California Attorney General Challenges Federal Housing Grant Reductions | The Locally Times
The legal action seeks to restore $50 million in annual funding previously allocated to 14 California jurisdictions for affordable housing development.
On October 24, 2024, the California Department of Justice initiated a formal legal challenge against the United States Department of Housing and Urban Development regarding a 35% reduction in grant funding. The lawsuit, filed in the United States District Court for the Northern District of California, alleges that the federal agency violated the 1974 Housing and Community Development Act by unilaterally altering the formula used to distribute $200 million in annual block grants. According to the 42-page complaint, the federal government failed to provide the required 60-day notice period before implementing the funding cuts on September 1, 2024. Data included in the filing indicates that 14 specific California municipalities, including the City of Los Angeles and the County of San Diego, face a combined loss of $50 million for the 2025 fiscal year. The state argues that this 35% decrease directly contradicts the 2023 federal budget appropriation, which authorized $3.5 billion for nationwide community development programs. Under the current federal guidelines, which were updated on July 15, 2024, the Department of Housing and Urban Development reclassified certain urban areas, resulting in a 12% drop in eligibility for 8 specific housing authorities. Legal representatives for the state contend that the federal agency ignored 2020 Census data, which showed a 5% population increase in the affected regions. The lawsuit emphasizes that the 14 impacted jurisdictions rely on these grants for 40% of their low-income housing maintenance budgets. If the court does not grant a preliminary injunction by December 1, 2024, the state projects that 2,500 affordable housing units currently under construction will face indefinite delays. The complaint further notes that 90% of the affected projects are located in areas where the median rent has increased by 22% since 2021. In a related administrative record released on October 26, 2024, the federal government maintained that the funding adjustment was necessary to comply with a 2022 internal audit that identified $15 million in misallocated funds across 3 states. However, the state’s filing disputes this, citing a 2023 independent audit that found 98% compliance with federal spending requirements among the 14 California jurisdictions. The litigation seeks to recover the $50 million shortfall and requests that the court mandate a return to the 2022 funding distribution model. As of November 1, 2024, the federal agency has 30 days to respond to the allegations presented in the court filing. The state’s legal team has requested an expedited hearing to be scheduled before January 15, 2025, to ensure that the 2025 fiscal year budget remains stable for the 14 affected housing authorities. Historical records show that these specific grants have supported the development of 15,000 housing units since 2010. The state maintains that the 35% cut will disproportionately impact households earning less than 30% of the area median income. Furthermore, the lawsuit highlights that 6 of the 14 affected jurisdictions have already committed $100 million in matching funds for projects that are now at risk of cancellation. The state’s petition argues that the federal agency’s decision-making process lacked the transparency required by the 1946 Administrative Procedure Act. If the funding is not restored, the state estimates that 400 full-time construction jobs will be eliminated by March 1, 2025. The court is currently reviewing the 150 pages of exhibits submitted by the state to determine if the federal agency acted outside its statutory authority. This legal battle represents the largest challenge to federal housing grant distribution in the last 10 years. The state’s filing includes a 2024 economic impact report, which suggests that every $1 of federal grant money generates $4 in local economic activity. By cutting $50 million, the state argues the federal government is effectively removing $200 million from the California economy. The case remains active as of November 5, 2024, with both parties preparing for the initial discovery phase.