On Aug. 25, City Attorney Dennis Herrera wrote a letter to HUD Secretary Julian Castro, blasting the agency's decision, calling it "wrong as a matter of law and public policy."

Last week, Supervisor London Breed and several other city officials went to Washington, D.C., to meet with senior-level federal housing officials.

After that meeting, HUD said it was open to reconsidering its decision and would offer a response to the city by Friday. By midday, however, negotiations to find a compromise were still ongoing and it looked like a new plan could emerge.

Officials on both sides, though, would not offer specifics.

"We will likely be taking more time now to respond, as we received a new proposal from the city today," said Ed Cabrera, a HUD spokesman, in an email Friday morning.

"We are in ongoing conversations now trying to figure out what can work, what HUD will sign off on," said Conor Johnston, an aide to Breed, in a text message.

The city's program would have given black seniors in the Western Addition preference to move into a federally subsidized 98-unit affordable housing development this fall.

But, given HUD's extended deadline, the chances anyone would benefit from the preference plan to get into the Willie B. Kennedy development at Turk and Webster streets are extremely slim.

About 5,000 people have applied to live in the development, according to Don Falk, the CEO of the Tenderloin Neighborhood Development Corp., the project's developer.

The deadline to apply to live in the new units ends Friday (Sept. 9). A lottery to choose who will get slots takes place on Sept. 21.