A dispute over how to use affordable-housing funds tied to the Staples Center hotel and entertainment development is threatening to delay work on the project.

The Figueroa Corridor Coalition for Economic Justice is challenging a plan to use $8 million to build housing for students in a job training program run by the YWCA of Greater Los Angeles.

Figueroa Corridor officials say the funding should be used to provide affordable housing to compensate for the residents who were displaced by the original Staples project, not to build dormitories. The students, however, are considered at-risk youth who have limited housing options.

“The sad reality is that this area has enough problems for everyone,” said L.A. City Councilman Ed Reyes, who chairs the council’s Planning and Land Use Management Committee. “There are parents who need help housing their families and at the same time we have emancipated youth who face a bleak existence.”

Last week, the committee tabled a decision on whether the funding can be used for the YWCA project. The issue comes up again this week; Reyes said he hopes the two groups will be able to work out a compromise.

Figueroa Corridor Coalition leaders say the money is needed for low-cost family housing around Staples Center, which is ground zero for downtown’s luxury condo boom but has seen few affordable units.

Without long-term affordable housing, coalition leaders argue that poor families displaced by the original Staples Center development won’t be able to afford to live in the area.

“This was supposed to ensure there would be a balance between market-rate and affordable development,” said Lizette Hernandez, coordinator of the Figueroa Corridor Coalition. “This new direction falls outside that balance.”

The job training program, for which the YWCA receives $60 million in federal funding each year, teaches at-risk youth between the ages of 16 and 24 skilled jobs such as heavy duty mechanics, nurses and emergency medical technicians, among others.

“This isn’t a dormitory,” YWCA Chief Executive Faye Washington said of the project near Olive and 11th streets. “These kids, if they didn’t have this place, they would be on the sidewalks over at Fifth and San Julian.”

The disputed funds are tied to the community benefits program that Staples Center owner Anschutz Entertainment Group negotiated with the Figueroa Corridor Coalition when the company’s $1.2 billion mixed-use project was first approved by the council in 2001.

AEG agreed that 20 percent of all housing units entitled around the Staples Center would be set aside for affordable housing. Those units must be built alongside the market rate projects or at another site within a 5-mile radius.

As AEG sold off the entitled land to residential developers, the community benefits program was applied to the new owners. When it came time for the South Group, which is building a $145 million condo project at Grand Avenue and 11th Street, to pay for its affordable housing quota, the partnership of Portland-based Williams & Dame Development Inc. and Gerding/Edlen Development Co. LLC chose to fund the YWCA project.

South Group principals liked the YWCA project enough that the partnership is paying $280,000 more than obligated under the community benefits agreement. The group is responsible for 130 units of affordable housing, but under the YWCA project it’s paying for the equivalent of 200 units.

“There are a lot of different constituencies for affordable housing and it’s our job to try to respond to them,” said Tom Cody, a principal with Gerding/Edlen Development. “But I don’t understand how anyone could look at their (YWCA) program and see anything otherwise.”

The Figueroa Corridor Coalition, a signatory on the community benefits program, wasn’t consulted on whether the South Group could apply the funds to the YWCA project. Hernandez, the group’s leader, said she first heard of the application of funds hours before the Community Redevelopment Agency board approved the use. Hernandez believes the use is invalid because her group hasn’t signed off.

If the stalemate persists, the council could delay approval of public financing for the project, which features a 1,100-room hotel, a 7,100-seat live theater, broadcast studios, nightclubs, movie theaters, shops and restaurants.