RICHMOND -- Housing advocates will have to lobby hard to rescue a low-income home loan program that had been financed with lottery profits, the chairman of the Virginia Housing Study Commission said this week.

The Virginia Housing Partnership Fund has been using lottery profits for loans to build and renovate low-income housing. But Gov. L. Douglas Wilder plans to take future lottery profits to help balance the state's operating budget.

Del. Alan A. Diamonstein (D-Newport News), chairman of the housing commission, said he would like to see the loan program placed in the state's general fund budget to ensure its continued funding.

"That's not going to be an easy task," Diamonstein told housing advocates as he presided over a public hearing. "You've got to start contacting the legislature."

"We have more of a challenge than we've ever had," said Sen. Stanley C. Walker (D-Norfolk), a commission member.

Speakers at the hearing called for more housing aid for the mentally disabled, minorities, first-time home buyers and the rural poor.

While Diamonstein said he believes housing will remain a priority during Wilder's administration, he was not encouraging to all the advocates.

"Finances might be a problem," he told Teddy Goodson, a Northern Virginia real estate agent who proposed a state mortgage insurance program to help first-time home buyers.

Several speakers urged help for the homeless and mentally disabled.

Mary Ann Bergeron, executive director of the Virginia Association of Community Services Boards, said 5,000 mentally disabled people are on a waiting list for housing statewide.

King E. Davis, commissioner of the Virginia Department of Mental Health, Mental Retardation and Substance Abuse Services, said the mentally ill often lose their leases during repeated hospitalizations. "Some individuals remain hospitalized primarily because they lack housing," he said.

Racial discrimination in housing remains a problem in Virginia, said Robert Collin, who teaches in the University of Virginia's Department of Urban and Environmental Planning.

Collin said black students who posed as U.Va. assistant professors seeking rental housing were discriminated against in 14 of 20 cases in the Charlottesville area.

"We're shocked to find this result," Collin said.

He said the state needs to toughen its fair housing law to bring it in line with federal regulations.