Trump Admin Suspends $1B to LA Homeless Agency Fraud Probe

The Department of Housing and Urban Development (HUD) has suspended all federal funding to the Los Angeles Homeless Services Authority (LAHSA), cutting off nearly $1 billion in taxpayer money amid an explosive fraud investigation, Fox News reported. The action, announced on June 11, 2026, represents one of the largest federal funding suspensions against a local agency in recent years.

HUD sent a letter to LAHSA Board Chair Wendy Greuel and CEO Gita O’Neill, notifying them that the agency is immediately suspended from participating in federal programs while HUD’s Inspector General investigates potential offenses by the agency and its leadership.

A Pattern of Mismanagement

The suspension follows years of mounting evidence of financial mismanagement and fraud within LAHSA, the joint powers authority created by the City and County of Los Angeles to coordinate homelessness services across the region.

According to HUD, LAHSA has received nearly $1 billion in federal funding since 2021, in addition to city, county, and state funds. Despite this massive investment, the agency has been plagued by scandals:

A federal judge last year concluded LAHSA had committed “obvious fraud” after the agency sought funding for an 88-bed shelter that was operating at roughly half-capacity. The judge considered placing LAHSA into receivership.
Former LAHSA CEO Va Lecia Adams Kellum resigned last year after investigators found she directed $2.1 million in federal funds to her husband’s Santa Monica-based nonprofit employer.
The agency could not verify the existence of nearly 2,300 housing sites for which it was responsible, with 70% of contracts for those sites disclosing no expenses over the prior year.
In November 2024, the City Controller’s Office found LAHSA failed to spend $513 million in public funds budgeted for fiscal year 2024, blaming a lack of staff and outdated technology.

Public audits also revealed a pattern of late payments to service providers and poor record-keeping that prevented the agency from monitoring contracts, including $5 million in cash advances sent to five different service providers.

Federal Response

HUD Secretary Scott Turner framed the suspension as a necessary step to protect taxpayer dollars, as the Washington Examiner reported.

“Under President Trump’s leadership, HUD will fund results, not corrupt failure or the homeless industrial complex,” Turner said in a statement. “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.”

Federal Trade Commission Chairman Andrew Ferguson, who serves as vice chair of the White House Task Force to Eliminate Fraud, praised the action. “Los Angeles didn’t care about helping the homeless, but the Trump Administration does,” Ferguson said. “It is unconscionable that Los Angeles has wasted billions of taxpayer dollars that was supposed to be used on housing our nation’s most vulnerable.”

The task force, chaired by Vice President JD Vance, was established earlier in 2026 as part of a broader administration crackdown on fraud.

Local Fallout

The federal action comes after local officials had already begun distancing themselves from LAHSA. Los Angeles County has withdrawn its funding from the agency, and the City of Los Angeles is considering doing the same, according to HUD’s letter.

“LAHSA’s failures have been so severe and pervasive that Los Angeles County has withdrawn its funding for the agency, and the City of Los Angeles is considering doing so as well,” HUD wrote.

The city council has moved to explore bypassing LAHSA and contracting directly with service providers, while the county has begun redirecting hundreds of millions in annual homelessness funding to a new county department.

Homelessness in Los Angeles

More than 72,000 people are experiencing homelessness across Los Angeles County. LAHSA reported that countywide homelessness fell for a second straight year in 2025, and Mayor Karen Bass has pointed to the data as evidence of improvement.

However, critics argue that modest declines do not justify the billions spent. Just the News reported that HUD’s letter details conflicts of interest, financial mismanagement, fraud, and lack of oversight at the agency.

Broader Implications

The funding suspension is part of a wider Trump administration effort to increase oversight of homelessness spending nationwide. HUD has already implemented significant policy changes, including a new Notice of Funding Opportunity that restricts permanent housing spending to no more than 30% of federal Continuum of Care funds — a major shift away from the “Housing First” approach that has drawn lawsuits from 21 states, including California.

HUD’s letter concluded with a stark warning: “HUD cannot ignore LAHSA’s wanton mismanagement of public funds. HUD’s mission is to reduce the plague of homelessness in America. Turning over billions of dollars from American taxpayers to an organization under investigation and suspected of gross misuse of federal funding and ‘obvious fraud’ does nothing to reduce homelessness.”

What’s Next

The HUD Inspector General’s investigation could lead to criminal referrals, and other cities’ homelessness agencies may face increased federal scrutiny. The suspension also injects new tension into Los Angeles’ mayoral race, where Mayor Karen Bass is seeking reelection. The fate of current LAHSA programs and the clients who depend on them remains uncertain as federal, state, and local officials grapple with how to fill the gap left by the funding freeze.