The developers who five years ago promised to build a commercial and residential project on a major city-owned parcel on H Street NE should lose their rights to the land because the project has made almost no progress, the staff of Washington's urban renewal agency said yesterday.

The recommendation to the board of the D.C. Redevelopment Land Agency marks the latest setback in the city's 14-year effort to rebuild the riot-scarred H Street corridor. If the board accepts the staff suggestion, it will mark the sixth time in the last 18 months that a parcel in the area has been reclaimed by RLA because a developer failed to carry out his plans.

"We recognize it is a tough market but we want to have some movement and not a wait-and-see attitude . . . You must be able to show the board you are out there really plugging," said city housing director and RLA board member Robert L. Moore after a meeting between the board and the developers yesterday.

The board recognizes that it is "trying to complete a high-risk project in a bad economy," Moore said, but recent terminations and this latest threat to remove the developers were meant as "a clear signal" that RLA means for H Street developers to become more aggressive and creative.

George Thompson, one of the three partners who in 1976 won the rights to the largest single city parcel on H Street told the board yesterday that his project had been hampered by a combination of high interest rates, the difficulty in finding businessmen who wanted to locate along H Street, and the lack of parking in the area.

Thompson said that after two months of negotiations, officials of Dart Drug are very interested in putting a store on the five-acre parcel bounded by Eighth, 10th, G and H streets. Dart would be the major tenant in the development proposed by Farragut Partners, which Thompson said also would include a fast food restaurant, a handful of smaller stores and 96 town houses.

"Dart is committed to going with Farragut Partners," Robert Jeffers, the developers' attorney, told the board. However, he added that the drug company's interest is largely contingent on the city's lowering its five-year-old asking price for the land "to where they Dart Drug believe the project is feasible."

Jeffers said Dart could not pay the city's asking price of $5.95 per square foot. RLA officials did not respond directly to the suggestion that they should consider lowering the price for the land.

Dart president Herbert Haft could not be reached for comment.

Board members Stephen Klein and Judith Jenkins asked Jeffers and Thompson for letters or documents proving that Dart is ready to locate a store on the parcel. Jeffers and Thompson said they had none, but would supply them to the board. No Dart representatives were present at yesterday's meeting.

Klein, noting that the negotiations had only begun two months ago, said, "it appears that the only reason for this activity is the threat of termination." RLA first wrote the developers about the lack of progress about that time.

Three years ago the developers bought a portion of the site and began the first phase of the three-part project, erecting a high-rise building containing 204 federally subsidized apartments for the elderly on the G Street side of the property. That project was completed in 1980. There has been no activity on the site since then.

It has been standard procedure in the city's urban renewal projects not to conclude sales of parcels until work is ready to begin, often long after development rights are awarded.

Before the 1968 riots, H Street was the city's second major retail shopping area, but the civil disturbances damaged more than half the stores along the 13-block commercial strip.

After the riots the city bought up 15 parcels to assist the redevelopment of the area. In the intervening 14 years, federally subsidized housing has been built on six of the parcels. The other pieces of land, all slated for commercial development, have languished.

Moore said the success of Hechinger Mall, a 30-store shopping center that opened a year ago near the western end of H Street NE, should spur the redevelopment of the eastern end, where the Farragut Partners parcel is located.

The city obtained a $3.2 million federal grant to help build the $20 million Hechinger Mall, which includes the largest Safeway store on the East Coast. Officials have said they will seek a similar grant to aid the developers at the other end of H Street NE.