The District of Columbia's decade old effort to house problem youths, adult offenders and others in group homes in the community rather than in large, isolated institutions is being threatened by the inner city real estate boom here.

Rapidly rising land values in neighborhoods like Columbia Heights, Mount Pleasant and Adams-Morgan close to 16th Street NW are making it increasingly expensive for the city to rent large Victorian houses in those areas for use as halfway houses and group homes.

The landlords who own the houses are benefiting from the increase in land values while forcing the city to cover more and more of their operating expenses.

To avoid losing their leases on the increasingly valuable houses, city officials have agreed to pay property tax increases for some landlords; been lenient with landlords who haven't maintained their houses properly and even used city money to pay for costly repairs and improvements in the houses.

What the city officials fear most is that landlords may sell the houses to high-income buyers, investors and speculators, like those who have been purchasing and renovating most of the rest of the homes in the surrounding neighborhoods.

"In some of these areas that are being rehabilitated, we're probably in the position of poor tenants quaking (before the landlords), afraid (that houses) will be sold to some rich newcomers," said Sam Starobin, head of the D.C. Department of General Services, which handles property leased or owned by the city. ". . . A house could be pulled out from under us, and then where would we go?"

During the same time that the neighborhoods near lower and middle 16th Street were undergoing a real estate revival, Washington joined a strong national trend to move as many wards of the city as possible out of institutions community residences.

A combination of zoning restrictions, citizen opposition in certain neighborhoods and a lack of sufficiently large old houses in other parts of the city forced government agencies to seek houses in the neighborhoods that contain three and four story Victorian-Style brick row houses and where the real estate boom has become most intense.

A check of city rental records showed that at least 30 halfway houses and group homes are located in the triangular wedge of developing real estate stretching for about two miles northeast from Dupont Circle through the 16th Street corridor to the vicinity of the so-called 14th Street riot corridor.

These group homes include halfway houses for prisoners, community health and baby clinics, youth homes emergenccy care shelters, drug clinics and detoxification center for alcoholics, among others.

Higher-income residents of some changing neighborhoods have been outraged when officials suggested placing group homes nearby. Capitol Hill residents, complained so bitterly when the Department of Human Resources located two youth group homes there that officials tend now to shy away from trying to put another one in the area.

DHR's youth group home program provides, perhaps, the best example of the frustrations the local real estate boom is causing for city officials.

While almost all youths in DHR's care were kept in institutions a decade ago, more than 200 are now housed in 16 group homes. These youths include delinquents, youths who are hard to control, others awaiting court action and some who are simply homeless.

Each home contains 12 to 15 youths and is run by counselors who are present around-the-clock. By expanding the youth group home program, the city has been able to close Maple Glen, a D.C. institution in Laurel for youths who are difficult to control.

Most of the 16 youth group homes are located in Columbia Heights or just north and south of that neighborhood on the periphery of the redeveloping Adams-Morgan and Mount Pleasant areas. Columbia Heights is still a generally rundown area with a high crime rate, even though real estate prices there are soaring.

DHR leases 13 of its youth group homes directly from landlords and staffs them DHR personnel. Three other homes are run by contractors who provide the personnel, equipment, food, housing and other necessities for a fee.

Although the cost is high - $52 a day for each child for the directly leased homes, and $25 a day for each child for the contractor-run homes, according to City Council figures - a special task force commissioned by the Council to study DHR recently reported that most of the homes "offer youths little more than a place to sleep."

Most of the homes, the report said, "are so poorly maintained that they threaten the health and safety of residents. Leaking roofs, peeling paint and faulty plumbing are common place. In at least two homes, the basement floods in rainstorm; in one home, the furnace is defective; and in another, the porch is resting on rotten timbers. Counselors and supervisory staff report that requests for repairs have not been headed."

Willian Barr, director of DHR's Social Rehabilitation Administration, which administers aid to youths through the Bureau of Youth Services, said, "It's bad to concentrate all (the homes) in the same area. That's like setting up institutions in the city."

However, Barr said most of the houses are located in and near Columbia Heights because "that's where we could get in without a lot of opposition . . . Recently, the whole effort to block us is intensified whenever we want to go into a neighborhood."

Barr said the opposition comes from both blacks and whites. "It used to be racial," he said. "Now it's class. They (citizens) don't want hoodlums, they talk about property values."

"We're constantly looking for property," Barr said. "We really are at the mercy of a landlord who has property on a given date and who has a certificate of occupancy" that permits him to rent the property to the city.

As a result, Barr said, landlords often don't maintain houses the way they should.

In the past, the city didn't have to put tax escalator clauses into leases. Now, according to Starobin and James Gray, of the DGS space management office, it has become the standard practice. "If we insure the landlord from unexpected increases then we can negotiate with him from the best initial price," said Starobin.

