Several nonprofits filed a lawsuit last year accusing the U.S. Department of Housing and Urban Development of changing the rules for receiving $75 million to build housing for homeless families and individuals. The plaintiffs accused the Trump administration of issuing a new Notice of Funding Opportunity, or NOFO, for the Continuum of Care program to better align with its social policies.

U.S District Judge Mary McElroy, nominated by President Trump, said the department’s “slapdash imposition of political whims” was unlawful and she ordered it to scrap the new policy.

“Once again, this Court is faced with a case in which an executive agency has made a last-minute decision to make major, disruptive changes to grants within its purview, all for the express purpose of accomplishing the current administration’s policy objectives,” McElroy said in her ruling that the NOFO violated the Administrative Procedure Act, a law governing how federal agencies develop and issue regulations.

A spokesperson for HUD did not immediately respond to a request for comment.

Advocates for plaintiffs welcomed the ruling.

“For more than three decades, the federal government has supported housing providers and communities through HUD’s programs to help people experiencing homelessness move into stable housing,” Skye Perryman, president and chief executive of Democracy Forward, co-counsel for the plaintiffs, said in a statement. “We are pleased that the court has stopped the Trump-Vance administration from holding life-saving funding hostage to a political agenda.”

Ann Oliva, chief executive of the National Alliance to End Homelessness, said the ruling was “a victory for people across this nation who have overcome homelessness and stabilized in HUD’s permanent housing programs.”

“Today’s news reinforces a fundamental truth: that the work to end homelessness is not partisan, and never should be interfered with for political means,” Oliva said in a statement.

Plaintiffs argued the Trump administration was aiming to upend polices in place for decades to satisfy its political considerations, including whether jurisdictions “support sanctuary protections, harm reduction practices, or inclusive policies for transgender people.”

The Alliance and the Women’s Development Corporation argued that HUD lacked the authority to make the changes, adding that the new award process was “shockingly unlawful” and would “irreparably injure qualified applicants for these funds and the communities they serve.”

In its court filings, HUD argued the new criteria was an effort “to ensure the availability of funding to protect our Nation’s most vulnerable individuals and families from the trauma of homelessness while simultaneously promoting self-sufficiency.”

“Defendants acted reasonably and prudently because the NOFO conditions, focusing on public safety, cooperation with law enforcement and prohibitions on illegal drug use, are sufficiently related to the funding goals of self-sufficiency and reduction of trauma,” HUD wrote.

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“Every year, the declinists, the pundits and critics suffering from California derangement syndrome look at this state and try to tear down our progress,” he said, instead pointing to technological advancements and engineering talent as a metric of his administration’s success. 

“California’s success is not by chance — it’s by design. We’ve created the conditions where dreamers and doers and misfits and marvelers with grit and ingenuity get to build and do the impossible.”

He touted a 9% reduction in unsheltered homelessness, cheaper insulin and increased clean energy use in California as among his accomplishments, in a speech delivered with an eye toward higher office. 

The address, his first State of the State to lawmakers in the Assembly chambers since 2020, was light on policy details for Newsom’s final year in office. Instead, he used as an opportunity to highlight progress on some of his most ambitious promises on housing affordability, expanded health care coverage, universal pre-kindergarten and going fossil fuel-free. Some of those haven’t yet been met.

He targeted the Trump administration on a range of issues, including excessive policing and immigration raids, saying the state “faces an assault on our values unlike anything I have seen in my lifetime.” And in a common talking point for Newsom recently, he indirectly criticized the president for deprioritizing clean energy as China dominates electric vehicle production, and pointed to his own visits to international climate conferences.

“In California, we are not silent. We are not hunkering down. We are not retreating. We are a beacon. This state is providing a different narrative,” he said. 

In a closing segment that roused the most support from lawmakers, he renewed his call for Trump to back a requested $34 billion aid package for Los Angeles to recover from last January’s wildfires. 

