EARLY LAST WEEK, Congress finally passed legislation clearing the way for the District of Columbia's housing finance agency to issue revenue bonds. Two days later, the House sent to the Senate another piece of legislation sharply restricting the way the funds raised by those bonds can be used. The conflict is more apparent than real, however, and it presents the City Council with an opportunity to work out a sound housing program -- one that does not invite the kinds of abuses that have become familiar in similar programs in other cities.

The first bill was purely technical in nature.The City Council had the authority to issue the bonds itself, but thanks to one of those quirks in the homerule charter, it could not delegate that authority to a local housing body, and this it needed to do in order to put that local body on an equal footing with similar housing bodies across the country.

The second, and more general, bill is aimed at limiting the way those local housing authorities spend the tax-exempt funds generated by the sale of bonds. In several cities, these bodies have used their bond-issuing power to give all or many home buyers a break on mortgage interest rates. The House bill would bar high income families from getting those breaks. In addition, the proceeds from the bond sales could not be used to finance more than 5 percent of the home mortgages in any community and, after two years, they could not be used for new single-family housing at all.

In setting up its new program, the District government should be guided by the principles of that second bill, whether or not it becomes law. The only legitimate purpose for which a community should use its ability to float tax-exempt housing bonds is to help those who cannot help themselves. By defining carefully what "low- and moderate-income housing" is, the council can set a pattern that other cities can fall back on if the Senate also passes, as it should, the more general limitations on how these tax-exempt bonds can be used.