Democracy Defenders’ Lawsuit Demands Court Block Trump Pocket Rescission of HUD Funds

A coalition of 10 nonprofit housing organizations, represented by Democracy Defenders Action, filed suit Tuesday in the U.S. District Court for the District of Columbia seeking to block the Trump administration from implementing a pocket rescission of $56.1 million of the $57.5 million Congress appropriated for HUD’s Comprehensive Housing Counseling program. 

The lawsuit, National Urban League et al. v. Trump et al., names as plaintiffs the National Urban League, Housing Action Illinois (also known as Fair Housing Illinois), the North Carolina Housing Coalition, New Jersey Citizen Action, the Housing & Community Development Network of New Jersey, the National Coalition for Asian Pacific American Community Development, the Fair Housing Resource Center of Painesville, Ohio, the Southwest Fresno Community Development Corporation, Somerville Community Corporation of Massachusetts, and Consumer Credit & Budget Counseling, Inc. (doing business as National Foundation for Debt Management). 

Two of the groups—the National Urban League and Housing Action Illinois—were specifically cited by the White House as examples of “radical groups” with “DEI-centric discriminatory agendas.”

Democracy Defenders Action is a 501(c)(4) advocacy organization co-founded by former Obama ethics counsel Norm Eisen. It describes itself as a “bipartisan, all-star team of experts” dedicated to fighting “autocracy,” protecting the Constitution, and safeguarding democracy through litigation, policy work, and communications. Its sister 501(c)(3), Democracy Defenders Fund, handles much of the legal work. 

Communications associate Ashara Wilson circulated the press release to newsrooms, including the California Globe.

“The Trump administration’s decision is as illegal as it is heartless,” said Tianna Mays, legal director at Democracy Defenders Fund. “The president cannot unilaterally slash congressionally appropriated housing funds, putting thousands of vulnerable families at risk. We will fight this in court on behalf of every household in America that depends on these support services as the cost of living continues to rise.”

The complaint (see below) argues that President Trump and OMB Director Russell Vought used an illegal “pocket rescission” under the Impoundment Control Act by transmitting a rescission proposal to Congress just five days before the September 30, 2026, statutory deadline to obligate the funds. Plaintiffs contend this automatically canceled the money without congressional action, violating the Impoundment Control Act, the Appropriations Clause, the separation of powers, the First Amendment, and the Administrative Procedure Act.

They seek an order requiring HUD to award the full $57.5 million and a prohibition on denying or conditioning funds based on recipients’ speech, viewpoints, or other protected First Amendment activity.

The Government Accountability Office on Tuesday again declared the administration’s $810 million pocket rescission unlawful under the Impoundment Control Act, writing that the September 25 special message “do not permit the President to withhold the appropriations” and that allowing the money to expire “subverts both the constitutional process for enacting federal law and Congress’s constitutional power of the purse.” OMB Director Russell Vought dismissed the finding as “not a surprise,” calling the GAO “hyper partisan” and accusing the watchdog of changing its legal view “based on whether Democrats are in the White House.” The White House pointed reporters to Vought’s statement. 

Exhibit A in Washington's brokenness. A self-proclaimed fan of limited government and budget analyst chooses to order his day around the method of cutting $1 billion in spending, without any constitutional understanding or historical knowledge of how our country operated for the… https://t.co/qTRzMmvbzw

— Russ Vought (@russvought) September 29, 2026

North Carolina Housing Coalition officials told Democracy Defenders that delayed funding already forced local agencies to incur unreimbursed costs and that more agencies will drop out, with one contact warning of another housing bubble if the policy stands.This lawsuit follows the administration’s September 25 announcement of nearly $1 billion in pocket rescissions targeting what the White House called “the most harmful government spending,” including leftover Biden-era grants for migrant services, DEI programs, and certain nonprofits. 

California Globe previously reported on that package, which included the $56 million HUD counseling cut and named California-linked groups among those affected.

Excerpt from the filed complaint:

“This action challenges the Trump Administration’s effort to punish grantees for their past speech and viewpoint on topics that have nothing to do with grant activities by unilaterally cancelling congressionally mandated funding for a federal housing counseling program—using a so-called ‘pocket rescission.’

On September 25, 2026, just five days before the statutory deadline to obligate the funds, President Trump signed and the Office of Management and Budget (OMB) transmitted to Congress a package of proposed rescissions of almost $1 billion in congressional appropriations. 

… One of the proposed rescissions is for $56.1 million of the $57.5 million appropriated by Congress for the Department of Housing and Urban Development’s (HUD’s) Comprehensive Housing Counseling (CHC) program…There can be no doubt that the Administration’s decision to rescind the CHC program funding… was based upon its deep animus for the grant applicants’ particular viewpoint.

Defendants declared as much in their official public statements… that CHC grantees are ‘NGOs with divisive and DEI-centric agendas that peddle discrimination based on race.’ … OMB then gave three examples of these ‘radical groups,’ two of which were Plaintiffs National Urban League and Housing Action Illinois.”

The groups ask the court to vacate the rescission, compel HUD to administer the program as Congress directed, and bar viewpoint-based funding decisions. HUD Secretary Scott Turner and OMB have not yet responded in court. 

The administration has maintained that the Impoundment Control Act permits such last-minute proposals when funds are about to expire and that the targeted grants supported organizations advancing race-based or ideological agendas rather than core housing counseling.