The Minnesota Department of Human Services says it's making moves to terminate the Housing Stabilization Services program as federal authorities investigate fraud tied to the program.

DHS' Temporary Commissioner Shireen Gandhi wrote a letter Friday to the federal Centers for Medicare and Medicaid Services requesting to end the program.

Housing Stabilization Services is a newer Minnesota Medical Assistance benefit meant to help find and maintain homes for people with disabilities or the elderly. But a search warrant filed last month in the U.S. District Court of Minnesota details a "massive scheme to defraud" the program.

"DHS is rooting out fraud wherever we find it. We cannot allow one more cent of taxpayer money going out the door to providers who claim to serve Minnesotans in need of stable housing while lining their pockets for personal gain," said DHS Temporary Commissioner Shireen Gandhi. "As I made clear in my letter to CMS, our own data analysis has shown that this program does not have the necessary controls to stop bad actors, and we are urging CMS to approve our request to end this program as swiftly as possible."

What was originally estimated in 2020 to cost taxpayers about $2.5 million a year ended up costing $104 million in 2024. The FBI in the warrant called the housing program "extremely vulnerable to fraud."

Sen. Melissa Wiklund, DFL-Bloomington, is chair of the Senate Health and Human Services Committee. She said it's "prudent at this time" to end the program. 

"In response to alleged fraud in this system, the legislature acted to strengthen accountability and oversight in the 2025 legislative session. Those safeguards for program integrity would need to be in place for the relaunch of any new program, to ensure funds go to assist people who need vital housing support," Wiklund said in a written statement.

Earlier this week, Gov. Tim Walz said he'd stopped payments to 50 program recipients. DHS said it has since issued 11 payment withholds to HSS providers.

DHS Inspector General James Clark said a data analysis revealed "too many fraudulent, unqualified bad actors have likely stolen money from our state's taxpayers, and also cheated Minnesotans who need housing services."

The human services department added that it intends to redesign and relaunch the benefit, working with the legislature and providers to create a robust program.

Walz said in a statement that he "fully supports" the decision to end the program.

"Until the legislature can redesign this program, it is simply too susceptible to fraud to continue. This effort is one of many that the Administration is making to prevent fraud, tighten controls, catch and penalize criminal activity, and ensure state services go to only those who truly need them," he said.

Minnesota Republicans accused Walz of taking too long to stop the program. 

"Today we learned Governor Walz is shutting down a housing program riddled with fraud, not to fix it, but to prevent any more embarrassment. Instead of holding anyone accountable, they're pulling the plug before an audit can expose just how badly they mismanaged millions in taxpayer funds," said Minnesota Senate Republican Leader Mark Johnson.

"Friday afternoon's surprise announcement from the Walz Administration is the right decision, but it's too little, too late. Once again, state agencies failed to catch fraud in real time. Instead of stopping it, they're scrambling after the fact, after millions of taxpayer dollars have already been stolen," said Minnesota House Speaker Lisa Demuth.

Republican Sen. Jordan Rasmusson of Fergus Falls shared a similar sentiment, saying "Minnesotans are tired of their hard-earned tax dollars going to criminals."

No charges have been filed in the investigation.