In a letter to Mayor Walter E. Washington, the U.S. Department of Housing and Urban Development criticized the city housing department yesterday for its methods in trying to find permanent housing for more than 300 displaced families.

On Oct. 31, the city's Department of Housing and Community Development sent notices to vacate to families living in city-owned housing who had been displaced when their former homes were acquired for HUD-financed projects.

This week, the city sent what it called "clarifying" letters to the same tenants and told them they were not being evicted. Nevertheless, HUD said yesterday. "the timing and issuance of the vacate notices was ill-chosen and only served to compound and further aggravate a negative public perception of DHCD's relocation process."

HUD also notified the city that part of its new relocation policy is inflexible. The city had said that in the future, if displaced tenants reject three referrals to permanent housing, considered acceptable by the city, they may face eviction.

HUD told the city yesterday that such evictions should occur "only in extreme cases" and that until further notice the city must receive HUD's approval before evicting any displaced families.

HUD's criticisms were contained in a letter delivered to the District Building last night from area HUD director Terry Chisholm. The letter raised serious questions about the city's newly submitted relocation plan, and notified the city that it will receive an allocated $26 million in federal community development funds only after the city shows it has done everything "reasonable" to solve relocation problems.

The city had submitted its 64-page relocation plan Oct. 31 in response to an earlier criticism by HUD. In September, the federal agency gave the city only conditional approval of its proposed community development block grant program.

That program, which would provide $26 million for such things as social programs for the elderly and housing rehabilitation, was held up by HUD on two conditions. The city was told to submit an acceptable relocation plan and show four months of progress in carrying out such a plan.

In yesterday's letter, the area HUD office said that after extensive review it still had many questions about the plan and criticized part of it.

The release of the community development funds "will be based solely upon documented performance by the District which is deemed satisfactory by the Secretary (of HUD)," Chisholm wrote.

In its letter, HUD also said it strongly urges development of a special task force to deal with relocation.

The city's housing and community development director, Lorenzo W. Jacobs Jr., said last night that he had no comment about HUD's criticism because he had not received HUD's letter. "We were waiting all day to get it," Jacobs said.

Jacobs said the city still has "several million dollars" in community development block grant funds from last fiscal year. He also said that there are adequate funds to pay the salaries of his department's staff.

"We don't anticipate delays in our programs because of the relocation problems" as long as the problems HUD raised are "taken care of by January," Jacobs said.

Among concerns raised yesterday, HUD noted that the city's relocation plan listed an exact number of families the city expects to relocate within each three-month period from last October through next September. HUD countered that in many instances, the city will not be able to relocate the families because some housing projects proposed for the families will not be completed in time.

For example, Chisholm wrote, the city had said that by the end of this month, 89 families were to be relocated into housing that included six HUD-assisted developments with 349 apartments. HUD said its records show that 178 of those apartments will not be realy for occupancy by then.