California, other states file suit over changes to federal housing funding

Sixteen attorneys general say the new guidance by the U.S. Department of Housing and Urban Development violates the Constitution.

by Alan Riquelmy, Court House News, March 16, 2026

OAKLAND, Calif. (CN) — Over a dozen attorneys general argued in a suit announced Monday that President Donald Trump’s administration has illegally issued rules that threaten state funding and undermine housing protections.

The federal suit, filed in the Northern District of California, hinges on guidance issued last year by the U.S. Department of Housing and Urban Development. That guidance threatens to cut funding if states consider housing protections other than those in the Fair Housing Act.

Sixteen attorneys general call it a violation of the Constitution and the Administrative Procedure Act.

“This is not just bad policy, it’s unlawful,” said California Attorney General Rob Bonta in a press conference.

According to the attorneys general, the Fair Housing Act forbids discrimination in seven categories, including race, religion and disability. Some states go further with their own protections. California also has categories for veterans, gender identity, sexual orientation and source of income.

States like California and Illinois argued they face agency decertification, which means the loss of federal funding through the fair housing assistance program, if they include those extra protections. They’ve asked a judge to stop the Trump administration from enforcing the guidance.

“We will not go backward, and we will not give into threats,” Illinois Attorney General Kwame Raoul said.

In total, the 16 attorneys general filing suit face losing $10.7 million in funding. California’s portion is about $3 million, Bonta said.

The attorneys general say the federal guidance fails on several fronts.

Raoul said some conditions in the guidance are vague, leading states to guess what’s prohibited. Additionally, the guidance falls in the wake of the housing department gutting its workforce and hindering its ability to police discrimination.

The federal agency also has fired whistleblowers when they revealed the dismantling of fair housing enforcement, the attorneys general said.

According to Bonta, the Fair Housing Act sets a floor for protections, not a ceiling. States can add to the list of categories.

While the guidance would weaken states’ fair housing laws, it also would make new criteria they must follow to obtain federal dollars, the attorneys general said.

It would prohibit states and local agencies from pressing claims based on disparate impact liability. That liability forbids discrimination stemming from a housing policy, regardless of whether that was the intent.

An anti-abortion condition is also attached to the funding. However, the attorneys general said the guidance doesn’t define how to “facilitate” or “promote” abortion, how local and state agencies might do that, or the reason for its imposition.

The guidance also includes immigration and gender-identity conditions.

Under the guidance, federal dollars can’t subsidize or promote the immigration of people without legal residency. Again, it fails to define key terms, the attorneys general said.

Concerning gender ideology, the guidance prohibits agencies from promoting it. The attorneys general said “gender ideology” is imprecisely defined, forcing local and state entities to guess its meaning.

“All levels of government — local, state, and federal — should be laser focused not only on building more housing, but also ensuring that everyone can access a home free from discrimination,” Bonta said in a statement. “Unfortunately, the Trump administration thinks otherwise. HUD, without legal authority, is effectively undermining state laws that offer stronger protections than federal law.”

The suit is the 62nd filed by California, or one in which the state is a plaintiff, against the Trump administration since he took office in January 2025.

Asked about the potential need for more funding to handle lawsuits, Bonta said he feels well supported by the Legislature.

Lawmakers in early 2025 approved $50 million for Bonta’s office, half of which was in anticipation of legal battles with the Trump administration.

“If he doubles the pace of his lawbreaking, we might need more resources,” Bonta said of Trump.

The other attorneys general in the suit represent Arizona, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Maine, Maryland, Massachusetts, Michigan, New Jersey, Rhode Island, Vermont and Washington.

Representatives for the U.S. Justice Department and Department of Housing and Urban Development couldn’t be reached for comment.