REGIONAL— Thousands of Minnesotans who depended on state assistance to find or keep a place to live are facing new uncertainty after the state Department of Human Services shut down the Housing Stabilization Services program following revelations of widespread fraud.
The program, known as HSS, officially ended last Friday. It helped older adults and people with disabilities, including those with substance use disorders, secure and maintain stable housing. For many, that meant the difference between having a place to live and losing it altogether.
“It’s upsetting that we had to take this step to stop criminals from taking advantage of services intended to help people,” said temporary Human Services Commissioner Shireen Gandhi. “We know that Housing Stabilization Services truly filled an important gap for so many participants. We’re working closely with partners to help them connect people to other services wherever possible.”
Authorized by the Legislature in 2017 and launched in 2020 as part of Minnesota’s Medicaid program, HSS was designed to provide supportive housing services to vulnerable residents who often struggled to navigate the complex system of housing, benefits, and medical care. Analysts expected it to cost about $2.6 million a year when it was approved.
By 2024, the cost had exploded to $107 million. More than 700 providers were billing the state, and investigators began finding patterns that didn’t add up.
According to DHS, the agency’s Office of Inspector General suspended payments to 77 HSS providers this year after uncovering “credible allegations of fraud.” Investigators found that many companies billed for services that were never delivered, or in some cases didn’t even have legitimate clients.
In July, the FBI also raided five Minnesota businesses accused of pocketing millions in Medicaid funds through fraudulent housing claims. In September, federal officials charged eight individuals with wire fraud and described the scheme as one of the largest in the state’s history.
“I have spent my career as a fraud prosecutor, and the depth of the fraud in Minnesota takes my breath away,” said acting U.S. Attorney Joseph Thompson in a press release announcing the indictments. “This fraud must be stopped.”
Thompson talked with the Minnesota Star Tribune after the July FBI raids.
“This fraud crisis didn’t come out of nowhere,” Thompson said. “It’s the result of widespread failure across nearly every level of leadership in Minnesota. Politicians who turned a blind eye, agencies that failed to act, prosecutors who didn’t push hard enough, and a public that wanted to believe it couldn’t happen here.”
DHS and Gov. Tim Walz decided that continuing the program was unsustainable. Even after new fraud-prevention measures were introduced this year, the agency concluded that its staff simply lacked the capacity to investigate the scale of abuse that had taken root.
In August, DHS asked the federal Centers for Medicare and Medicaid Services for permission to end the program. That request received final approval in October.
DHS stopped accepting new eligibility requests on Oct. 10, and Oct. 31 marked the final day services could be provided. The department said it received more than 200 public comments before the shutdown, most expressing concern for clients who would lose services. DHS has since published a summary of those comments and a list of alternative housing resources on its website.
State officials say most people affected should already be connected with county, tribal, or managed-care contacts who are helping them transition to other programs. Those who need help finding support can reach out to their county or tribal offices or, if they have one, a case manager.
The department’s housing resources webpage, mn.gov/dhs/housing-resources, offers information about available programs, eligibility criteria, and links to community housing benefits. Questions can also be directed to dhshousingstabilization@state.mn.us, although responses may be delayed due to heavy volume.
While the termination leaves a gap in services, DHS has said it intends to work with the Legislature, community partners, and federal officials to design a replacement program that includes stronger verification and monitoring systems. No timeline has been announced for when that might happen.
The fraud scandal surrounding HSS follows on the heels of the Feeding Our Future scandal, where millions in federal food aid were stolen through fraudulent meal programs, and growing concerns about irregularities in autism-related and other Medicaid billing.
The crisis has put Walz in the political crosshairs as he seeks a third term in 2026. Republican lawmakers have accused his administration of fostering an environment where fraud flourished under weak oversight.
During the 2025 session, House Republicans successfully pushed for creation of the House Fraud Prevention and State Agency Oversight Committee, a bipartisan body tasked with investigating waste, fraud, and abuse in state programs.
Separately, Walz last week ordered an external audit of 14 high-risk Medicaid programs to identify vulnerabilities and root out fraudulent billing. The move was part of a broader executive effort to demonstrate accountability and restore public confidence in state government.
Federal prosecutors estimate total fraud across Minnesota’s public assistance programs could exceed $1 billion once all current investigations are complete. That figure includes the Feeding Our Future case, which remains the largest and most publicized of the state’s fraud scandals.
Walz has defended his handling of the HSS shutdown, arguing that once credible evidence of fraud emerged, the administration moved swiftly to stop payments and coordinate with law enforcement.
Critics, however, point out that similar patterns of rapid program growth, weak vetting of providers, and delayed enforcement have plagued other state-run initiatives in recent years.
For the thousands of Minnesotans who used HSS to stay housed, the shutdown represents more than a bureaucratic failure. It is a disruption of the fragile safety net that kept them afloat.
DHS says it will continue coordinating with local governments and nonprofit partners to connect displaced clients with other programs, though options may vary by region.