The Department of Housing and Urban Development has proposed a completely new system for subsidizing the nation's 1.3 million public housing units that would shrink federal spending for daily upkeep and major repairs.

HUD officials say that the new system would replace the current subsidy methods that reward inefficiency and high costs for public housing improvements. Housing advocates opposed to the new system say that it is simply another Reagan administration budget-cutting scheme designed to harm poor people.

Thety-one percent of the public housing authorities containing a total of nearly 700,000 units theoretically would be entitled to larger subsidies under the new program, although they actually would not get this windfall. They would continue to receive the current subsidy amount. But those authorities entitled to less under the new formula in fact would receive the lower amount, according to recent testimony by HUD Assistant Secretary Philip Abrams before a Senate subcommittee.

HUD officials generally agree with housing advocates that public housing authorities in big northern cities generally would lose money under the new system, and those authorities in the South and West generally would come out winners. Authorities in cities with rent control certainly would be harmed under the new formula.

The housing subcommittee in the House of Representatives, which is controlled by Democrats, already has rejected the HUD proposal as part of its budget resolution. The Republican-controlled Senate panel is expected to vote on it later this month.

"The biggest thing we are trying to correct is to put some incentives to manage correctly," said W. Calvert Brand, Abrams' deputy. "There is no incentive to manage effectively" under the current system. "We got into a habit where the system was driven by whatever the costs were, and the subsidy was increased to cover the costs."

Brand said "this reform of the public housing system is not a budget-cutting exercise."

Housing advocates strenuously disagree.

"The heart of our opp HUD proposals call for scrapping the current system of two separate subsidies--one for day-to-day operating expenses based on a complicated formula of historical costs and a second for rehabilitation and renovation expenses--with one lump-sum payment that would be figured on the lowest 40 percent of the rents found in privately owned older housing in a metropolitian area.

The nation's public housing is controlled and managed by local public housing authorities that receive hefty federal subsidies. Under the current system, HUD is spending $1.3 billion in operating subsidies and $2.5 billion in modernization funds this fiscal year. The modernization budget is unusually high this year because of a special HUD program. That budget stood at $1.8 billion last fiscal year.

Under the proposed fair market rent system, HUD would spend $1.6 billion for essential operating expenses and $1.4 billion in modernization. But under the new system, the government would spend $4.5 billion over the next three years compared with $4.8 billion under the old system for operating subsidies.

Modernization funds under the new system would decline from $1.4 billion to $350 million by fiscal 1987, when they would be abolished, according to HUD figures. There are no HUD estimates for modernization spending under the present formula.

Nineosition to the administration's proposal is our profound conviction that operating and maintaining public housing is not comparable to operating and maintaining private-market housing," said Robert L. Maffin, executive director of the National Association of Housing and Redevelopment Officials, in testimony before a Senate subcommittee on the HUD proposal.

Maffin and other housing advocates say public housing operating costs are pushed up by increased vandalism, security and maintenance. Also, social service costs are incurred because public housing tenants are predominately single mothers with two to four children or elderly women. Private housing does not incur these extra costs or provide these social services, the housing advocates say.

In addition, the new program "ties public housing to the same system that destroyed low-income, privately owned housing," said Gordon Cavanaugh, lawyer for the Council of Large Public Housing Authorities. "They are tying public housing to the minimum habitable privately owned unit."

Ray Struyk of the Urban Institute, a recognized expert in public housing financing who had recommended a lump-sum-payments program, also was critical of the new HUD proposal.

Struyk said pegging the subsidy to the 40th percentile of private markets rents was "too low," and $3.45 billion spent on modernization over the next four years was insufficient to bring all public housing up to minimal standards before the program is abolished.

He added that HUD's decision to prohibit public housing authorities from receiving more money under the new system than they received under the old "appears to be a frankly expedient way to" cut costs.

Cavanaugh said his group's survey of 43 large and medium-sized authorities, containing nearly 400,000 units, showed that all of them would lose between 24 and 62 percent of their subsidy funds under the new system.

Brand said that the budget proposal calls for shrinking the modernization funds and then abolishing them entirely because this money is paying for new heating systems and new insulation, big-ticket items that are only purchased once in several years.

The nation's public housing is controlled and managed by local public housing authorities that recieve hefty federal subsidies. Under the current system, HUD is spending $1.3 billion in operating subsidies and $2.5 billion in modernization funds this fiscal year. The modernization budget is unusually high this year because of a special HUD program. That budget stood at $1.8 billion last fiscal year.

Under the proposed fair market rent system, HUD would spend $1.6 billion for essential operating expenses and $1.4 billion in modernization. But under the new system, the government would spend $4.5 billion over the next three years compared with $4.8 billion under the old system for operating subsidies.

Modernization funds under the new system would decline from $1.4 billion to $350 million by fiscal 1987, when they would be abolished, according to HUD figures. There are no JUD estimates for modernization spending under the present formula.