It started in 1968, an ambitious federal effort to help low-income persons own their homes. Thirteen years later, the Turnkey III public housing homeownership program is the object of an experimental effort to make the program work better.

Run by local public housing authorities, Turnkey III allows prospective low-income buyers to live in the dwellings they plan to purchase before assuming title from the housing authority. During that time, which can be as long as 30 years, the prospective buyers are responsible for maintaining their homes which may be apartments, town houses or detached, single-family houses.

The program takes its name from the turnkey method of public housing construction, whereby a private firm builds the housing and sells it to the housing authority.

The authority maintains a special account for each buyer and deposits in it money that would be spent for maintenance, thus allowing the occupants to accumulate "sweat equity" in the property.

The buyer-resident also pays into the account monthly an amount based on 20 or 25 percent of household income. Aid from the U.S. Department of Housing and Urban Development pays the difference between the monthly payments and total housing costs.

The program was designed to aid low-income persons whose wages would gradually increase to a level where they could pay off their share of the project's captital debt, with the help of a private loan if necessary. When the residents can afford to make payments equal to or exceeding housing costs, the HUD subsidy stops and the occupant is expected to take title or move out.

Turnkey III has not resulted in as many homeowners as HUD would have likes, however. Program activity dropped off in 1973, during then-President Nixon's moratorium on housing subsidies.

The program has been criticized by congressional and HUD auditors, who cited a high turnover rate in the housing.

Privately HUD officials running the program say many participants didn't understand the difference between the homeownership project and conventional renting.

Sine the moratorium, Turnkey III construction has been limited to individual projects approved by HUD headquarters.

Misunderstanding of Turnkey III rules and goals is also cited as a main source of problems by a group of North Carolina housing authorities who are developing a modified Turnkey III for 140 dwellings.

Their experimental program, which HUD has substantially approved, is directed toward the problems of screening buyers and housing authority counseling of participants.

The small North Carolina project, if successful, could serve as a model for the rest of the country.

Montgomery County is one Washington area government that would like to see Turnkey III revised, said Joyce Siegel, community relations director for the county's Housing Opportunities Commission.

The county's Turnkey III program covers 76 dwellings, 45 of which have completed the transition to occupant ownership. Some of the units were purchased after less than two years in the project, she said.

The program is a "marvelous opportunity for people, for real upward mobility," Siegel added. "We're really interested in seeing it revised."

Fairfax County's experience with Turnkey III has been far less positive. "It just doesn't work for us," said Jeff Kidwell, development officer with the county's redevelopment and housing authority.

Besides the familiar problems involved in making sure the participants are prepared for homeownership, Kidwell cited the difficulty of turnkey development in general. "We can't get the developer to come in with a site," he said.

Fairfax County has another strategy to encourage low-income homeownership in cooperative public housing. An HUD program to subsidizes residents' monthly costs in privately built coops, but Fairfax housing authorities could be among the first to apply this model to a publicly built project.

The co-op approach is being considered for two or three projects in the county, of which two still await final HUD approval. The other, a 138-apartment complex at Seven Corners, was bought by the authority from an owner who had planned to convert it to condominiums. Substantial rehabilitation work is to begin this weekend, Kidwell said.

Meanwhile, the North Carolina program will attempt to redesign the Turnkey III concept. One of the first steps will be the use of single family detached houses without the common areas that can make conventional Turnkey III projects seem like apartments. The four participating housing authorities also hope to avoid the complication of undivided property interests in selling the houses.

The screening of resident buyers will be more strict than HUD requires under the North Carolina approach, which sets a minimum $500 cash "down payment" as a condition of occupancy and stipulates that a buyer must be able to pay full monthly operating expenses, plus utilities, with 25 percent of monthly family income.

Particpants in the North Carolina program will be encouraged to take title as early as possible after an initial two to five-year period, during which they build up accounts with the authority. An unusual feature of the experimental program is that if a resident moves out before acquiring title, the payment can forfeit all monthly payments.