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State shuts down $107 million housing stabilization program, citing fraud • Minnesota Reformer [1]
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Date: 2025-08
Citing “credible allegations of fraud” and “exponential growth in spending,” the Department of Human Services asked the federal government for assistance in terminating a state housing program, according to a letter signed by DHS Temporary Commissioner Shireen Gandhi and released Friday.
The end of the Housing Stabilization Services program — which resides under the umbrella of the federal-state Medicaid program — comes after Gov. Tim Walz on Monday said his administration halted payments to 50 of the largest providers. Federal investigators say the program has become the source of a massive fraud scheme.
Gandhi’s letter to the federal Centers for Medicaid and CHIP Services notes that “the DHS Office of Inspector General has suspended payment to 77 housing stabilization providers this year based on credible allegations of fraud.”
Earlier this month, the FBI raided five Minnesota businesses that have received millions in Medicaid money for services they didn’t provide, according to unsealed search warrants. The Housing Stabilization Services program is intended to help older adults and people with disabilities find and maintain housing.
Since its inception, the program’s growth has exploded. The Star Tribune reported recently that when the bill creating the program passed in 2017, analysts expected the cost to be $2.6 million a year, but by 2024, the cost was $107 million. Meanwhile, DHS data showed more than 700 companies were paid for services in 2024.
Acting U.S. Attorney Joe Thompson told KSTP recently that the “vast majority” of the Housing Stabilization Services program is fraudulent.
KARE 11 first reported on the program’s flaws in May, including widespread reports of payments for no actual services to people in need.
The failure of the program — in concert with the hundreds of millions lost via other programs — is sure to become political fodder, especially should Walz run for a third term.
Thompson said recently that when his current investigations are finished, fraud in programs administered by Minnesota could exceed $1 billion, stemming from a pandemic-era food aid program known as Feeding Our Future, the state’s autism program and rapidly increasing sums allegedly pilfered from other Medicaid programs.
Thompson says the problem is systemic.
“This fraud crisis didn’t come out of nowhere. 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 and law enforcement who didn’t push hard enough. Reporters who ignored the story. Community leaders who stayed silent,” he told the Star Tribune recently. “And a public that wanted to believe it couldn’t happen here.”
Walz will argue he took decisive action once evidence of fraud began to emerge in the housing stabilization program.
In the wake of the Feeding Our Future scandal, Walz and his administration faced years of criticism for being slow to act despite red flags about the program.
Even when the state Department of Education — which administered the food aid program — sought to stop payment to some suspicious vendors, however, they sued the department and won in court.
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