Federal housing officials have dropped a seven-month effort to resolve a longstanding dispute between Alexandria officials and some residents of Parker-Gray, who claim the city has exercised discriminatory housing policies in that traditionally black neighborhood.

In a letter to Alexandria Mayor James P. Moran Jr. dated Dec. 4, Raymond Solecki, director of the Office of Fair Housing and Equal Opportunity in the Department of Housing and Urban Development, said HUD officials were "administratively closing the case . . . as an unsuccessful conciliation."

Solecki said the Parker-Gray residents, who filed the claim of discrimination against the city with HUD in 1985, are "free to seek judicial relief."

Parker-Gray resident Eudora Lyles, a member of the 16th Census Tract Crisis Committee, which filed the charges, declined to comment yesterday on HUD's action. Attorneys for the residents could not be reached yesterday for comment.

"I assume the whole thing will be forgotten now," said Moran, who called the charges an "ironic twist of fate {given that Alexandria} is one of the suburban jurisdictions that has done the most for housing for minority residents."

The dispute involves changes that stem from Alexandria's development boom during the last decade, which has seen many areas of the city become "gentrified" and in the process displaced some long-time residents.

Parker-Gray, which sits between the Braddock Road Metro stop and Old Town, is one of the city's oldest black neighborhoods. In recent years, some of its residents have objected to changes brought by development and by city decisions, including:The selection of the adjacent Braddock Road Metro site, which increased the value of real estate in the neighborhood and led to higher property taxes. The city's sanctioning of the Virginia highway department's expansion of Rte. 1, which passes through the neighborhood. The 1979 closing of the predominantly black Parker-Gray High School. The 1984 decision by the City Council to name Parker-Gray as a special preservation district, which residents say also pushed up property taxes.

However, other residents of Parker-Gray supported the preservation district, which they saw as the only way to preserve some of the neighborhood's historical character and curb pressures from developers to put high-density commercial properties near the new Metro stop.

HUD officials initially found no merit to the discrimination charges filed by the 16th Census group in 1985. But in late 1986, they reversed that decision and urged city officials to sit down with members of the committee in an attempt to resolve their differences.

"We were not finding for either party," said HUD spokesman Michael Zerega. "We were simply there to offer our offices to discuss their concerns."

Last May, city officials met in a day-long session in Washington with members of the Crisis Committee, under the sponsorship of HUD.

Later, HUD sent the city a draft agreement. It was rejected because of "outrageous" demands that would have involved "turning over functions of government to nonelected people," said one city source who declined to be identified.