenges what the complaint calls “service requirement conditions.” The states argue that those conditions punish applicants who follow a Housing First approach, impose new requirements without required rulemaking, and conflict with the McKinney-Vento Homeless Assistance Act and the Administrative Procedure Act. HUD has not lost or been ordered to change the FY 2026 notice in this new case. The court must still decide whether the challenged provisions can remain in place.

This new lawsuit follows an earlier court fight over HUD’s Fiscal Year 2025 Continuum of Care notices. On June 29, the same federal court in Rhode Island ruled that HUD acted arbitrarily and capriciously when it tried to change the FY 2025 grant criteria. The court described the earlier dispute as involving funding gaps and grantees’ inability to reshape a decades-long approach to homelessness assistance immediately.

How HUD grant rules impact local housing providers

A Continuum of Care is both a planning body and a funding pathway. Local agencies, nonprofit providers, governments, and housing partners coordinate a local homelessness response, rank projects, and submit applications to HUD through a collaborative applicant.

HUD controls the federal notice, scoring rules, award decisions, and grant conditions. Local Continuums of Care decide which projects to rank for funding, but they must do that within HUD’s rules and deadlines.

Kentucky has three Continuums of Care. They are the Louisville-Jefferson County CoC, the Lexington-Fayette County CoC, and the Kentucky Balance of State CoC. The Balance of State CoC covers the other 118 counties, and Kentucky Housing Corporation serves as its lead planning entity and collaborative applicant.

Kentucky Housing Corporation also administers federal homeless programs, manages statewide data, coordinates planning, oversees coordinated entry for the Balance of State CoC, and serves as the statewide lead agency for the Homeless Management Information System across Kentucky’s three CoCs. KHC awards CoC and Emergency Solutions Grant funds to organizations in the Balance of State CoC through a competitive application.

That means HUD’s notice tells Kentucky’s housing agencies and local providers what kinds of projects are more likely to receive federal money. It also affects which existing projects must compete for renewal and which projects local CoCs may feel compelled to rank higher.

Why Kentucky housing programs are tied to the HUD notice

Kentucky is directly implicated because the governor is a named plaintiff.

The complaint says the Kentucky Constitution gives the governor “supreme executive power” and the duty to ensure the laws are faithfully executed. Gov. Beshear’s office is using that authority to challenge HUD’s funding notice in federal court.

Kentucky is also implicated because the state’s homelessness response depends on federal Continuum of Care funding. In the earlier FY 2025 dispute, the Governor’s office said Kentucky had been at risk of losing 70 percent or more of the more than $15 million that supported permanent supportive housing in 118 of Kentucky’s 120 counties. The office also said the earlier cap threatened more than $20 million in federal funding for rental assistance and supportive services for homeless Kentuckians.

Those earlier figures show how quickly a federal funding notice can impact Kentucky housing providers. If renewal money is reduced or redirected, a local provider may have to cut leases, case management, rental assistance, or housing slots.

The Kentucky Balance of State CoC is the clearest local pathway.

It covers every county except Jefferson and Fayette. Rural counties often have fewer shelters, fewer nonprofit providers, fewer public transit options, and fewer local dollars to replace a lost federal grant.

Louisville and Lexington have separate Continuums of Care, so their local applications, ranking choices, and provider networks will also matter. Louisville’s Coalition for the Homeless describes the local CoC as a community plan to organize shelter and services for people experiencing homelessness. In practical terms, that means HUD’s grant rules can affect which Louisville projects receive renewal money and which local needs receive priority.

Kentucky residents most likely to feel the effect include people in permanent supportive housing, people using rapid rehousing, families with children, veterans, domestic violence survivors, people with disabilities, seniors, and people living in counties where homelessness is harder to count and harder to serve.

What to watch or what you can do

The first date to track is August 26, 2026. That is HUD’s application deadline for the FY 2026 Continuum of Care competition. If the court does not intervene before then, Kentucky CoCs and providers may have to submit applications under HUD’s contested rules.

Ask Kentucky Housing Corporation for the FY 2026 local competition calendar for the Balance of State CoC. The federal deadline is not the only deadline. Local project applications, local ranking decisions, board review, and provider submissions usually happen earlier.

Ask KHC, Louisville’s CoC, and Lexington’s CoC which permanent supportive housing and rapid rehousing grants are up for renewal under the FY 2026 notice. Ask for the amount of renewal funding at stake, the number of households served, and the county locations of affected projects.

Ask the Governor’s office whether Kentucky has a FY 2026 estimate comparable to the earlier FY 2025 numbers. The earlier statement identified 700 households, 1,200 Kentuckians, and permanent supportive housing in 118 counties. A new estimate would help Kentuckians understand the current risk.

Call or email Kentucky’s congressional delegation and ask whether they support congressional oversight of HUD’s FY 2026 CoC notice. Congress controls appropriations language, and the plaintiffs argue that HUD’s notice conflicts with how Congress directed CoC funds to be used.

Read local CoC board materials when they are posted. Look for project-ranking policies, renewal reductions, reallocation decisions, score sheets, and public comments from providers. Those documents will show how a federal notice becomes a local funding decision.

Document provider impact carefully. If a housing nonprofit says a grant reduction would end leases, cut case management, reduce domestic violence housing options, or close a rural program, ask for the grant name, award amount, number of households served, and service area.

Share this with someone who follows housing, homelessness, or local government funding.

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