The U.S. Department of Housing and Urban Development has threatened to cut off $3.7 million in annual federal funds to Fairfax County because the county's board of supervisors has rejected plans to build a subsidized housing project in Springfield.

In a letter to Board Chairman John F. Herrity, Washington area HUD Director James E. Clay said the county board's 5-to-0 vote opposing the 100-unit Rolling Road Estates project last Monday "will seriously jeopardize continued (HUD) funding under the (community) block grant program."

The supervisors voted down the low and moderate-income development planned for a site on Rolling Road between the Newington Station and the Saratoga subdivision with only five members of the nine-member board present. Some supervisors opposed the project vigorously opposed by many residents, because they said it would create a high concentration of sunsidized housing in that area.

According to Clay's letter, 26,989 households are in need of housing assistance in the county. Currently, there are about 500 subsidized houses existing or under construction, a housing official said yesterday.

"In the absence of demonstrated affirmative action by the county to accomplish its (housing assistance plan) goals, the department will have to terminate, reduce or limit the availability of currently approved comminity development block grant funds . . . or reduce the next year's grant . . . or both, as appropriate," Clay said in his letter to Herrity.

During the past three years, the county has received $7.5 million in HUD community development block grant funds, which is used not only for construction of sunsidized housing but to fund such projects as water and sewer service expansion and construction of community centers.

"The loss of community development funds would be an absolute disaster," said Supervisor Alan Magazine (D-Mason), who voted against the project Monday.

Magazine, who said he isn't "totally surprised" by the HUD letter, said he plans to ask the supervisors at today's board meeting to reverse last week's decision on the project.

"To play Russian roulette with these funds is irresponsible and not in the best interest of Fairfax County," said Magazine.

Magazine said that, although he was in favor of the project, he had to vote with the majority against it in order to be permitted under law to ask for a reconsideration of the vote at a later meeting of the board.

Magazine said he is not only concerned about the HUD letter, but about a Justice Department probe of the county's minority employment practices as well. "Unless we take these things seriously, we're asking for federal intervention and a loss of local control," he said.

Supervisor Marie B. Travesky (R-Springfield), who introduced the measure to reject the subsidized housing project, said she is "very disturbed" by the "high handness" of the HUD letter. "It sounds like blackmail . . . I really don't want to jeopardize our block grants."

However, she said she still opposes the project.

Voting besides Travesky and Magazine to reject the project were Supervisors Audrey Moore (D-Annandale), John P. Schaccochis (R-Dranesville) and Joseph Alexander (D-Lee).

The Rolling Road Estates project, being built by a private devoloper, would include 70 moderate-income families and 30 low-income families. A maximum income of $10,500 would qualify for the low-income housing and a family of four with a maximum income of $16,400 would fall in the moderate-income bracket.

"I'm going to continue to oppose the Rolling Road Estates project," said Herrity.Herrity said he opposes the project because of the alleged "secretive" manner in which it was planned and because there already are 500 subsidized housing units planned within a two-mile radius of that area.

"I think this place will become the public housing capital of Fairfax County," Herrity said.