To preserve affordable housing in a rapidly gentrifying area 10 blocks north of the U.S. Capitol, D.C. Mayor Anthony A. Williams is proposing to spend $558 million, a sum that exceeds what the city has promised to spend on a new ballpark.

The money -- much of which would come from private investors -- would pay for the first installment of the mayor's New Communities initiative, which seeks to harness escalating property values in the District by replacing blocks of concentrated poverty with townhouses and apartments attractive to middle- and upper-income buyers.

Under the plan, profits from those units would help subsidize homes for working-class families and improve the lives of the poor families who live there.

Williams (D) is proposing to launch the initiative in the Northwest neighborhood that includes the Sursum Corda housing cooperative, a 28-acre site loosely bounded by New Jersey and New York avenues and North Capitol and K streets. The neighborhood now has a half-dozen federally subsidized apartment buildings and housing complexes, but it is surrounded by high-dollar commercial development, luxury condominiums and renovated townhouses selling for $350,000 and up.

To prevent the area's very poor residents from being driven out, Williams proposes to tear down Sursum Corda, Temple Courts and the apartments attached to the now-closed Golden Rule supermarket and replace them with 1,698 new units. About 300 units would take the form of low-rise apartments and townhouses, and the rest would be in high-rise buildings.

More than 500 units would be heavily subsidized and reserved for families who now live in the neighborhood. Another 591 would be priced as workforce housing for teachers, police officers and other middle-income buyers. And 587 units would be offered at market rate.

The redevelopment plan also calls for a new public school for kindergarten through grade 8 to replace Walker-Jones Elementary and R.H. Terrell Junior High, a new health clinic and library to replace shabby and outdated ones, a new recreation center with a swimming pool, a new playground and dozens of spots to house neighborhood-oriented retail.

City Administrator Robert C. Bobb and Stanley Jackson, Williams's deputy mayor for economic development, plan to present the proposal today to the D.C. Council's Committee on Economic Development. According to a document distributed to council members, they will ask the committee to approve a $558 million redevelopment plan.

Of that sum, about $300 million would come from developers and other investors, whose involvement would qualify them for federal tax credits. That group could include KSI Services Inc., one of the region's largest residential developers, which recently negotiated a deal with Sursum Corda residents to redevelop their 5.8-acre property. City officials expect KSI to cooperate with the goals of the New Communities initiative because the company is counting on $40 million in government subsidies for the project, as well as city approval for zoning changes.

An additional $55 million would come from the sale of 154 market-rate condominiums in the neighborhood; $85 million would be generated by leasing city-owned land. And the budget includes $10 million from the federal government, though Jackson said the city has yet to discuss the project with the U.S. Department of Housing and Urban Development.

Finally, the plan calls for the city to dedicate $6 million a year for 15 years from its Housing Production Trust Fund to finance $110 million in bonds. But Jackson said the city might well need "an additional chunk of housing production dollars" to achieve its goal of replacing every low-income unit.

If the initiative works in the area around Sursum Corda, the city hopes to expand it to eight other sites, starting with Barry Farm and Lincoln Heights. Because those complexes are city-owned, Jackson said, their price tags are likely to be much smaller.

Council Chairman Linda W. Cropp (D) said the council has many questions about the proposal, including "where some of that funding is coming from." But "the good part," she said, "is they're looking at an approach to provide affordable housing and market-rate housing in these communities."

Mayor Williams's first target is the Northwest neighborhood with the Sursum Corda complex.