The Minnesota Department of Human Services (DHS) is shutting down its Housing Stabilization Services (HSS) program due to a major fraud investigation. This move comes after the FBI uncovered widespread misuse of funds within the program, originally created to help elderly and disabled residents find and keep housing.
On Friday, DHS Temporary Commissioner Shireen Gandhi sent a letter to the federal Centers for Medicare and Medicaid Services (CMS), requesting to officially end the program. In her statement, Gandhi emphasized that the state is taking strong action to stop fraud and protect taxpayer money.
“We cannot allow one more cent of taxpayer money going out the door to providers who are supposed to help Minnesotans in need but are instead using the system for personal gain,” Gandhi said.
Launched in 2020, the HSS program was expected to cost about $2.5 million a year. However, by 2024, spending skyrocketed to $104 million. A recent FBI search warrant called the program “extremely vulnerable to fraud,” prompting urgent action from state and federal authorities.
According to DHS Inspector General James Clark, data analysis showed that a significant number of fraudulent providers were involved, taking advantage of the system and cheating both the state and the people who needed help the most.
“Too many unqualified and dishonest actors have likely stolen taxpayer money while failing to serve the Minnesotans who truly need housing services,” Clark said.
Governor Tim Walz has also backed the decision, saying the program needs to be completely redesigned before it can continue. Earlier in the week, Walz ordered a halt to payments to 50 recipients suspected of fraud. DHS has also withheld payments to 11 providers under investigation.
“Until this program is redesigned with strong safeguards, it cannot continue,” Walz stated. “This is part of our broader effort to prevent fraud and make sure state programs serve those who actually need help.”
Senator Melissa Wiklund, chair of the Senate Health and Human Services Committee, also supported ending the program temporarily. She explained that during the 2025 legislative session, lawmakers took steps to improve oversight and accountability. These new measures, she said, would need to be in place before any similar program is launched again.
“It’s wise to pause the program for now. We’ve added stronger controls, and those need to be part of any future version,” she said.
Despite these actions, some Republican lawmakers criticized the Walz Administration for acting too slowly. They argued that shutting the program down now is more about avoiding political fallout than truly fixing the issue.
“Instead of addressing the fraud and fixing the problem, the governor is pulling the plug before an audit can show how badly things were mismanaged,” said Senate Republican Leader Mark Johnson.
House Speaker Lisa Demuth agreed, calling the announcement “too little, too late.” She said state agencies should have caught the fraud earlier and taken action sooner.
Senator Jordan Rasmusson from Fergus Falls added that the situation reflects growing public frustration.
“Minnesotans are tired of watching their hard-earned tax dollars go to criminals,” he said.
The DHS says it does plan to relaunch a new and improved version of the housing program in the future. The redesign will involve working closely with the legislature and housing service providers to make sure stronger safeguards are in place to prevent similar issues.
For now, however, the Housing Stabilization Services program is officially coming to an end as the state tries to clean up the damage and rebuild public trust.
