Fairfax County has approved a controversial plan to purchase and renovate a run-down, 32-year-old apartment project from a Washington hotel magnate, and convert one-quarter of it into federally subsidized public housing.

The 512-unit housing project, Jefferson Village, is principally owned by Marshall B. Coyne, the proprietor of Washington's Madison Hotel. County housing authority officials said the 70-building, low- and moderate-income project, on 35 acres at Rte. 50 just across from Loehmann's shopping center, is deteriorating for lack of maintenance and needs electrical and landscaping improvements.

The county plan, passed by a vote of 6 to 2 late Monday night, calls for the Redevelopment and Housing Authority to purchase 119 units with $3.3 million in federal public housing funds. The remaining 393 units would be bought by the county for $10.4 million, to be financed by housing authority bonds.

The authority would then make the necessary heating, insulation and landscaping improvements on the property. The improvements would cost about $7 million and also be financed by authority bonds. Residents of Jefferson Village would have priority for the 119 public housing units and the housing authority would try to sell or rent the remaining 393 units, again giving first consideration to present residents.

"Almost everybody says the existing situation has to be improved," said Supervisor James M. Scott, who represents the area and was a strong supporter of the plan. "What we have before us is a proposal to improve the existing situation."

Opponents of the plan, led by County Board Chairman John F. Herrity, contended that the housing authority may not be able to sell or rent all the available units because of the depressed housing market, and that the county could be caught paying hundreds of thousands of dollars to finance any authority deficit caused by the project.

"The housing authority is not capable of dealing in the volatile real estate market in Fairfax County," Herrity said yesterday. "They are creating a junior HUD situation with themselves as the landlords. It's a major break in policy."

Authority director Walter B. Webdale acknowledged that the Jefferson Village purchase is by far the largest apartment complex that the authority would own, but that the authority already owns several smaller projects.

Herrity also charged Monday night that the $26,000 average purchase price per unit that the authority would pay under the plan would be $6,000 more than the two- and three-bedroom town houses are worth.

Authority officials said they must go ahead with the purchase to avoid a possible condominium conversion and to assure that the $3.3 million in public housing money pledged to Jefferson Village by HUD is not reclaimed because of delays.

"We've seen a tremendous conversion to condominiums in Northern Virginia displacing low-income people from their units," said Webdale. "We know that with this plan, we're going to have some relocation. But it'll be better than a private developer and 100 percent relocation. There are going to be relocations whether we're there or we're not there."

Webdale said the housing authority would financially assist all residents of Jefferson Village who would be relocated.

Dranesville Supervisor Nancy K. Falck joined Herrity in opposing the plan. She told the board she feared by the time the authority finished rehabilitating Jefferson Village, it would be too expensive for low- and moderate-income tenants, many of whom now are recent Asian and Hispanic immigrants.

Before the board vote, more than 20 people spoke about the project at a public hearing. All but seven of them favored the plan.

"The conservation plan for Jefferson Village is a godsend," said Malik Khan, cochairman of the Jefferson Village Task Force, an area citizens group. "It is absolutely the best thing for the aging, crumbling, going-to-pot Jefferson Village. In the final analysis, it is the best thing for the whole surrounding area."