The controversy surrounding a planned development in Colesville is about to add another chapter to the long story of Montgomery County's housing shortage.

Next week, at a public meeting guaranteed to draw a crowd of vocal citizens, Lotto Construction Company will say yes or no to a plan that would mean construction of almost 100 low-income units and provide some hope for the 6,500 famlies and individuals on the waiting list for government-subsidized homes.

A yes from Lotto will be the go-ahead for the 48-unit Broadmore development on Randolph Road near Colesville Gardens, and will push forward the start of work on another, already-approved Lotto plan for 43 units in Germantown. When completed the proposed townhouses will be rented to families who earn less than $17,400 a year after taxes, and who will pay no more than one-quarter of their income in rent.

Despite the critical need for the housing, Lotto may very well say no. Shortly after the county Housing Opportunities Commission (HOC) hired the construction company, neighborhood groups in Colesville demanded that the contract include a clause that would compel Lotto to build middle-income single-family homes along with the low-income units. These homes, the citizens said, would maintain the quality of their neighborhoods.

HOC has guaranteed Lotto that it will buy the completed low-income homes with the $1,975,617 provided for that purpose by the Department of Housing and Urban Development (HUD). But the construction company would be on its own when it came to selling the middle-income houses, and Ray Lotto, president of the construction company, says, "It is difficult to sell single-family homes now because the market is very difficult."

The Greater Colesville Citizens Association charges that HOC tried "to thwart community involvement in the decision-making process" by giving residents only two weeks' notice before a hearing on the Broadmore plans. Some members of the association also have said they question whether Colesville is an appropriate site for public housing because the local school lacks the special education teachers "to meet the additional needs these (incoming) children might have."

An added complicationis the deadline against which HOC is working. The housing commission must show "considerable progress" toward construction of the Colesville and Germantown developments by Sept. 30 or lose the HUD funding. A HOC spokesman said that if Lotto does not agree to build the middle-income homes, the commission will drop the Broadmore plans because of its commitment to the citizens' association. The number of low-income units in the Germantown development would then be increased.

While Colesville residents, HOC and Lotto wrangle, people like Teri Hart enter their second and third years on the waiting list for subsidized housing.

Hart, a 22-year-old mother of one, has been living in a four-bedroom house with her mother and five sisters and brothers while she waits for housing. A resident of Montgomery County all her life, Hart is epileptic and cannot work. Her $244 monthly welfare payments do not go very far in the open housing market.

"Right now I don't want anything more than a place to live," Hart said. "It makes me feel very depressed, and at the housing office, they only give me the run around."

Hart has been waiting two years for housing, although as a disabled person she qualifies for priority consideration. The housing commission assigns points in the priority system to applicants who are veterans, disabled or have had their homes destroyed by government action.

"Sometimes I think suicide is the best thing for my baby and me," Hart said.

Persons even more severely disabled than Hart are unable to get off the waiting list and into the few developments in Montgomery County. One 61-year-old man, who asked that his name not be used, said his first priority is to find housing for himself and his 17-year-old son, who suffers from leukemia.

The man, who also has been waiting two years for housing, lives with his daughter and son-in-law and their two children. Every two weeks, the son undergoes chemotherapy, causing him to vomit for 24 hours. "We are all afraid that this is going to affect my daughter's young children. They ask what is going on -- it upsets them a great deal," he said.

Members of the Greater Colesville Citizens' Association stressed that they are not trying to keep low-income and disabled people out of their neighborhoods. But, they said, isolating them in a development will create segregation that may destroy their communities and stigmatize the public housing residents.

"I've come to the conclusion that to make public housing work, you have to integrate it into the neighborhood," said Dan Wilhelm, the incoming president of the citizens' association, whose property borders the site of the proposed new development. "If integration doesn't work, then there's frustration on the part of the renters. And if they're frustrated they'll take it out on the rest of the community in terms of violence, crime and vandalism."

Ed Wetzlar, another member of the association, said he fears that Broadmore residents will be labeled if there are no middle-income houses to make it a more varied neighborhood. "Kids at school will say, 'Those kids live on the other side of the track,'" he added.

Siding with Wilhelm and Wetzlar is Montgomery County Council Member Rose Crenca, who argued at a recent public hearing that HOC should use its federal funds to buy homes scattered through the community. HOC will pay Lotto approximately $83,000 per unit at Broadmore, the Coleville development, and $79,997 per unit at Germantown. "There certainly are enough homes on the market for that price," she said.

"If public housing renters areisolated, there is no way for neighbor to meet neighbor and for them to become friends," Crenca added.

However, HOC community relations officer Joyce Siegal said that a scattered homes program is impossible because HUD specified that its grant be used for developments.

Siegal also countered citizen claims that HOC is paying an "exorbitant" price for the Colesville site. While it is true that HOC willpay Lotto $118,000 an acre for land that cost $15,000 an acre two years ago, Siegal said the $15,000 price tag was the result of a "distress sale" and was too low.

Still, Wilhelm sid, the citizen group is "suspicious and the deal makes us uneasy as taxpayers." Wetzlar said, however, that the association is much more satisfied with HOC since it agreed to the clause concerning middle-income homes at Broadmore.

HOC, which has had the HUD funds since June, 1979, was in the process of negotiating with Lotto in late June this year when citizens protested the project at several public hearings and in correspondence with HOC Commissioner Harold L. Kramer.

After a stormy July 22 meeting, and although it was not bound by law to do so, HOC announced that it would meet citizen demands by telling Lotto he could only proceed with development if he agreed to develop single-family homes along with the townhouses.

But, as Siegal admitted, if Lotto doesn't agree to the clause, HOC has no choice but to give HUD back the money. "There is no way on earth we would have the time before Sept. 30 to advertise to find another contractor, have the site appraised and approved, have meetings with citizens and still be making considerable progress by the end of September," she said.

Earlier this week, Lotto met with HOC, but he said he won't know until the public hearing next Wednesday what he will decide. "I have to familiarize myself with the information," he said.

"We hope -- we all hope -- that he'll come up with a yes on the enforceable sections," Siegal said. "Or else there'll be a crunch on an already crunched situation."