Background of the Case

At the core of the litigation is HUD's decision to stop the distribution of funds under the Fair Housing Initiatives Program (FHIP)—the main source of federal support for local nonprofits investigating and combating housing discrimination. Congress had allocated funds for Fiscal Year 2024, including multi-year Private Enforcement Initiative (PEI) grants and new competitive awards.

According to the plaintiffs, HUD unlawfully withheld these appropriations by refusing to release years two and three of existing PEI grants and by failing to award the FY24 FHIP funds altogether. If these funds remain unspent, they would have lapsed permanently at the end of the federal fiscal year on September 30, 2025.

Legal Claims

NFHA and TFHC argued that HUD's actions violated the Administrative Procedure Act and the Appropriations Clause of the U.S. Constitution. Specifically, they claimed HUD:

• Unlawfully withheld or unreasonably delayed required agency action (APA §706(1));
• Acted arbitrarily and capriciously (APA §706(2));
• Improperly "impounded" congressionally appropriated funds, infringing on the powers of Congress; and
• Effectively terminated multi-year grants without due process.

The plaintiffs sought injunctive relief, requiring HUD to proceed with both ongoing PEI grant funding and new FY24 awards.

Court Action

On July 29, 2025, Judge Sparkle L. Sooknanan issued a Temporary Restraining Order (TRO) against HUD. The court directed HUD to:

• Provide a detailed timeline for making new FHIP awards before the September 30 deadline, and
• Report back on its progress to ensure funds would not lapse.

The court emphasized the irreparable harm that would result if funds remained frozen, including diminished enforcement capacity for local fair housing groups.

In August 2025, the TRO was converted into a Preliminary Injunction, keeping HUD under court order to administer the FHIP program and obligate the funds until further notice.

Implications for Fair Housing Enforcement

The ruling carries significant practical consequences:

1. Funding Restored: HUD must now resume payments under existing PEI grants and promptly award FY24 funds.
2. Local Enforcement Capacity: The decision ensures that nonprofit fair housing agencies, which process the majority of discrimination complaints, can continue conducting investigations, testing, and enforcement.
3. Compliance Exposure: As local enforcement increases, property owners and managers should anticipate a greater focus on fair housing compliance. Poor file documentation, non-compliant marketing practices, or discriminatory tenant selection procedures are likely to face increased scrutiny.

Broader Context

This is not the first time HUD has been challenged over its handling of FHIP funds in 2025. In March 2025, four NFHA member organizations successfully obtained a TRO in a separate case filed in the District of Massachusetts after HUD attempted to terminate 78 existing FHIP grants. That earlier order forced HUD to reinstate funding, underscoring the judiciary's growing role in ensuring HUD fulfills its statutory fair housing responsibilities.

Conclusion

The NFHA/TFHC lawsuit highlights the stakes of HUD's enforcement posture in 2025. While HUD has taken steps to curtail its civil rights activities, federal courts are stepping in to require the Department to honor its statutory obligations. For housing providers, this development means fair housing enforcement is far from dormant.

Owners, agents, and management companies should treat this as a timely reminder: compliance matters. With fresh funding in the hands of fair housing organizations, the risk of investigation and enforcement action is only increasing.