Fifteen States and D.C. Sue HUD over Changes to Fair Housing Assistance Program Policies

Fifteen states and the District of Columbia sued HUD in California federal court, alleging that the agency’s 2025 Fair Housing Assistance Program (FHAP) guidance — which modified the program’s certification and reimbursement policies and limited enforcement of state fair housing laws — violates the Administrative Procedures Act (APA) and the Constitution’s spending clause.

In September 2025, HUD issued guidance stating that it will revoke a substantial equivalence certification if the certified state or local agency enforces fair housing laws “that grant substantive rights outside the seven protected traits found in the federal Fair Housing Act.”  Relatedly, the guidance states that HUD will reimburse an agency only for complaints with a “clear, primary basis in a prohibited characteristic that is covered by the plain language of the federal Fair Housing Act.”  Additionally, the guidance imposes various conditions on the receipt of FHAP funding.  For example, the guidance requires that an FHAP funded agency “administer its grant in accordance with all applicable immigration restrictions and requirements” and “not issue findings utilizing disparate impact liability as defined by Executive Order 14281.”

Notably, the states allege that the policy changes (which limit fair housing enforcement) exceed HUD’s authority — and are otherwise unlawful under the APA — because they contravene the Fair Housing Act’s text and intent and since HUD lacks authority to impose funding conditions like compliance with immigration restrictions.  Additionally, the states allege that the policy changes are arbitrary and capricious because, among other reasons, certified agencies will face undue burdens complying with the new rules (which reverse longstanding prior guidance) and because HUD failed to articulate a satisfactory explanation for the new policies.

Separately, the states allege that HUD’s imposition of additional conditions (such as compliance with immigration restrictions) violates the Constitution’s spending clause because the conditions are ambiguous and unrelated to the FHAP.

HUD has yet to respond to the complaint, and the case remains pending before the court.