Federal and local officials clashed in court over HUD’s June suspension of LAHSA and roughly $240 million in homelessness funding. HUD alleges years of financial mismanagement, including unverified sites and a late conflict-of-interest policy; LAHSA says HUD skipped required procedures. Lawyers warned removing LAHSA could disrupt about 200 providers and 11,000 people housed by federally funded programs. A judge may issue a decision within days as an inspector general probe continues.
Explosive Court Showdown Puts LA Homeless Agency — And $240M — At Risk
The future of Los Angeles' primary homelessness coordinator and roughly $240 million in federal assistance was the subject of a heated federal court hearing, as officials sparred over who should control the money and why alleged mismanagement persisted for years.
US District Judge David O. Carter is weighing whether to block HUD's suspension of LAHSA as the agency fights to retain its role overseeing federal homelessness grants in Los Angeles. MediaNews Group via Getty Images
Who Is At The Center?
Los Angeles Homeless Services Authority (LAHSA) manages an $845 million budget and coordinates contracts with more than 100 service providers across the city and county. In June, the U.S. Department of Housing and Urban Development (HUD) suspended LAHSA after opening an investigation into alleged false statements, financial mismanagement, internal control failures and conflicts of interest. The suspension froze about $240 million in funding tied to LAHSA operations.
Bill Essayli, US Attorney for the Central District of California, represented the federal government in federal court Thursday. Obtained by the CA Post
The Legal Fight
LAHSA sued to block HUD’s suspension, arguing the department failed to follow required procedures that would have given the agency notice and a chance to respond. HUD countered that the freeze should remain while it directs providers to seek funding directly from the agency and while federal investigators continue their probe.
Federal attorney Joshua Ha pointed to nearly two decades of audits flagging problems at LAHSA. David Buchan for CA Post
Allegations And Audit History
HUD’s case cites nearly two decades of audits and reviews that repeatedly flagged weaknesses in LAHSA’s grant oversight, performance monitoring and accounting. Specific allegations include:
Essayli said he doesn't believe the money is going to the right places. CA Post
- Failure to verify nearly 2,300 housing sites funded by federal grants.
- Questions over whether taxpayer dollars paid for vacant motel rooms.
- Improper shifting of funds between contracts and millions in unused federal funds.
- Absence of a written conflict-of-interest policy until September 2025.
Courtroom Tensions
The hearing filled the courtroom with attorneys representing the federal government, LAHSA, the City and County of Los Angeles and the regional Continuum of Care, but elected city and county leaders were notably absent. U.S. Attorney Bill Essayli publicly criticized that absence and said he has seen service gaps firsthand while visiting Skid Row and MacArthur Park.
LAHSA pushed back, saying HUD imposed the suspension without following procedures that would have given the agency notice and an opportunity to respond. David Buchan for Ca Post
"The money is not getting to the people that need it," Essayli told the court, warning that recent fraud prosecutions tied to homelessness dollars suggest further indictments may follow.
US District Judge David O. Carter pressed HUD on why LAHSA remained the region’s lead homelessness coordinator as recently as April 2026 if long-running problems were so severe. A HUD attorney argued prior enforcement efforts had not worked and that recent audits showed the need for stronger action.
Local Providers Warn Of Disruption
Attorneys for the Los Angeles Continuum of Care warned that sidelining LAHSA could fracture regional coordination and force roughly 200 providers to seek funds directly from Washington — potentially disrupting services for about 11,000 people housed through programs tied to the federal money.
What Happens Next
HUD’s inspector general continues its investigation, and permanent debarment of LAHSA remains a possible outcome depending on findings. Judge Carter was expected to rule quickly, and federal officials signaled urgency about moving resources more effectively to people in need.
Potential consequences include: reorganization of regional homeless services coordination, direct HUD distribution of funds to providers, criminal or civil enforcement actions if fraud is substantiated, and long-term changes to how homelessness funding is overseen in Los Angeles.
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