D.C. Social Services Commissioner Marjorie Hall Ellis said yesterday that the city plans to end the policy that created a nomadic existence for homeless families sheltered at a motel that had refused to keep them during the day.

Since January, families housed at the Budget Motor Inn, 1615 New York Ave. NE, had been forced by the motel's policy to pack their belongings each morning, leave by 7:30 a.m. and stay away until about 7:30 p.m.

The District government took the families to and from the Pitts Motor Inn, another shelter, where the families ate but could not sleep because the hotel is filled to capacity.

Beginning today, Ellis said, families will not have to leave the Budget Motor Inn. She said the new policy was established after she informed the Budget management that the hotel "cannot simply put them {homeless families} out during the day but must treat them like any other guests who did not plan to check out."

Ellis' new agreement with the Budget came after the Neighborhood Legal Services program filed a lawsuit on behalf of three homeless families who alleged that the city was engaging in an "arbitrary practice" by providing 24-hour shelter to other homeless families while allowing the Budget to force families to leave during the day.

The city pays the Budget $50 a day per room to house families.

Yesterday, the plaintiffs in the lawsuit and their attorney, Richard Gladstein, argued during a court hearing for a temporary restraining order to compel the District to provide 24-hour shelter to all families during the winter months.

Ellis said the court gave the city until tomorrow to negotiate a settlement. She said the main unresolved issue is whether the city is under any obligation to provide all homeless families with 24-hour shelter.

The class action lawsuit alleged that the narrow, crowded hallway of the Pitts was the the only place that most of about 60 families not sheltered during the day have to go. The suit maintained that such accommodations have been "highly unhealthy" and "demeaning" to the families. "Many of the families have contracted infectious diseases from other homeless families forced to remain in the hallway or out on the street," the lawsuit alleged. "Fights often break out due to the stress, fatigue and desperation suffered by families as a result of the environment."

Jerry Holbrook, general manager for the Budget, said this month that he would not consider keeping the families all day because the children have no place to play and he feared that property would be damaged.

He could not be reached for comment yesterday.

Homeless families housed at the Pitts and the Capitol City Inn, the city's primary shelter hotels for families during the past two years, provide families with around-the-clock shelter.

Susanne Sinclair-Smith, an attorney for the Washington Legal Clinic for the Homeless, said that although the city is willing to settle the issues in connection with the Budget families, a larger question remains.

"My concern is that they will deal with these families and months down the line they won't continue to consider it {24-hour shelter} a priority," Sinclair-Smith said.