A federal judge is deliberating the future of the Los Angeles Homeless Services Authority (LAHSA) and $240 million in federal funding after a contentious hearing Thursday. U.S. District Judge David O. Carter is considering whether to block the U.S. Department of Housing and Urban Development's (HUD) suspension of LAHSA, the agency tasked with overseeing homelessness services in Los Angeles.

The legal battle centers on allegations of years of financial mismanagement and oversight failures at LAHSA, which manages an $845 million budget and contracts with over 100 service providers. HUD suspended LAHSA in June, launching an investigation into purported false statements, financial mismanagement, internal control deficiencies, and conflicts of interest.

LAHSA has sued to overturn the suspension, while the federal government contends the freeze should remain to allow service providers to seek funding directly from HUD. The hearing in federal court saw attorneys representing the federal government, LAHSA, the city, and the county, but notably, no elected city or county officials were present. U.S. Attorney Bill Essayli publicly criticized this absence, calling it a "leadership problem."

Essayli stated that the federal government cannot continue to allocate taxpayer money to a system with persistent, documented failures. According to HUD's allegations, LAHSA has failed to adequately track expenditures for vacant motel rooms, improperly reallocated funds between contracts, could not verify the status of nearly 2,300 housing sites, and only implemented a conflict-of-interest policy in September 2025. Federal attorney Joshua Ha highlighted nearly two decades of audits flagging issues at LAHSA, including concerns over grant oversight, performance, accounting, and significant amounts of unused federal funds.

Judge Carter questioned HUD's decision to allow LAHSA to continue as the lead agency as recently as April 2026 if the problems were so severe. A HUD attorney responded that prior enforcement actions had been ineffective and that recent audits indicated "the time for half measures has passed."

Carter also criticized the city and county for what he described as a cycle of "blame shifting" with LAHSA, stating, "The city is LAHSA, the county is LAHSA, and LAHSA are the city and the county."

Essayli recounted experiences on Skid Row and with law enforcement, observing a homeless family struggling to access services, and asserted that "The money is not getting to the people that need it." He also pointed to recent federal fraud prosecutions related to homelessness funding and warned that further indictments are anticipated.

LAHSA's defense argued that HUD initiated the suspension without adhering to proper procedures that would have provided the agency notice and an opportunity to respond. Attorneys for the Los Angeles Continuum of Care, a regional coalition coordinating federal homelessness funding, cautioned that bypassing LAHSA could destabilize the system and create a chaotic scramble for funds. They noted that approximately 200 providers depend on this funding, and it supports housing for about 11,000 individuals.

Paul Webster, Executive Director of LA Alliance, expressed that the situation felt familiar, characterizing LAHSA as consistently failing to meet its intended purpose and deflecting blame. Essayli suggested that LAHSA's role at the center of the system is nearing an end, stating, "I think it’s clear LAHSA is not going to be in the driver’s seat moving forward. It’s just a matter of when, not if."

HUD's inspector general investigation is ongoing, with the possibility of LAHSA facing permanent debarment.

Essayli anticipates that Judge Carter will issue a decision relatively quickly, possibly within the next week.