The project, named Apache ASL Trails in a reference to American Sign Language, now finds itself in an unlikely spot, facing charges of discrimination for favoring deaf and hard-of-hearing people over others, disabled or not. The federal agency released its finding in January after examining marketing materials and the project’s criteria for tenant selection, even though the developer assured it that the documents in question had been misinterpreted or were outdated.

Last June, HUD drafted a compliance agreement limiting the number of units set aside for deaf residents, which seems to have only stoked the dispute. State officials said the agency at one point threatened to withhold money from the state if it did not continue with the plan. But the state housing director, Michael Trailor, did not back down, saying he had to “stand up for the rights of disabled people.”

Advocates for the disabled fear that the finding might complicate other projects in which federal money would be used to build housing for adults with special needs. Already, the Southwest Autism Research and Resource Center, based in Phoenix, has scrapped plans to use federal grants to help pay for a development designed for autistic adults, opting instead to pursue private financing.

Through combative legal correspondence and in emotional meetings, the parties in the Tempe project, working to negotiate a compromise, have argued over the meaning of the federal statute governing fair housing practices and the word “discrimination” as it applies to the deaf.

John Trasviña, HUD’s assistant secretary for fair housing and equal opportunity, said in a statement that “federal law prohibits facilities that receive HUD funds from providing separate or different housing for one group of individuals with disabilities because this practice denies or limits access to housing for other individuals based on the types of disabilities they have.” (The agency did not make Mr. Trasviña or other officials available for on-the-record interviews.)