For a community struggling with overbuilding, a soft real estate market and developer credit problems, the Washington area seems to have more than its usual share of perplexing development issues.

While some of those issues are mostly a nuisance, the resolution of others is critical to economic growth. So the slump in development provides an excellent opportunity to plan for the next round of growth. Comprehensive planning is hardly the focus of debate on many of these issues, however. It is instead a combination of politics, personalities and doctrinal positions.

From the standpoint of total economic development and the fiscal integrity of a local government, the debate over housing in downtown Washington -- and its effect on commercial development -- is perhaps the most crucial public policy issue in dispute. Indeed, commercial development is the essence of economic development in the District. It fuels the city's corporate tax engine. Capricious tampering with that engine could be disastrous for the economy of a city that already faces a fiscal crisis.

Yet tampering is precisely what the D.C. Zoning Commission seems bent on doing in its doctrinal approach to creating a so-called "living downtown."

A laudable concept promoted by city officials over the years, the rather idealistic vision of a "living downtown" -- a bustling employment center by day and a vibrant residential, arts and entertainment community by night -- is a fallacy, given very real development and economic constraints.

Realistically, downtown Washington -- essentially the area bounded by Pennsylvania Avenue NW, 15th Street NW, Massachusetts Avenue NW and Third Street NW -- is a place to work first and foremost. It is an office market with a retail core and a severely limited capacity for affordable housing. As long as land prices remain as high as market forces have driven them, the 9,000 residential units originally envisioned for downtown Washington will never be built.

Pennsylvania Avenue Development Corp., the nonprofit corporation created by Congress in 1972 to redevelop the avenue and nearby streets, has been able to facilitate housing development in the area by writing down the cost of land to developers. The District has no such leverage.

The Mayor's Commission on Downtown Housing provided an instructive assessment of the issue in a 1988 report. "No matter how appealing or prestigious as an urban paradigm Washington's downtown housing plan may be, its success must necessarily stand or fall on the pivotal point of cost, and as an extension of that the project's benefit-to-cost ratio, that is a sufficient return of benefits to the city to justify its investment," the mayor's commission said. "It is imperative in making this determination that those involved in the decision-making process clearly understand the hard economic realities of housing development, especially in an environment where costly constraints and impediments must be overcome."

Without economic incentives to stimulate housing development, developers opt to build as many commercial buildings as they are allowed, the panel correctly pointed out. Without subsidies, land prices are "well in excess of the price that private-sector housing developers can pay," the mayor's commission emphasized.

After coming to grips with the reality of the market, District officials, accepting some of the panel's recommendations, devised a downtown development district plan. It contains several developer incentives to create housing in or near downtown. Under the plan, developers of commercial property would, for example, contribute to a housing trust fund that would support residential construction elsewhere in the city, some of it in neighborhoods close to downtown. Or developers would be awarded bonus commercial development space that could be transferred to other areas of the city, in exchange for building residential units in the heart of downtown.

The development industry, though not in total agreement with the District's proposal, generally supports the incentives concept. Community groups astutely point out that scarce housing money can be used more efficiently in neighborhoods that need it more. They embrace the concept of using a housing trust fund to rehabilitate the thousands of boarded-up units in District neighborhoods. In eloquently pragmatic testimony before the zoning commission, Jim Dickerson, a spokesman for the Coalition for Nonprofit Housing Development, wondered why authorities and the commission persist in calling for housing in an expensive office area. "Why aren't we acting like other cities such as Miami and Boston {that} have effective policies already in place, which take the wealth created in their respective downtowns and transfer a portion of it to the neighborhoods and people who deserve it most?" Dickerson asked.

The zoning commission, chaired by Tersch Boasberg, isn't buying into that logic, clinging instead to the fallacious notion that there can be a "vibrant downtown of mixed uses: offices, retail, hotels, theaters, museums, historic buildings and neighborhoods with significant housing opportunities."

All of those uses are being incorporated in the development of downtown. A mix of hotels, theaters, restaurants and a limited amount of housing -- which only wealthy professionals for the most part can afford -- will create a vibrance after 6 p.m.

But let's not kid ourselves. This isn't merely a housing issue. Nor is it a simple matter of carrying out an idealistic plan to create a living downtown. Rather, it is a matter of fiscal sanity. It boils down to what's best for the District's economy and its fiscal integrity.

The District obviously can't provide subsidies to developers to build housing downtown. It's doubtful that it could even if it didn't have a budget crisis. Developers aren't about to commit financial suicide by building market-rate housing at a loss. Forced to build housing on that basis, developers will almost certainly abandon downtown for the suburbs. That would be a devastating loss in light of the fact that commercial development generates millions of dollars in taxes and other revenue. Commercial development is economic development in the District.

But more than losing commercial development, District residents would lose services and funding for critical needs in education, health care and the like. In short, its fiscal woes would worsen. The irony of it all is that no housing would be built downtown after all.

Commercial development has a place, and it is downtown. Why be so zealous in promoting housing there and ignore the city's genuine housing needs? Why indeed? "So that those who interpret the comprehensive plan literally can have their way no matter what the consequences?" asked Dickerson.

It is a question worth pondering by elected city officials.