LA agency sues Trump admin after HUD moves to cut funds over fraud, mismanagement

LAHSA’s legal action seeks to block any interruption of federal resources that the agency says currently support housing and services for more than 11,000 people across Los Angeles County.

The lawsuit comes after HUD notified LAHSA on June 11, 2026, that it intended to suspend federal Continuum of Care funding administered by the agency. HUD has accused LAHSA of repeated false statements, financial mismanagement, weak internal controls, and failures to maintain safeguards against conflicts of interest. The federal suspension notice stated that LAHSA received more than $220 million in 2024 and $944 million since 2021.

LAHSA is now arguing that HUD’s action is legally and factually unjustified and would jeopardize housing stability for thousands of formerly homeless residents. “We are taking this step to protect formerly unhoused people who found a permanent home,” said Gita O’Neill, LAHSA’s Interim Chief Executive Officer.

“The people who will be harmed by this decision are not bureaucrats. They are families, veterans, seniors, and formerly homeless Angelenos who rely on these resources to remain housed. We must do everything in our power to ensure those funds continue reaching the people who rely on them.”

HUD previously said the Los Angeles Continuum of Care, led by LAHSA, has received nearly $1 billion in taxpayer dollars over the last five years while Los Angeles has remained the center of the nation’s homelessness crisis. Federal officials also alleged that LAHSA could not determine whether funding had been used to pay for empty hotel rooms, failed to provide documentation verifying nearly 2,300 housing sites, and did not have its own written conflict-of-interest policy until September 2025 despite certifying compliance with federal rules.

The suspension notice also cited conflict-of-interest concerns involving LAHSA’s former CEO, who resigned after she and the agency allegedly violated federal rules by committing more than $2 million in federal funds to her husband’s employer.

LAHSA disputed HUD’s characterization and says the federal government’s notification letter relied on inaccuracies and misrepresentations. The agency’s legal brief argues that HUD improperly attributed a failure to spend more than $500 million in homeless services funding to LAHSA even though the source cited by HUD did not mention the agency.

LAHSA also claimed HUD conflated reviews, assessments, public comments, and media statements with formal audits, misrepresented the agency’s corrective actions and cooperation, and suggested wrongdoing without evidence. “We have worked to build real transparency at LAHSA. Weaponizing old, corrected financial reviews to suddenly strip housing from thousands of people makes no sense—legally or practically,” said LAHSA Commission Chair Amber Shiekh.

"LAHSA cannot stand by while an unjustified federal decision threatens to pull the rug out from under Los Angeles’s homeless services system. We are taking legal action because our first and highest responsibility is to protect this system and the people who rely on it.”

O’Neill said LAHSA has spent the past year reorganizing its financial operations, strengthening oversight, implementing nearly all recommendations from prior reviews, and beginning to implement KPMG’s recommendations to modernize its financial infrastructure.

“Over the last year, LAHSA has reorganized its financial operations, strengthened oversight, implemented nearly all recommendations identified in prior reviews, and begun implementing KPMG's recommendations to modernize our financial infrastructure,” continued O'Neill. “We take our stewardship responsibilities seriously, and we remain focused on ensuring that every available dollar supports people experiencing or at risk of homelessness.”

The court fight comes as Los Angeles’ homelessness spending has faced renewed scrutiny. As previously reported by The Post Millennial, Los Angeles spent $5.5 million to construct just 100 beds for the homeless while California Gov. Gavin Newsom’s 1,200 tiny homes project remained unfinished three years after it was announced.

A related report noted that Newsom initially set aside $33 million in 2023 for roughly 1,200 tiny homes across California, including 500 in Los Angeles, 350 in Sacramento, 200 in San Jose, and 150 in San Diego, but the program stalled amid bureaucratic delays, design issues, and rising per-unit costs.

LAHSA pointed to recent homelessness figures, saying Los Angeles has seen measurable progress since 2023. According to the agency, homelessness has declined 4.3 percent countywide and 5.5 percent within the City of Los Angeles. Unsheltered homelessness has fallen 14 percent countywide and 17.5 percent within the city, while national homelessness increased by 13.5 percent during the same period.

HUD, however, has argued that Los Angeles’ failure to address the homelessness crisis remains glaring. The agency said federal funding has increased 178 percent since HUD first mandated the Housing First policy in 2013, while homelessness in LA increased 100 percent, free housing for the homeless increased 212 percent, and HUD Continuum of Care funding per homeless person increased 39 percent.

In addition to the federal complaint, LAHSA filed an application seeking a temporary restraining order to prevent HUD from suspending funding while the case is reviewed by the court.