LANSING, MI – Around 7,000 Michigan families could lose access to housing assistance programs if a federal policy change announced this month is made permanent, according to Michigan Attorney General Dana Nessel.

That includes approximately 2,000 families with children, Nessel’s office said in a press release sent out with the Michigan Coalition Against Homelessness (MCAH), made up of more than 92 homeless service providers.

Sarah Rennie, MCAH senior director of advocacy, said in the coalition’s 35 plus years of operation, it’s “never encountered a threat as devastating and extreme to persons in poverty.”

“Lives will be lost,” Rennie said.

The policy change is to a federal Continuum of Care (CoC) program, created by Congress to provide nonprofits and state and local governments with funds to help end homelessness.

It’s offered through the U.S. Department of Housing and Urban Development (HUD), which Nessel and a coalition of 20 other states are now suing for “illegally upending support for tens of thousands of Americans experiencing homelessness or housing insecurity.”

The lawsuit filed Nov. 25 alleges that the changes will limit access to long-term housing and other services by restricting funding and imposing illegal conditions on grants.

“If permitted to take effect, these changes will displace thousands of Michigan families,” Nessel said.

On Thursday, Nov. 13, HUD released the policy changes, described as “monumental reforms” to the CoC program, including with a $3.9 billion funding announcement.

The federal changes, first reported by POLITICO, also significantly cut funding for permanent housing programs.

Instead, more than half of 2026 funding would be shifted to transitional housing assistance programs with some work or service requirements.

According to an advocacy guide shared by the National Alliance to End Homelessness, permanent housing now accounts for around 87% of CoC funded programs. That would be brought down to 30%.

About 170,000 people nationwide could be at risk of experiencing homelessness because of this change, many with disabilities and complex health needs, according to the guide.

The new policy may also create gaps in funding that could leave participating landlords and staff unpaid, deter future private sector investment, stall construction and shift costs to local and state governments, the alliance wrote.

Last year, Michigan received more than $100 million through the CoC grant program, according to Nessel’s office.

Rennie said the federal order “completely misunderstands the root causes of homelessness.”

“Homeless rates in Michigan continue to rise, not because of a failure in the current homeless service delivery system, but because Michigan faces an affordable housing crisis,” she said. “Recent estimates show the state is short by over 290,000 affordable housing units. Additionally, real wages remain stagnant while inflation rises, putting many hard-working families on the brink of financial disaster.”

She said a shift in services, funding cuts and a lack of time for agencies to plan “will turn the state’s housing crisis into a housing catastrophe.”

HUD Secretary Scott Turner wrote that the change would align with a Trump administration executive order.

He said it would restore “accountability to homelessness programs and promote … self-sufficiency among vulnerable Americans.”

HUD had not responded to a request for comment as of the time of publishing.

Nessel’s lawsuit contends that the changes to the CoC program dramatically reduces the amount of grant funds that can be spent on permanent housing without Congressional authority.

The changes aren’t incremental, she said, and will disrupt providers’ ability to both provide housing and budget for their programs.

The funding announcement also includes a requirement that 70% of projects be “competed,” meaning applicants must submit proposals for evaluation.

Turner wrote that the change would end “the status quo that automatically renewed funding without measuring success.”

Historically, around 90% of funding year to year is protected, Nessel’s office said, meaning a renewal of projects is guaranteed to ensure that individuals and families relying on them have stable housing.

But this figure has also been cut down – to around 30% – meaning 70% of projects will again compete for funds.

“These new policies virtually guarantee that tens of thousands of formerly homeless people in permanent housing nationwide will eventually be evicted through no fault of their own when the funds aren’t renewed,” Nessel said.

Her office added that the change also puts “new unlawful conditions” on accessing funding.

HUD’s longstanding policy is encouraging a “housing first” model, Nessel said, that provides stable housing without preconditions for access – like sobriety or a minimum personal income.

She said the change would make requirements more stringent for both providers and those seeking services.

The lawsuit, filed Tuesday in the federal District of Rhode Island, was also signed onto by attorneys general in Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Rhode Island, Vermont, Washington and Wisconsin, along with the governors of Kentucky and Pennsylvania.

In addition to the lawsuit, groups like the National Alliance to End Homelessness have begun advocating against the change to Congress, requesting a one-year extension of existing CoC contracts.

On Nov. 13, over 40 Senate Democrats sent a letter to Turner criticising the change. U.S. Sen. Elissa Slotkin, D-Holly, was among those who signed on.

On Oct. 28, before the change was formally announced, 22 House Republicans also sent a letter requesting the grants be renewed so programs would not be destabilized. Rep. Jack Bergman, R-Watersmeet, was among those who signed.

Neither Slotkin nor Bergman could be reached for comment as of the time of publishing.