The D.C. City Council approved legislation last night to change the composition of the District's Housing Finance Agency board and to reaffirm the council's controversial decision to approve all of the agency's projects prior to issuance of mortgage revenue bonds.

Until January, the finance agency had sole authority to approve housing projects and issue tax-exempt bonds to finance them.

Two weeks ago, the council affirmed its intent to review all projects by overriding the mayor's veto of legislation to limit the authority of the finance agency.

Six members of the nine-member finance agency board offered the mayor their resignations in the wake of the override.

These resignations are effective tomorrow. The legislation approved last night is designed to ensure continuation of the agency's activities by guaranteeing the presence of a quorum of the board, said Council member Charlene Drew Jarvis (D-Ward 4), who introduced the legislation.

The finance agency is a quasi-independent body that has the power to sell tax-exempt bonds and use the proceeds to make low-interest funds available for residential mortgage and construction loans.

The agency was formed six years ago to alleviate a shortage of housing for low- and moderate-income residents.

At last night's meeting, the council adopted two identical pieces of legislation -- an emergency bill effective immediately, and temporary legislation that would go into effect 90 days later, provided it wins a second favorable action by the council, approval of the mayor and survives a 30-day congressional review period.

Meanwhile, the council plans to adopt permanent legislation on the subject.

The measures establish an interim finance agency board that would serve for 45 days and include the three ex-officio executive branch representatives, who did not offer their resignations, and two council members, Chairman David A. Clarke and Jarvis, chairman of the council's Housing Committee.

The measures also reduced the size of the board from nine members -- six public members and three government members -- to five public members, to be appointed by the mayor with the council's advice and consent.

The council also must approve the person the board selects as the agency's executive director.

The legislation reflected a daylong effort to reach a compromise between the mayor and council members.

In seeking the compromise, the council clearly retained a role in approving all housing projects that come before the finance agency.

The legislation that was adopted establishes a procedure for the council review of housing projects.

The agency would be required to submit details of all proposals to the council, which would have 45 days to approve or disapprove. If the council disapproved, the agency would be given an opportunity to make revisions before resubmitting the project to the council.

But Jarvis acknowledged that after the council approves a project, it could be substantially changed without having to be sent back to the council.

City Council members had complained that the agency had failed to address the city's housing crisis for low- and moderate-income residents and had not established housing priorities.

Jarvis said the interim board should be able to put a number of policies in place before the permanent board is formed.