he U.S. Department of Housing and Urban Development has threatened to withhold $26 million in community development frunds from the District of Columbia because of dissatisfaction with the city's program for relocating displaced families.
A cutoff of the funds would disrupt a long list of housing programs, ranging from rehabilitation and weatherproofing of old dwellings to day care for children and social programs for the elderly. Federally assisted construction programs, financed separately, would not be affected.
The threat of a cutoff was contained in a letter from HUD's Washington area director, Terry Chisholm, to Mayor Walter E. Washington, dated Sept. 22 and made public yesterday.
It was the first threat to D.C. in the four years that HUD has distributed community block grants to cities and urbanized counties across the nation.
Of 1,298 communities that qualified for such grants this year, 280 have received similar warnings, HUD reported. They included such big cities as Chicago, Philadelphia and Boston, and one Washington suburb, Fairfax County.
The biggest problem in the District, officials said, involves families displaced when their homes were acquired for HUD-financed rehabilitation or for demolition to make way for new housing projects.
Federal regulations say such families may be temporarily relocated for up to one year before permanent housing is found for them. Chisholm's letter said a HUD review "found evidence of noncompliance with applicable laws and regulations," including violations of the one-year limit.
The HUD warning threatened to spark a new controversy over the city's housing program, which became a focal issue in this year's mayoral campaign.
Marion Barry, the Democratic mayoral nominee, sharply attacked Mayor Washington for alleged shortcomings in housing and said he would remove Washington's appointee as housing director, Lorenzo W. Joacobs Jr.
Jacobs said yesterday that the HUD threat "won't have any practical effect on our operations because we have funds sufficient to carry us through November, and we will satisfy in early November the conditions that HUD has imposed for the release of additional funds."
In his warning letter, Chisholm said the city will get $6 million of the money if it submits a "satisfactory" relocation plan by next Wednesday. It will get the remaining $20 million only if it shows four months of progress in carrying out that plan.
As it has in past years, HUD told the city that it is holding back another $6.5 million from its community development grant to repay federal loans the city received in past years to finance urban renewal projects.
In his letter to Mayor Washington, Chisholm said HUD had "previously expressed our concern about the amount (of money) being used for administration. While we recognize the District's past efforts to reduce these expenditures," he continued, "we urge you to continue actions to further reduce the cost . . ."
Chisholm said his office also was concerned about seven other problem areas - public housing modernization, rehabilitation or urban renewal properties, site improvements, rehabilitation financing, assistance to minority contractors, public services and planning activities.
He said HUD would deal with these problem areas in greater detail.
Stephen Johnston, a spokesman for the city's housing department, said staff officials have met with HUD representatives to discuss problems in these areas, and already are moving to correct them.
James L. Fletcher, director of community planning and development in the area HUD office, said a complain, about the way the District ran its relocation program was filed in August by Neighborhood Legal Services, a public-interest law firm.
Fletcher said his office already had identified some of the problems cited in the complaint, and determined the course of action disclosed yesterday.
Elbert Ransom, who oversees relocation for the D.C. housing department, said 118 families currently are living in temporary relocation housing.
Ransom said he did not know how many were housed in violation of the one-year rule. At a hearing last May before the D.C. City Council's housing committee, he testified that "at least 75 or 80" families had lived in such housing for at least two years.
The most widespread complaint is that the housing is decrepit and dangerous.Jacobs said yesterday, however, that some of the housing is better and cheaper than the families could otherwise get, and many are unwilling to move.
"We have been too kind-hearted in pursuing the eviction of these people from temporary quarters," Jacobs said.
Chisholm's letter to the mayor came to light at a news conference called by Nadine P. Winter (D-Ward 6), head of the City Council's housing committee and a candidate for reelection. Winter insisted her motives were non-political.
"The kind of action which HUD is proposing in its letter should have been taken years ago by the mayor of this city, and by the (D.C.) Department of Housing and Community Development," he said.
As she has in the past, Winter called for the mayor to fire Jacobs immediately and not wait for Barry to try to remove him. Neither the mayor's press office nor Jacobs would comment.
Community block grants, the funds involved in the dispute, were introduced four years ago after Congress decided to consolidate the funding for a wide variety of programs sponsored by HUD. The idea was that cities and urbanized counties could best determine their own priorities.
Under the Carter administration, HUD has insisted that recipients stress programs designed to assist lower-and middle-income families.
That policy led HUD last year to threaten affluent Fairfax County with the loss of $3.8 million in development funds if the Board of Supervisors persisted in blocking a proposed subsidized housing project.Rolling Road Estates, in the Springfield area. Last June, the board reversed itself and approved the project by a vote of 6 to 3.
Some Michigan communities withdrew their applications for HUD funds rather than obey the department's directives. At least one community in Connecticut lost funds when it defied a warning, a HUD spokesman said.