The lawsuit was filed by three community organizations alleging that the lease agreement did not undergo proper local and federal reviews.
The Fire broke ground in April for their new training facility on the Near West Side.
The property had been designated for affordable housing in the past, but was never developed.
"Too long CHA has been used for everything but public housing. Too long we have not been heard. Too long we have been pushed out of the cities with these anti-Black policies, so we're here to say no more. And we're not going to stop fighting," a speaker said.
The lawsuit says 775 public housing units were promised at the site and only 245 have been returned, disproportionately impacting communities of color.