Yes. State grant programs that assist with housing down payments are counted as income. However, when you enter the 1099-NEC be sure to tell the system that this was NOT an attempt to earn money and it did NOT involve an activity like your regular job.
As long as you tell it that then it should not generate a schedule C (which you do not need to file) and you won't have to pay self-employment tax on the grant (which you do not owe).
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