NJ nonprofits sue Trump administration over housing counseling cuts

The plaintiffs say the loss of federal funding threatens help for homebuyers, renters, and families facing foreclosure.

Two New Jersey nonprofits joined a federal lawsuit Tuesday challenging the Trump administration’s effort to cancel $56.1 million in housing counseling funding, warning that the cuts would undermine services that help residents buy homes, avoid foreclosure and remain housed.

New Jersey Citizen Action and the Housing and Community Development Network of New Jersey are among 10 organizations suing the Trump administration over the funding cuts. The complaint alleges the administration unlawfully withheld money Congress approved and targeted recipients because of their advocacy and political views.

The lawsuit, filed Sept. 29 in U.S. District Court for the District of Columbia, challenges the cancellation of nearly all of the $57.5 million Congress appropriated for HUD’s Comprehensive Housing Counseling program. It also contests new restrictions regarding which counseling services federal grants can cover.

The Housing and Community Development Network administers federal funding, training and compliance oversight for nine local HUD-approved counseling agencies serving most of New Jersey’s 21 counties, according to the complaint. The network and its participating agencies have received HUD counseling funds continuously since 2014. Its fiscal 2024-25 award totaled about $333,000.

New Jersey Citizen Action has provided housing counseling since 1993 and received HUD certification in 1995. Its free services include rental, foreclosure, financial, and homeownership counseling throughout all 21 counties, according to the complaint.

The HUD housing counseling funding supports about 9% of Citizen Action’s organizational budget, according to the lawsuit. The organization receives the money through the statewide network and says losing it would require reducing or reallocating its counseling capacity.

“NJ families and residents are in the midst of a housing affordability crisis, and will be deeply harmed by the White House rescission of HUD-housing counseling dollars,” Staci Berger, president and CEO of the Housing and Community Development Network of New Jersey, said in a statement about the lawsuit.

“We are pursuing this action to protect our neighbors and communities, so that they are able to access affordable, safe and stable housing using the wide array of HUD housing counseling services that Congress authorized,” Berger said.

Dena Mottola Jaborska, executive director of New Jersey Citizen Action, said the administration was targeting nonprofit providers and federal programs that offer a critical lifeline to people struggling with housing affordability.

The dispute centers on a maneuver the administration calls a “pocket rescission,” which involves proposing to cancel appropriated money shortly before the deadline to commit it, then withholding the funds as that deadline passes.

According to the complaint, President Donald Trump sent Congress the proposal Sept. 25, five days before the Sept. 30 deadline for HUD to commit the housing counseling funds. The organizations argue that the administration cannot cancel the money without Congress passing a law approving the rescission.

The White House defended the cuts in a Sept. 25 announcement, saying the counseling program had not demonstrated reduced mortgage delinquencies among counseled homebuyers, and accusing recipients of pursuing discriminatory diversity, equity, and inclusion agendas. It singled out the National Urban League and Housing Action Illinois, both plaintiffs in the lawsuit, criticizing their positions on immigration and racial justice.

The organizations cite those statements as evidence of unconstitutional retaliation. Their complaint alleges that the administration withheld funding to punish speech and advocacy outside the housing counseling program, violating the First Amendment. The lawsuit also argues that HUD violated federal spending requirements and the Administrative Procedure Act by abandoning longstanding policies without adequate explanation or consideration of organizations that relied on the funding.

Months of uncertainty preceded the funding dispute, according to the plaintiffs.

Federal housing officials did not release the fiscal 2025 funding notice until March 26, 2026, although the grant period was supposed to begin retroactively on Oct. 1, 2025. Applications were due May 26, and HUD listed Aug. 3 as the anticipated award date. In their complaint, the plaintiffs allege that the agency failed to make the funding available by that date.

While awaiting awards, counseling agencies continued serving clients and incurred expenses they expected federal grants to reimburse. The complaint says the delays forced organizations to draw down reserves, reduce services and defer spending, with some organizations laying off employees or withdrawing from the program.

The March funding notice also excluded one-on-one counseling for prospective homebuyers from eligible expenses, according to the complaint. It restricted federally funded counseling for existing homeowners to borrowers with mortgages made, insured, guaranteed, or held by HUD, the Department of Veterans Affairs, or the Department of Agriculture.

That change would prevent agencies from using grants for foreclosure-prevention counseling for borrowers with mortgages outside those categories, according to the organizations. They say HUD had funded those services for more than 30 years.

The plaintiffs are asking the court to order the administration to commit the appropriated funds and continue operating the counseling program. They also seek to preserve the money beyond the Sept. 30 deadline while the case proceeds and block enforcement of the challenged funding restrictions.

Besides the two New Jersey organizations, the plaintiffs include the National Urban League, Housing Action Illinois, North Carolina Housing Coalition, National CAPACD, Fair Housing Resource Center, Southwest Fresno Community Development Corporation, Somerville Community Corporation and the National Foundation for Debt Management.

Defendants include Trump, HUD, HUD Secretary Scott Turner, the Office of Management and Budget, and its director, Russell Vought.