City leaders said yesterday that Harvard should use a newly-acquired three-acre parking lot off Mt. Auburn St. for low-density open market housing.

The University announced officially today the purchase of the $4 million parking lot, located across Mt. Auburn St. from the Post Office.

It is the largest land purchase in University history, according to records at the Middlesex County Courthouse. Harvard paid half as much, about $2 million, for the site of the John F. Kennedy School of Government.

"For the present, the University intends to continue the current parking operation, leasing the land to Louis DiGiovanni" who sold Harvard the property, Robin Schmidt, vice-president for government and community affairs, announced in a press release yesterday.

The press release does not detail how the land will eventually be used. "Several Cambridge officials and citizens have urged the University to consider building on this site in a manner compatible with the density and height of the adjoining residential neighborhood," the release quotes Schmidt as saying.

Schmidt was unavailable for further comment.

"Ideally, that land could be used for townhouse, sort of a small village," David Wylie, a Cambridge city councilor, said yesterday. The next choice is low-rise housing with the minimum possible density."

Wylie said high land values in the area might make it uneconomical for the University to build moderate and low income housing, but, he added, "the worst thing they could do is build tax-exempt institutional buildings."

Former City Councilor Mary Ellen Preusser predicted the University would most likely build "expensive, luxurious, housing."

"It's a shame it won't be a mix of low and moderate income housing," Preusser, who has battled with the University over zoning restrictions in the past, said.

"I think Harvard will go the route of saying they spent so much on the property that they can do with it what they want," she added.

Both Preusser and Wylie called on

Harvard to work with the city on plans for the site. "I hope there is discussion with the city planning department, the Neighborhood 10 Association, and the businessmen of Harvard Square, so that they will have some sense of which options would create the least havoc," Wylie said.

The University in its announcement of the purchase pledged "to confer with neighborhood groups and city officials" before deciding what to build on the site