Like many of the District's Reed-Cooke residents, Ed Jackson welcomes the rebirth of his neighborhood, the eastern portion of the Adams-Morgan area that is fast becoming one of the city's prime development spots.

Over the years, many Reed-Cooke streets, with their decaying apartment buildings and dilapidated warehouses, have come to define urban blight. Even during the past five years when Adams-Morgan has been discovered as a trendy place to live and do business in, the Reed-Cooke area has been relatively untouched.

But with much of Adams-Morgan now saturated with development, especially the area west of 18th Street NW, land investors are discovering the money-making potential of Reed-Cooke. It is an area of 10 city blocks bounded by 16th Street NW on the east, 18th Street on the west, Florida Avenue on the south and Columbia Road on the north. About 4,000 people live in the neighborhood, mostly in town houses and mid- to-high-rise apartments.

For Jackson, however, there are drawbacks associated with the redevelopment of the area.

"Low- and moderate-income people are quickly losing ground here because of the development," said Jackson, who is chairman of the Adams-Morgan Community Development Corp. and the Advisory Neighborhood Commission representative for much of Reed-Cooke.

Replacing many of those low-income residents are more upscale persons who have paid as much as $200,000 to live in renovated apartment buildings that once housed poor families -- a phenomenon that Jackson and many others are worried about.

"We want to try to maintain the diversity of our neighborhood," said Jackson, a Reed-Cooke resident for 27 years.

It is that diversity that makes Reed-Cooke unique to the city, residents said.

The neighborhood, which saw its first building boom in the early 1900s with the introduction of the streetcar line, is named for Marie Reed, a church, educational and community leader who died in the late 1970s, and Henry D. Cooke, a banker and lawyer who was the District's first governor during the early 1870s.

The neighborhood has twice as many black as white residents and about one-ninth of its population is Hispanic, according to city demographic records.

The area's housing, from subsidized apartments to high-priced condominiums, is as diverse as its people. Current housing on the market ranges from a $40,000 town house on Ontario Road to a $200,000 apartment on Champlain Street to a $3 million mansion on 16th Street.

The area also is home to several commercial and industrial buildings, including auto shops, printing plants, small office buildings and numerous large warehouses.

With more upscale shops and restaurants opening along 18th Street and Columbia Road, the commercial heart of Adams-Morgan, neighborhood leaders said commercial development of nearby Reed-Cooke is inevitable.

Many residents fear that the area's unusual mix of zoning that has allowed warehouses to be built next to row houses will be taken advantage of by developers who will demolish housing to make way for commercial structures that produce greater revenue.

"Tenants are an endangered species in any improving neighborhood," said Andrew Wechsler, vice president of RAM: the Reed-Cooke Neighborhood Organization.

Wechsler's group is one of the neighborhood organizations trying to rezone sections of Reed-Cooke to allow for additional residential construction. Currently, zoning along lower Champlain Street and Kalorama Road prevents new residential buildings from being constructed, even though housing is now mixed with commercial structures.

Neighborhood organizations petitioned the District's Zoning Commission in 1980 to rezone sections of Reed-Cooke to slow commercial development of the neighborhood and save low-income housing.

Six years later, the case still has not been heard, and a city planning official said a decision on the rezoning probably will not be made until after completion of the District's ward planning process later this year.

But neighborhood leaders said they cannot wait for completion of the ward planning and are pushing hard to prevent demolition of any residential building in the commercial zone.

As a result, D.C. City Council member Frank Smith Jr. (D-Ward 1) is considering introducing legislation that would place a moratorium on housing demolition until completion of the ward plans or until consideration of the original rezoning case filed by the residents, according to Ezekiel Mobley Jr., the councilman's staff director.

Neighborhood groups claim their case is further strengthened by the District's comprehensive plan, which identified Reed-Cooke as a "special treatment area" for planning purposes that should "protect current housing in the area and provide for the development of new housing."

Edward Morgan, one of the largest private Reed-Cooke landholders, said he is against any rezoning changes. The zoning "should be left alone. If it ain't broke, don't fix it," said Morgan, who owns numerous commercial ventures in the area, including two restaurants on 18th Street, a 45,000-foot parking lot between 18th and Champlain streets, two large parcels on Champlain Street and scattered properties along Kalorama Road.

Morgan, who began buying up property in 1961 when land prices were running at $3 per square foot, said that some of his property was recently appraised at $40 per foot.

"I'm really not a speculator. . . . I'm a hard seller. I only sell when I'm desperate," Morgan said. He added that he has no short-term plans to develop his properties in the western Reed-Cooke neighborhood, which currently comprises mostly parking lots, commercial structures and a service station.

Morgan's immediate development plans are geared to a massive renovation project in eastern Reed-Cooke that will turn an old roller rink at 1649 Kalorama Rd. into one of the nation's largest movie, television and recording studios.

The renovation of the 120,000-square-foot, 40-year-old building, which will cost more than $10 million, is scheduled to be completed in a year. It will house an acre-size motion picture stage, several smaller studios, editing facilities and numerous support businesses.

William Moore, a partner with Techniarts, a Silver Spring video company that is developing the project with Morgan, said the huge studio will attract more film productions to Washington and boost the local movie industry.

One of the more active developers in the Reed-Cooke area is the Champlain Development Group, which has been praised by many neighborhood leaders for its recent renovation of a five-story apartment building at 2370 Champlain St.

The development firm, taking advantage of the street's unusual mixed-used zoning, converted the 60-year-old structure into four floors of cooperative apartments and one floor of office use. Ten of the 11 apartments recently were sold for between $54,000 and $200,000, and a defense consulting company will be moving 30 of its employes to the first floor of the building within two weeks.

The building, purchased in 1977 for $175,000, was recently appraised at $2.3 million, according to one of the company's partners, Sean Walsh.

"This neighborhood will be destroyed if everyone builds commercial, and we weren't prepared to be the ones to do that," Walsh said. His firm also plans to renovate three commercial structures on the same block over the next three years.

Other Reed-Cooke areas also are being studied for development.

The Adams Morgan Community Development Corp., a nonprofit group that receives city funds to attract businesses and residents to the area, said that next week it will begin examining the revitalization of the 2400 block of 17th Street, an especially deteriorated area of Reed-Cooke.

The group said it will consider options for a stretch of the block that now includes a factory, an abandoned public school and a rundown, 24-unit apartment building at 2422-2424 17th St. that went on the market this week for $435,000.

Stephen Matthews, the corporation's executive director, said many longtime residents are afraid that the area could become too exclusive for them. "It could be like Georgetown," he said. "Every neighborhood should have a mix. You can't have all rich or all poor or all white or all black living in a community."

One group trying to maintain the area's housing stock for low-income residents is Jubilee Housing, a nonprofit, church-related outfit that buys and renovates decaying apartment buildings. It then leases the apartments to the original tenants. Since 1973, Jubilee has bought seven apartments in the Reed-Cooke neighborhood, according to Robert Boulter, the group's vice president, but none since 1984.

"We don't want to run businesses out," said Jackson. "But there's a lot of work that needs to be done to improve the neighborhood."