City housing officials have agreed to let the developers of the Metro Center urban renewal site drop plans for a large downtown hotel as part of the project in return for a pledge from the developers to pay several million dollars more for the coveted site in the heart of downtown.

The agreement was worked out "in concept" Monday night by city housing director Robert L. Moore and developers Oliver T. Carr and Theodore R. Hagans Jr.

Two weeks ago, the city's urban renewal agency had threatened to take the project away from Carr and Hagans if an agreement could not be reached on a price for the 3.7-acre site, on which the developers plan to build a $211 million office, hotel and department store complex. The new agreement appears to have blunted that threat.

City officials and the developers have been arguing since July over whether the land should be priced as if office buildings were going to be built on it or whether it should have a lower price to accommodate a department store and a hotel. Carr and Hagans had contended that hotel uses would not be economically feasible unless the land price "was substantially reduced."

Last month Moore, who is a member of the Redevelopment Land Agency's board, dropped the price some as an incentive for a department store in the project. (The Hecht Co. plans to relocate its store at Seventh and F streets NW to the Metro Center site, which is on the north side of G Street between 11th and 13th Streets.)

But Moore refused to make further reductions that would provide what the developers considered incentives for a hotel. Both sides indicated yesterday that they would attempt to reach an agreement in the next five days on a land price that would not involve construction of a hotel.

"We had been in a confrontational position and had not been listening to each other for some time," Carr told the urban renewal agency board yesterday. The agency owns the Metro Center land. "The gut issue," he said, "was over whether there should or should not be a hotel" on the site, Carr said.

In an 11-page letter to the board, Carr recited the history of the negotiations, blaming the city for all delays and saying that he and Hagans had repeatedly asked Moore to lower his asking price of $54 million to allow for a hotel.

On Monday afternoon, instead of lowering the price, Moore agreed to allow the developers to drop the hotel and build a high-rise office building in its place. The developers in turn agreed to pay a higher price, Carr said.

Carr's letter does not give the developers' asking price, but a source said it was about $37 million.

At the city's price of $54 million, the developers would pay $335 a square foot--the highest price paid thus far for city-owned land. The city sold a choice parcel of real estate across the street from Metro Center for $130 a square foot in December 1980, but since that time the city has been criticized for allegedly selling its land too cheaply. Privately owned land in downtown has sold for $500 to $600 a square foot.

Moore told the board yesterday that the two sides still must reach agreements on allowing small businessmen who were displaced by the redevelopment to return, on hiring minorities and on distributing 20 percent of the ownership in the project to individuals or community groups.

RLA chairman Nira Long criticized Moore and the housing department staff for not informing the board earlier that many issues were still left to be resolved.

"I'm disturbed that we are being told all of these issues today," Long said. She said she assumed that any price the city offered should have taken these other requirements into consideration.