Three struggling small businesses filed a lawsuit against the Department of Housing and Urban Development in an effort to halt and reverse its decision to relocate from its longtime headquarters in the nation's capital.

In legal documents submitted this week, attorneys representing a party and novelty store and two local restaurants, all of which have seen business decline significantly in recent months, described HUD's decision to move its offices from Washington, D.C., to suburban Alexandria, Virginia, as unlawful and questioned whether it delivered any of the benefits officials said it would. 

The lawsuit accuses HUD of violating U.S. codes and the Administrative Procedure Act, which establish that departments attached to the seat of government be based in the District of Columbia, the lawyers claimed. 

"Each business owner believed, reasonably, that HUD would maintain its headquarters in the District for years to come, consistent with its prior representations and the law. And each business owner now fears that they will not be able to survive if HUD completes its planned unlawful move out of the District," the plaintiffs' lawyers wrote. 

Listed as plaintiffs were the owners of novelty supply merchant Total Party and dining establishments SpiceX and Brown Bag. All three businesses are located on L'Enfant Plaza, blocks from the Robert C. Weaver Building, which has been home to HUD since 1968. Named as a defendant alongside the federal government's affordable housing division was department Secretary Scott Turner. 

"HUD has identified no statutory authority permitting the move, has failed to explain its abrupt departure from prior plans to remain in the Weaver Building and has failed to provide any analysis underlying the claimed cost savings that it says prompted the move," according to the filing.

HUD had not responded to a request for comment from National Mortgage News prior to publication. 

The background of the lawsuit

The department announced its intention to move to Virginia in June 2025, noting it would establish a new base in offices that at the time housed the National Science Foundation. HUD's headquarters at the Weaver Building had been rumored targets for cuts by the Trump administration's Department of Government Efficiency, with federal officials pointing to its aging infrastructure and maintenance issues. 

In March, HUD leadership unveiled a plan to begin operations in Virginia, starting with the transfer of 20 program offices by mid April, including the insurer of government-backed mortgages, Ginnie Mae. 

In their argument, plaintiffs said the department failed to take into account the interests of small businesses that signed leases based on HUD's location near L'Enfant Plaza. They also said HUD failed to consider alternate sites within Washington, D.C. 

The consequences resulting from the departure of thousands of workers since April include a 20% reduction in year-over-year revenue for the fast-casual restaurant Brown Bag. Meanwhile, SpiceX, a neighboring Indian restaurant, reported missed rent payments that it attributed to the loss of customers, while Total Party was forced to reduce store hours. 

In support of their claims, attorneys pointed to a 2022 capital plan published by HUD, in which it explicitly described the intent to use and modernize its real estate holdings, including consolidating local satellite offices with Weaver Building headquarters, through 2028. 

"By proposing that HUD consolidate its various D.C. offices in the Weaver Building, the agency expressed an intent for the building to serve as its headquarters for years to come," the lawsuit said. 

The plaintiffs alleged that there was no basis to the expected high costs of repairs to the Weaver Building the agency reported as a reason for relocation, which came in hundreds of millions of dollars more than estimates from the General Services Administration. Their attorneys also said HUD had not responded to questions from Congress about its budget analysis, nor explained why a move to Virginia would result in a $26.2 million bill to relocate National Science Foundation staff. 

The lawsuit is asking for the courts to vacate and set aside HUD's decision to leave Washington and pause pending relocation plans.

According to a survey conducted by the local trade union American Federation of Government Employees, which represents HUD employees, 77% of respondents opposed the agency decision, and 20% suggested they may leave if plans proceed.