The Washington Project for the Arts, threatened for the past six months with losing its downtown home to new development, will be allowed to stay put.

An agreement signed by the WPA and Jenifer Building Associates, the building's new owners, was approved yesterday by the Pennsylvania Avenue Development Corporation, a federally funded group with jurisdiction over the site. The agreement includes provisions for the WPA to remain in approximately the same space -- the entire second and third floors and part of the ground floor -- in the building at Seventh and D streets NW that it has occupied since 1981. The artist-run gallery will have the right to lease the space for 18 years, at less than $10 a square foot.

"We are pleased and excited about the agreement," said WPA President James F. Fitzpatrick, an attorney with Arnold and Porter who was heavily involved in the negotiations.

"Although the plan might have been simpler," he told the PADC yesterday, "the negotiations weren't . . . I used to be 6-foot-3.

Fitzpatrick is less than six feet tall.

Yesterday's agreement was announced by Harvey B. Jacobson Jr., head of Jenifer Building Associates, at a morning board meeting of the PADC. The PADC approved the resolution brought by the developers, which spelled out the basic plans for the "marriage" between the WPA and Jenifer Building Associates, and which requires the PADC to provide $300,000 in historic preservation funds for the planned renovation of the building.

The WPA will be expected to contribute $400,000 to the renovation and will in turn become an equity partner, gaining a piece of the financial interest. A two-story addition, as well as the top three floors of the building, will go to office tenants. The remaining space, on the ground floor and in the basement, will be leased to retail and restaurant concerns.

Fitzpatrick was particularly excited about paving the road for other arts groups in the area. "What we have done," he said, "is to create an opportunity to maintain a viable, viable arts space downtown. We've done something of historic, national significance."

WPA Executive Director Jock Reynolds said the agreement would help give Washington "one of the richest downtown possibilities outside of New York City" for nonprofit arts groups.

Negotiations have been going on since the sale of building last December and have involved not only the WPA and Jenifer Building Associates but also the District of Columbia government and the PADC. The developers have a contract to buy the building for a reported $2.4 million, and the planned renovations will require an additional $5.6 million.

*The developers will appear before the PADC in September for final approval of a complete development plan. If okayed, renovations would begin immediately. At that time, the WPA would have to vacate the space for approximately one year but, Reynolds said, "We hope to be only a mere stone's throw away from where we are now.