The federal government has released to the District of Columbia $20 million in community development funds that had been withheld because of problems in relocating displaced persons.

The city government announced the release of the Department of housing and Urban Development funds, which is said are used for such purposes as housing renovation, low-interest renovation loans, innovative community development projects and home purchase assistance for low and moderate-income families.

Last Dec. 28, HUD notified city officials that $6 million of the city's total $26 million allocation of community development funds had been released.

HUD said the city would get the remaining $20 million only if it submitted acceptable reports outlining progress in finding housing for the families awaiting relocation.

The Families in question are those displaced by HUD-sponsored projects.

In a news release issued yesterday, the city said that in the first quarter of the fiscal year-actually, November, December and Junaury, according to a housing official-'78 cases were removed from the relocation work-load, or 126 percent of the quarterly goal of 62 households."

Most of the relocations were carried out in January, a top housing official said.

Robert L. Moore, the city's housing and community development director, said 55 percent of the relocations were to city-owned public housing, 28 percent to private market housing and 13 percent to privately owned hosing subsidized by the city.

James L. Woolfolk, the city's acting administrator for housing and business resources, said HUD had shifted last october to a new relocation requirement that was more difficult to meet.

The New requirement he said, called for relocation in any given year of not only those living where work would begin that year, but also of those living where work was expected to begin in laters years.

The city's first plan under the new requirements raised doubts at HUD. Late in December, a revised plan won acceptance and the initial $6 million was released.

Jim Clay, the city's deputy director of housing and community development, said the city has been given a year and half to complete relocation of all 314 families listed last October as displaced by HUD sponsored programs.

In another development, Mayor Marion Barry released yesterday copies of letters sent to the chairmen of the House and Senate Budget committees urging a reordering of Budget priorities to protect Washington and other urban areas.

Spelling out the prospective impact of President Carter's new budget on the District, he said job programs would be among the hardest hit, with 21,160 participants as against last year's 25,551.

In particular he said the summer young job program would be cut here by 33 percent from 13,500 to 9,093.

Barry also said proposed transportation fund cuts would delay Metro construction by four years and add to the eventual cost. School impact aid here would be cut by $4.5 million, causing the loss of 170 school staff members, and housing and welfare programs also would suffer, he said.