HUD suspends federal homeless funding to LA over fraud allegations

LOS ANGELES - The U.S. Department of Housing and Urban Development announced Thursday it has suspended federal funding to the Los Angeles Homeless Services Authority, essentially cutting off millions of dollars to the Los Angeles region over allegations of fraud and widespread mismanagement. 

What we know:

HUD’s decision to freeze funding stems from a federal investigation into LAHSA's internal controls and practices. 

According to HUD Secretary Scott Turner, the agency uncovered evidence of "false statements and its irresponsible actions and failures," pointing specifically to a severe lack of financial management and failure to protect against conflicts of interest.

Federal investigators highlighted several core failures to back up their claims of a "clear pattern of fraud":

• Untracked Expenditures: In August 2023, LAHSA was unable to verify if federal funds were paying for entirely empty hotel rooms because the agency failed to record when individuals exited transitional motel housing.
• Unspent Millions: Federal officials cited a November 2024 audit conducted by L.A. City Controller Kenneth Mejia, which revealed LAHSA failed to spend approximately $513 million in homelessness funding budgeted for that fiscal year.
• Conflicts of Interest: HUD referenced an investigation by LAist showing that former LAHSA CEO Va Lecia Adams Kellum—who stepped down last year after the county stripped $300 million away from the agency—had signed a $2.1 million contract with a nonprofit organization that employed her husband.

Despite allegations from Secretary Turner that LA remains the epicenter of a "drug-fueled" homeless crisis, recent HUD data contradicts claims of unchecked growth. 

LAHSA’s 2025 point-in-time count showed a 4% decrease in homelessness across LA County and a 3.4% drop in the city. 

Furthermore, unsheltered homelessness in the city has dropped by 17.5% over the last two years, marked by a 10.3% drop nationwide according to figures celebrated by Gov. Gavin Newsom.

What we don't know:

It remains unclear exactly how many millions of dollars will be instantly withheld during the suspension period, or how quickly local service providers will feel the financial squeeze. 

It's also unkown whether LAHSA can secure emergency alternative funding to keep its current rehousing operations afloat, leaving the immediate fate of thousands of formerly unhoused individuals currently relying on these federal subsidies hanging in the balance.

What they're saying:

HUD Secretary Scott Turner laid out the administration's stance on the funding freeze bluntly.

"Under President Trump's leadership, HUD will fund results, not corrupt failure or the homeless-industrial complex. Year after year, hundreds of millions of taxpayer dollars were funneled to LAHSA with little accountability. Meanwhile, homelessness skyrocketed. Taxpayers will no longer bankroll an organization that puts its own self-interests ahead of the Americans it was created to serve."

LAHSA officials strongly pushed back against the allegations, arguing that the agency has already taken steps to correct its past issues.

"LAHSA received a letter from HUD announcing a suspension of CoC funding. After initial review, this appears to be a blatant attempt to pull yet more resources from Los Angeles, a city they have targeted time and again, when it is clear that LAHSA has either corrected or is in the process of correcting nearly all of the issues raised."

Los Angeles Mayor Karen Bass shared concerns over LAHSA's historical issues, but sharply criticized HUD's aggressive methods.

"Bass, too, has grave concerns about LAHSA and zero tolerance for mismanagement and negligence, which is why she previously directed the city to evaluate how to move away from the agency. Threatening federal funds does nothing to house people and jeopardizes the progress Mayor Bass has led to reduce homelessness for two years in a row, after it only went up in Los Angeles for years. Ultimately, people will lose their lives. We urge HUD to work with the city of Los Angeles to provide the necessary funding to reduce homelessness."

County Supervisor Lindsey Horvath dismissed HUD's suspension entirely, labeling it political retribution.

"I have been calling for change and accountability at LAHSA, but if this administration desires accountability, too, they should work WITH LA County. While they focus on stunts and retribution against Los Angeles — a community that rejects their apocalyptic MAGA agenda — we're staying focused on results for our most vulnerable."

What's next:

The suspension will become permanent and final if LAHSA does not formally challenge HUD's notice. 

The agency has exactly 30 days from the receipt of the notice to file a written request for an official hearing.

 In the meantime, LAHSA leadership stated they are exploring all available administrative and legal options to protect local rehousing dollars while local city and county governments continue their broader structural transition away from LAHSA's centralized network.