California’s relationship with the president has steadily deteriorated in the past year, between the state’s frequent lawsuits, Trump’s deployment of immigration agents and the National Guard to Los Angeles, federal funding fights and Proposition 50, Newsom’s successful redistricting measure to help Democrats gain five new seats in Congress this year. But Newsom attempted a nod toward unity on the issue of fire aid, pointing to the recently deceased Republican Rep. Doug LaMalfa’s support for it. 

“It’s time for the president of the United States to act like a president for all of the United States,” he said, later adding, “we’re home to more Americans than any other state.”

Newsom casts homelessness as a ‘win’

On homelessness, the reduction in the number of Californians sleeping on the street, in vehicles and in other places not meant for habitation is an important figure for the governor as he seeks to show improvement on one of California’s most stubborn challenges in his final year in office. 

A humanitarian and public health crisis and the most visible consequence of California’s housing shortage, Newsom is sure to face national criticism on homelessness should he make an expected presidential run in 2028. 

Lawmakers were restrained in their responses to Newsom claiming success over the reduction. It comes after years of increases in homelessness despite Newsom’s campaign promises to tackle it and pouring over $24 billion to it during his two terms. In 2024, the year before the announced reduction, homelessness in California hit a record high: 123,974 were unsheltered while 63,110 were sheltered. That year, homelessness also spiked nationally.

Newsom did not announce the number who were homeless overall in 2025. The federal government in the coming weeks is expected to release the results of the 2025 homeless census for each state, including California. In the meantime, many California counties have already released their individual results. Several, including Contra Costa, San Diego and Los Angeles, indeed are showing progress.

“I think the question always comes back to us, is it enough?” said Senate President Pro Tem Monique Limón, a Santa Barbara Democrat, to reporters after the speech.

Newsom touted his administration’s focus on sweeping street encampments and building new mental health facilities paid for with Prop. 1, a $6.3 billion bond he promoted and which voters approved in 2024.

He also spoke about making the state more affordable, an issue over which Democrats and Republicans nationally are jockeying for credit after the 2024 presidential election showed voters were heavily motivated by the high cost of living. 

The issue is another weakness for Newsom on the national stage. Republicans criticizing him after the speech mostly accused him of not doing enough to lower costs.

“The results don’t match the rhetoric,” said Sen. Rosilicie Ochoa Bogh, a Yucaipa Republican, in a statement. “While speeches sound optimistic, budgets at the kitchen table don’t add up.”

Newsom plans to seek policies in his final year in office to crack down on large-scale investors buying up houses, forcing would-be homebuyers to compete — a day after Trump also announced a similar effort. It’s a new area for him in housing policy, after years seeking to boost construction. Newsom ran on a promise of building 3.5 million new housing units; the state has fallen far short of that. 

Newsom also ran on a promise of a universal public health care system; he has since shifted to expanding access to Medi-Cal, the state health program for low-income residents that faces punishing federal cuts under Trump. On Thursday, he touted the state’s production of $11 insulin as one way his administration has tackled health care costs. 

Projecting a rosier budget outlook

The address was also a preview of Newsom’s last budget proposal, to be released Friday. 

The state began the year facing an estimated $18 billion deficit and remains threatened by federal cuts. Newsom now says revenues have come in $42 billion higher than expected — a “windfall” officials mostly attribute to stock market gains and the artificial intelligence boom. But he did not reveal where that leaves the deficit, disappointing some lawmakers.

“I didn’t hear anything about the budget deficit, I didn’t hear anything about what we’re going to do to grow our economy,” said Assemblymember Jasmeet Bains, a moderate Democrat from Bakersfield who is also running for Congress in a district with many residents who could lose health coverage under Trump’s tax and spending bill. “What about the health care disparities? … There’s a lot of questions that need to be answered.”

A rosier-than-expected financial picture could allow Newsom to avoid difficult fights with Democratic lawmakers over major cuts to programs, while maintaining funding for banner Newsom administration priorities like expanding public school to include all four-year-olds and providing more funding for community colleges.

