WASHINGTON — The nation's top housing official said yesterday that he blocked a $1.3 billion real estate deal — one of the richest in New York City history — out of concerns over the sky-high price and legal issues with the would-be landlord.

Or, as minister-turned-congressman Edolphus Towns put it, "There was something rotten in the cotton."

Housing and Urban Development Secretary Alphonso Jackson announced yesterday he would veto the sale of the Brooklyn property known as Starrett City, whose 6,000 apartments make up the nation's largest federally subsidized rental housing complex.

The real estate developer, Clipper Equity LLC, said it would try to find a new way to buy the property, but Jackson sounded doubtful the deal could be salvaged.

"The door is not open; the door is actually closed," Jackson said, before adding he might reconsider if the company can prove it will preserve the complex as affordable housing.

"If Starrett City is lost as affordable housing, there are no alternatives for most of the families except to move away," Jackson said. "It would be the worst kind of theft to steal all of this from them. The department will not stand idly by."

Clipper Equity insisted it wasn't taking no for an answer.

"We remain convinced that we can provide the assurances that Secretary Jackson, and other officials, responsibly require. We agree totally that affordability is a defining core value at Starrett City. This will not change. We ask only that we be given a fair opportunity to present our fully detailed plan to achieve that goal," the company said in a statement.

The would-be deal came amid a historic residential real estate boom in New York City and follows last year's $5.4 billion sale of Stuyvesant Town and Peter Cooper Village in Manhattan. Some residents there now face rent increases of more than 30 percent.

With about 6,000 apartments, 30-year-old Starrett City has about half as many as Stuyvesant Town and Peter Cooper Village. The Brooklyn complex has its own shopping center, schools, churches, synagogues, power plant and armed security force.

Many tenants pay between $200 and about $400 monthly for federally subsidized apartments in Starrett City. The families live on annual gross incomes of about $20,000 to $40,000 and feared the whopping purchase price for the complex meant their rents would rise dramatically.

Even in the hyperactive market, the proposed sale of Starrett City caused sticker shock. Jackson noted that in a neighborhood where apartments are valued around $95,000, Clipper Equity offered the equivalent of about $220,000 for each Starrett City unit.

Jackson said he was also heavily influenced by New York Attorney General Andrew Cuomo — a HUD Secretary in the Clinton administration — in discussions about a long-standing court injunction against a central figure in Clipper Equity.

Clipper Equity partner David Bistricer already owns 71 other buildings with 8,792 outstanding violations. Since 1998, Bistricer has been under permanent injunction from offering or selling cooperative buildings and apartments — a statewide ban Cuomo said he intends to enforce.

In addition to the legal and financial concerns swirling around the deal, yesterday's decision was also the result of some old-fashioned political arm-twisting in New York.

Jackson said that Towns, a Democrat whose district includes Starrett City, "must have called me 150 times. He just did not stop." At times, Jackson joked, "I thought maybe he was outside the building."

And Sen. Charles Schumer, D-N.Y., a high-ranking Democrat whose responsibilities include oversight of Jackson's agency, had vowed from the very beginning to kill the deal.

Schumer said he saw no way Clipper Equity could resurrect its bid, and warned both the seller and any future owner that they must ensure the long-term use of Starrett City as affordable housing.

"We don't want to put more subsidies into Starrett City just so the owner can walk away with millions of extra dollars," the senator said.