The Reagan administration is softening its opposition to Democrat-sponsored fair housing legislation but still opposes provisions it says would deny the right to trial by jury and be unfair to elderly people, according to a Housing and Urban Development official.

Another administration objection that a new ban of discrimination against the handicapped could force landlords to accept drug addicts or alcoholics was addressed in two amendments passed last week.The bill, expected to be voted on Tuesday in the House Judiciary Committee, would toughen enforcement of the Fair Housing Act of 1968 and expand it to ban discrimination against handicapped people and families with children in rental or sale of living space. A similar bill has been introduced in the Senate.

The administration had introduced its own fair housing legislation and favors an expansion of the act, which now bans discrimination on the basis of sex, ethnic origin or religion.

But it is wary of the version now being discussed in the House Judiciary Committee, believing it may be unconstitutional and unfair to some landlords, tenants and homebuyers, HUD general counsel J. Michael Dorsey said in an interview Friday.

The committee last week rejected changes that would have met some administration objections, but it approved one excluding abusers of controlled substances from being classified as handicapped.

Another amendment would allow landlords or sellers to reject people "whose tenancy would constitute a direct threat to the health or safety of other individuals."

Dorsey said there is broad agreement that discrimination against the handicapped should be added to the law. But he had said in a letter to the Judiciary Committee last week that the Democratic version "does not clearly allow those who provide housing to exclude individuals with current impairments, such as current drug abuse, that pose a threat to property or safety of others."

Major objections to the bill have come from the Justice Department which opposes the setting up of an administrative law judge system to handle discrimination cases, rather than having them go to a regular jury.

Dorsey said that despite strong objections to parts of the proposed bill, the administration is taking a softer stand than it has in the past. But he said it has not altered its major objections to the Democratic proposals.

President Reagan has submitted four bills to amend fair housing laws in 1983, 1985, 1986 and this year. Dorsey said the current Democratic bill is "not the one that we would prefer."

But he indicated the administration wants fair housing laws expanded before Reagan leaves office.