After more than seven months of squabbling between the federal government and Fairfax County over a proposed public housing project, the Department of Housing and Urban Development has told county officials they must either approve the project by June 27 or lose $3.8 million in federal grants.

In a letter county officials received late Friday, Washington area HUD director Thomas R. Hobbs said his department is deeply disturbed by the county's delay of the Rolling Road Estates Project. The 100-unit development is planned for the Springfield area and would house low-and moderate-income families.

Hobb's letter said that unless the county approves the site plan for Rolling Road by June 27 "we will be unable to approve the (county's) community block grant application." HUD grant money has been used in the past by the county to pay for senior citizens' centers, storm drainage systems and home improvement loans.

Board of Supervisors Chairman John F. Herrity, a bitter opponent of the Rolling Road project, claims it will "create a ghetto" in the Springfield, area. He said yesterday that HUD's action is "a naked abuse of federal power, a transgression into the rights of local government."

Supervisor Alan H. Magazine (D-Mason), who has voted for the project, said yesterday that the county has delayed the housing project because of "political pressure" that comes, in part, from "an element of the community motivated by racist instincts."

HUD has authority under federal law to withhold the community development block grant money if the agency judges the county to be unresonably delaying public housing goals.

Claiming such an unreasonable delay, Hobbs has threatened the cut since April. It was then that the Board of Supervisors voted to delay approval of the controversial housing project for 90 days for the result of a lawsuit filed by Herrity and two Springfield residents against the county planning commission. The suit asks the County Circuit Court to order the commission to review the Rolling Road project as a public facility. Project supporters say such a review would force public hearings and could possibly stop the project due to have begun this spring.

Hobb's letter called the board's delay for the suit "an extraordinacy reaction litigation of which the board is not a party."

HUD also threatened in the letter to cut off the funds unless the county revises its current policy of requiring a public hearing before the approval of any publicly assisted project for more than 50 homes.

The county's current policy, according to HUD and Supervisor James M. Scott (D-Providence), discriminates against private developers who receive federal money in house building projects.

Herrity vowed yesterday to fight to retain the federal funds and said that "any self-respecting elected official cannot bend to this blatant pressure from the federal government."

Herrity, a candidate in Tuesday's primary for the Republican nomination in Northern Virginia's 8th Congressional District, has argued that Rolling Road will bring heavy traffic and excessive public housing to an area that now has more than its share.

Supporters of the project, including the county's Housing and Community Development Agency, say the project will neither affect property values nor overload Springfield with public housing.