Federal red tape is holding up renovations to the Boston Heights housing complex in Annapolis, a project housing advocates say is desperately needed.

The delay is costing the developer $25,000 a month and could put the project in jeopardy.

Annapolis Housing Authority Deputy Director Roger "Pip" Moyer said the city is badly in need of affordable housing and is facing a 700-person waiting list. The developer, the Bethesda-based Community Preservation and Development Corp., plans to fill many of the apartmentsfrom the Housing Authority's list.

"We're absolutely desperate," Moyer said. "I can't tell you how badly we need affordable housing. It's really tough, the people we see here day after day that we can't do anything for. It's a tragedy to see Boston Heights just sitting there."

When Congress passed the HUD Reform Act last fall, it transferred review authority for some projects from the state to the U.S. Department of Housing and Urban Development. The change delayed scoresof projects -- including the renovations to Boston Heights -- while HUD developed guidelines for reviewing the projects.

A HUD spokesman said the federal Office of Management and Budget should finish itsreview of the guidelines any day. Once the guidelines are approved, they will be published within two weeks. Projects awaiting HUD approval should move quickly after that, the spokesman said.

Leslie Steen, president of the development group, said her group can't pass the cost of the delay along to tenants, so it will have to raise more money or cut construction costs.

"I don't want to lose this project," Steen said. "We've got a lot invested in it. The Annapolis market is not going to produce a lot of affordable housing. The land costs are too high. It took a lot to buy this property."

The company bought Boston Heights, renamed Admiral Oaks, from former owner Sateesh K. Singh for $2 million last April. Developers usually make sales agreements contingent on getting approval to build, but Singh insisted on selling the 159-unit property outright.

If the delay goes on too long, Steen said the group may be forced to sell the property, which means someone could buy it and build market-rate housing.

Singh closed the complex in November 1989 after city officials threatened to condemn many units because of housing code violations such as damaged plumbing, heating and electrical wiring. Steen's group had hoped to reopen the complex in December, but the project is now on hold indefinitely.

The Housing Authority is trying to build single-family homesto help alleviate the housing crunch.

Emily Green, an aide to Mayor Alfred A. Hopkins, stepped in last month to help Steen. She contacted a former employer, U.S. Representative Tom McMillen, D-4. McMillen joined forces with the rest of the Maryland delegation, which senta letter to HUD Secretary Jack Kemp two weeks ago requesting that six stalled projects in the state be approved. The letter was written by Sen. Paul Sarbanes, D-Maryland.

"When you get the entire delegation involved, it usually gets the attention of the secretary pretty quickly," said Brad Fitch, a spokesman for McMillen.

Last fall, Congress voted to require HUD to review any project that uses a combination of HUD and other government funding to keep such projects from getting too much money.

Previously, the state Community Development Administration had sole authority to review such projects in Maryland.

Steen's group got CDA approval for Admiral Oaks, but missed the deadline to apply for a waiver of HUD approval by a few days. The project has been awaiting HUD's new guidelines since.

The $9 million project will be paid for by HUD Section 8 subsidies, CDA bonds, tax-exempt and taxable mortgages, and federal tax credits, which are shares in a limited partnership sold to non-profit corporations. The clock already has begun ticking on the Section 8 subsidies -- they were good for 15 years when approved more than a year ago.

Sixty-three of the project's 159 units will receive Section 8 subsidies. The units will cost $499 to $701 a month for two- to four-bedroom apartments. However, tenants in those units will have to pay only 30 percent of theirgross income for rent and utilities. The federal subsidies will pay for the rest.

The 96 remaining apartments, most of which are two-bedroom units, will cost an average of $497 a month. The cheapest oneswill cost $411 a month.

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