If there is space for homosexual relationships within Catholic teaching, why have bishops expelled Dignity chapters from church property?
Perhaps just addressing homosexuality openly and fully would be enough to provoke an official reaction. But the history is more complicated. On October 30, 1986, the Vatican issued a "Letter to the Bishops of the Catholic Church on the Pastoral Care of Homosexual Persons." This document instructed the bishops to withdraw all support, or even the semblance of support, from any group vague on the immorality of homogenital acts. Surely the Vatican had Dignity in mind. And many found the letter harsh and uninformed. In national convention in 1987, DignityUSA declared that it believes lesbian and gay people may indeed engage in loving, life-giving, and life-affirming sex, always in an ethically responsible and unselfish way.
Dignity proclaimed publicly what Church teaching does allow, but only in the privacy of conscience. Following these events, bishops began evicting local chapters for rejecting Church teaching and, most importantly, for opposing ecclesiastical authority. However, a few chapters continue to meet in Catholic facilities.
Taken from Daniel A. Helminiak, FAQs: Catholicism, Homosexuality, and Dignity, written for DignityUSA, 1996, 2000.