After more than four years of studies, proposals, counter-proposals and bitter community conflict, a 1 1/2-acre site under the Southeast Freeway may soon be transformed into basketball and tennis courts, according to city officials.

When the freeway was built in 1965, residents dubbed it the "China wall." It separates the increasingly affluent Capitol Hill residential neighborhood from one of the largest public housing areas in the city. One span under the freeway - between 7th and 8th Streets and I Street and Virginia Avenue - was not filled in with earth or concrete. An extra $500,000 was spent on structural supports so that the space could be used, according to Federal Highway Administration officials.

Disagreement over how to use the space has persisted between the communities on either side of the freeway for several years. The city has now worked out a Solomon-like compromise, according to James Clark, director of planning for the D.C. Department of Transportation. Half the area, he said, would be devoted to basketball and tennis courts, the use favored by residents of the public housing area.

The other half would be in limbo until ANC 6B (the Capitol Hill advisory neighborhood commission) makes a decision about it," Clark said in a telephone interview.

The Department of Transportation would spend about $170,000 on the project, 90 per cent of which would be federal funds. Clark said the department is ready to go forward immediately on preparing the site. The Department of Recreation has requested $175,000 in the fiscal 1979 budget to equip it for basketball and tennis and to provide lighting, according to the D.C. budget office. If the city council approves the request, the courts may be a reality by the fall of 1978 - at least on half of the site.

In 1973, the Afro-American Bicentennial Corp. decided to make the "under the freeway" project a major effort. It saw development of the site as a means of achieving "community unity by 76."

Today, the freeway still divides the community, largely along the racial and economic lines. Controversy over use of the site has deepened that division, especially in the past few months, and brought into the open the resentment of poor blacks toward the restoration movement on Capitol Hill.

"Until this question is resolved, the people in the Arthur Capper housing project are angry - angry at the restoration movement that's taking over Capitol Hill," said Vincent de Forest, chairman of the Afro-American Bicentennial Corp. (ABC). De Forest said he saw the site as a way to demonstrate how space under freeways could be used to unify communities the freeways had divided. He had hoped to see a recreation center, a supermarket, a community meeting room or some other faculty on the site by 1976. To help determine what should occupy the space, the ABC, in 1973, obtained $89,000 in federal and District funds to conduct a feasibility study.

As part of the study, the ABC surveyed about 3,000 area residents. About 1,100 of them felt the site should be used for recreation - with a roller skating rink and a bowling alley as the most frequently mentioned preferences. Food stores, social service centers and day care facilities also scored high in the survey, but trailed behind recreation. The ABC developed plans for several uses of the area, but nothing happened - because no money was found to fund any of the plans.

Early this year, the circumstances combined to bring about the possibility of obtaining funds. To build a neighborhood service center, the Department of Housing and Community Development took over space formerly used as a basketball and tennis courts at the Arthur Capper housing project at 5th and K streets, SE. The Department of Recreation agreed to replace the facility wherever space could be found for it. According to Julius T. Dickerson, director of design and development, de Forest happened along at the propitious moment.

Dickerson and de Forest obtained a commitment from the D.C. transportation department to use federal funds to excavate, landscape and pave the freeway site and to provide security lighting. The recreation department then applied for funds made available to the city from the Economic Development Administration (EDFA) through the Public Works Employment Act of 1976.

In May, however, the D.C. budget office decided not to include the Southeast Freeway project in its request for the EDA funds.

The freeway project wasn't considered eligible because there was no clear-cut community support for it, said Terry Peel, head of the capital improvements section of the budget office. Peel said that a mailgram sent to the mayor by ANC 6B which represents Capitol Hill, cast doubt on whether the project had wide support. The mailgram asked city officials not to proceed with the project until the ANC had the opportunity to consider it.

Ray Gooch, chairman of the ANC, said that the mailgram was sent to clarify a possible misunderstanding. A resident of the area who was not an elected commissioner but who served as chairman of an ANC committee on recreation had written a letter endorsing the recreation proposal, according to Gooch. "We didn't want that letter to misrepresent our position. We wanted to hear all sides and then to vote on the issue."

"The city could have come out smelling like a lily," said Dickerson. "It wouldn't have cost a nickel in District funds."

Dickerson said that ANC 6B sabotaged the project because the Barracks Row merchants on Eighth Street, one of the streets bordering the disputed under-freeway space, "had hangups about kids playing around too close to the commercial activity."

"The real issue is whether there should be mised commercial and recreational use of the same street. The experience of Market Row and the adjacent swimming pool characterizes the failure of mixed use," wrote Barry Hayman, owner of the Barracks Row Flea Market, in a letter to the Hill, a neighborhood newspaper. The letter drew an angry response from Pete Ward, executive director of Friendship House, a social service agency, who wrote that critics of the recreational plan really object to the facilities being used by "children of the predominantly black and low-income families..."

"Barracks Row has been renewed, but this project started before they came to the community. I don't feel that they should stop it. The kids here feel they've had something taken away from them," said Vivian Williams, a community organizer for Friendship House who works with residents of the Arthur Capper housing project.

Barbara Thomas, president of the Barracks Row Merchants Association, said tha the group has not taken a position on the matter. She said that as the Eighth Street commercial corridor develops, more short-term parking would probably be needed. Thomas suggested that some sort of compromise between recreation and parking might be possible on the site.