In past, DHR was able to talk landlords into making some renovations in houses so that they would be suitable for use as youth group homes. Now, however, DHR itself often pays for such renovations.

A reporter who recently visited three of the youth group homes observed rundown conditions in one and examples of extensive renovation work done at city expense in another. All three houses are located within a few blocks of one another in Columbia Heights, two of them next door to vacant derelict buildings.

John L. Wann Jr., a staff appraiser in DGS, said unrenovated shells in the area are now selling for $25,000, and renovated houses for as high as $65,000.

At 1300 Kenyon St. NW, which is leased by the city for $450 a month from landlord George Basiliko, portions of the front had holes in it and appeared to be generally deteriorated. DHR has leased this house for a decade.

Inside, John H. Brown, the administrator of the house, led the way into the basement, which was flooded with water that apparently has drained in from outside. Brown pointed out an old furnace in the basement and said, "We've had problems every weekend with the furnace . . . Last year the owner completely rebuilt the furnace, but it was patchwork."

While a reporter was in the house, a DHR truck pulled up in front and two DHR workmen began efforts to stop the flooding in the basement.

Carl Selsky, DHR's program director for youth group homes, said during the tour of the house that DHR is going to leave 1300 Kenyon because of "poor maintenance" by the landlord.

At a second home also owned by Basiliko, 3518 13th St. NW, the general condition of the building seemed better. However, the house administrator, Burnus Oates, said maintenance was done only on an emergency basis.

The sale history of 3518 13th St. illustrates what has happened to real estate values in the area. Basiliko paid $14,000 cash for the row house in 1971, city records show. He spent between $6,000 and $8,000 fixing it up, according to his own account. Then, records show, he leashed it to DHR for $250 a month.

If a city appraisal is accurate, the house by last summer was worth $63,500 - nearly three times what it had cost Basiliko to buy and improve it six years earlier. The appraisal report added that the neighborhood, located in the so-called 14th Street riot corridor, now "appears to be 'on the way up."'

The lease has been renewed through 1980 at an increased rent of $325 a month, which is still less than half of the $794 that the city would be allowed to pay by law. The governing law is determining rent is the federal economy act of 1932, which stipulates that annual rent will not exceed 15 percent of fair market value.

Gray said this rental figure was achieved through good bargaining on the part of his office. Basiliko has no tax escalation clause.

A third house visited by a reporter, 1459 Girard St. NW, which is comparable in size to 3518 13th St., was recently leased from National Aeronautics and Space Administration engineer John E. Malachi and his wife, Dora Jean. The city is paying the full rent allowed by law, $768.75 a month and the Malachis also have a tax escalator clause in the lease, requiring the city to pay any property tax increases after the first year of the lease.

Selsky pointed out that when Basiliko rented 1300 Kenyon to DHR a decade ago, he first made extensive renovations, adding a large storage area to the back of the house and completely landscaping the site, among other things.

"It's not all gravy," Basiliko said in a recent interview. "You've got to spend 6 to 8,000 dollars gettings it ready for them - fire proof the walls, heavy up the electrical service, fireproof the basement ceilings, add a fire alarm system. You've got to do that to most all these houses."

Basiliko, who in 1969 was the biggest single owner of slum properties in Washington, leases to DHR seven of the houses that it uses for youth group homes, including the two visited by a reporter.

All of these are located in or near Columbia Heights. In the same area, Basiliko leases a house to the city records, Basiliko is receiving $4,517 a month in rents from the city for these eight houses.

Barr said the department leases so many houses from Basiliko because "it just seems that he has a lot of available property." Years ago, city officials said, Basiliko put his houses into the shape DHR wanted, although there have been problems with maintenance of the homes.

The newly leased Malachi-owned house on Girard Street is a slightly different story. While Malachi put a good deal of money into getting this house into shape, officials said, the city itself paid at least $1,275 to install a stairway from the kitchen into the basement so youths could have easy access to it as a recreation area.

As he showed a reporter around the Girard Street house, Selsky pointed out other improvements that the city had made, including new doors and light switches.

When a reporter told Selsky that records showed that the city rather than the landlord and paid for these changes and additions, Selsky sid, "I don't think the department should do it. I think the owner should do stuff like this . . . . Damn right, the owner should do this sort of thing."

Malachi, who also owns another nearby house that he rents to DHR for a youth group home, said he dosen't think city's improvements at the Girard Street house will benefit him.

"It probably won't because it's a long-term lease, five years," he said. "What they improve probably won't be adventageous to me after they get through." CAPTION: Picture 1, This building at 3518 13th St. NW is used by the city for a youth group home. By Bob Burchette - The Washington Post; Picture 2, City has paid $450 a month for this house at 1300 Kenyon St. NW. Its administrator criticized its maintenance. By Bob Burchette - The Washington Post