Democrats will be sure to jockey for additional funding for their favored programs or to reverse scheduled cuts to Medi-Cal coverage for low-income undocumented immigrant adults they made last year. But Newsom will propose instead to put $7 billion into reserves and $11 billion toward pension obligations. 

Democratic lawmakers mostly said they were cautiously optimistic about Newsom’s budget preview, though progressives said they’ll continue to push for new taxes to backfill expected federal health care cuts, such as a proposal to tax the wealthiest Californians to generate more revenue, which Newsom vocally opposes. The governor instead will propose to renew a business development tax credit that has been often used by the technology and manufacturing sectors. 

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Now signed into law and taking effect Jan. 1, it takes aim at an issue that is much less prevalent on the streets of California. It says cities cannot punish outreach workers for helping homeless clients, even if those clients are sleeping in an illegal encampment. 

More precisely, the law says cities cannot bar people or organizations from providing homeless residents with legal services, medical care or things needed for survival, such as food, water, blankets, pillows and materials to protect themselves from the elements. 

“The legislation provides commonsense protections for service providers, especially non-profits and faith-based ones, who are doing the work every day to assist unhoused Californians,” Pérez said in an October statement. 

San Bernardino County, on the other hand, said the law will “override local authority and restrict enforcement tools that cities and counties use to promote public safety.”

It’s not unheard of for aid workers to find themselves caught in the crosshairs of a city’s crackdown on homeless encampments. The Bay Area city of Fremont earlier this year briefly made “aiding, abetting or concealing” an illegal homeless encampment a misdemeanor. Its city council later walked back that language — after CalMatters first reported it — but it made a lasting impression on state legislators. 

The legislation follows a statewide push toward the increased policing of homeless Californians. In 2024, the U.S. Supreme Court gave cities more power to cite and arrest people for sleeping outside, even if they have no shelter available. Since then, arrests and citations for homelessness-related offenses have soared in cities across the state.

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The Inland Region Housing Justice Coalition — which includes Time for Change Foundation, IE Tenants Union, Victor Valley Family Resource Center, ACLU of Southern California, Congregations Organized for Prophetic Engagement (COPE), Inland Equity Community Land Trust, Inland Congregations United for Change (ICUC), and Interfaith Movement for Human Integrity — opposed the measure and urged investments in housing and services.

“The number of encampments on county public property has increased over recent years,” said Board of Supervisors Chairman and Third District Supervisor Dawn Rowe. “These conditions threaten not only those living within the encampments, but also the broader community. The goal of this ordinance is to address critical health and safety risks, while also ensuring that people experiencing homelessness have access to the care and support they need.”

The County said the ordinance aligns with a July 2024 executive order by Gov. Gavin Newsom encouraging local governments to adopt policies to address homeless encampments and to humanely remove encampments. Following adoption, officials said they will prioritize flood channels and other areas that expose inhabitants to critical health and safety dangers, and will connect individuals to housing and supportive services while continuing outreach.

“Passing this ordinance is an important step in our proactive approach to addressing homeless encampments,” said Rowe. “It also ensures that people experiencing homelessness have access to the appropriate supportive services.”

Coalition leaders said the ordinance targets people experiencing homelessness without solving the region’s underlying shortages of housing and care. “The ordinance fails to address the real crisis. Our region’s lack of affordable housing and supportive services,” said the Inland Region Housing Justice Coalition in a joint statement. “Criminalizing homelessness only deepens poverty and makes it harder for people to get back on their feet.”

“We need investment in housing, not handcuffs,” said Raynesha Belvins, Homelessness Survivor and Advocate of Time for Change Foundation.

“This ordinance may have passed, but our community is united in demanding dignity and solutions,” added the coalition. “We will continue to push for policies that reflect compassion, equity, and justice,” said Sharon Green – CEO of Victor Valley Family Resource Center.

During the public hearing, coalition representatives urged county leaders to prioritize permanent supportive housing, rental protections, addiction treatment, mental health care, and wraparound support. They emphasized that enforcement-targeted policies are harmful and costly to taxpayers, while housing-first models save money and lives.

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