The District of Columbia has agreed to give public housing tenants who pay for their own utilities larger reductions in the amount of rent they pay, according to settlement papers filed this week in U.S. District Court here.

The settlement affects about 3,800 households, or 31 percent of all public housing tenants. Since federal and D.C. law limits to 25 percent of their monthly income the amount these tenants can pay for their rent and utilities, the city reduces their rents based on the tenants' utility costs.

However, attorneys from the Neighborhood Legal Services Program, who represented the public housing tenants in the class-action suit, argued that most of the tenants were being forced to pay more than 25 percent of their income because the city's rent reductions had not kept pace with increases in utility rates.

The tenants argued in court papers that the city had failed to update the rent Reductions since 1979 and that since then utility rates doubled, causing them "serious financial hardship."

Under the settlement, the reduction for utilities for a tenant living in a recently built four-bedroom town house, for example, will increase from $61 to $117, according to court papers.

The reduction for utilities for a two-bedroom apartment would go from $18 to $41.

The tenants are also claiming that because the amounts allowed for utilities were too low over the last three years, they have overpaid the city in rent. The suit also seeks to have the city return about $2 million in back rent, but that issue is still pending.

The tenants affected by the settlement live in such projects as the Carrollsburg Apartments, Barry Farms, East Capitol Dwellings and Lincoln Heights.