The City of Vancouver has passed its first legislation regulating short-term rentals at city council.

Councillors voted 7-4 Tuesday on a policy allowing homeowners and renters to list primary-only residences on sites like Airbnb for a licensing fee of $49 a year and a one-time application fee of $54.

Under the policy, renting out secondary suites would not be allowed, and a maximum of two adults would be allowed in each room. Homeowners caught listing units on short-term rental websites without a licence will face a fine of up to $1,000 for each infraction.

Mayor Gregor Robertson, Green Party Coun. Adriane Carr and the five Vision Vancouver councillors voted in favour of the motion, with the four NPA councillors opposed.

"We're just creating more bureaucracy, more taxation, more sticks. We're not solving the problem" said NPA Coun. George Affleck.

"This has been sold as a magic solution for creating more long-term rental housing. I don't think that's true."

Vision councillors defended the rules as necessary in a time of crisis. Mayor Gregor Robertson said the vacancy rate is just above zero and the city must do everything it can to free up housing for long-term renters.

"I'm stunned to hear that some councillors don't believe there's a problem here. We have 6,000 illegal short-term rentals in the city," said Robertson just before the vote.

"Hundreds of cities around the world are regulating short-term rentals. I think there's widespread acknowledgment that short-term rentals do affect the rental housing supply, particularly in cities like Vancouver where we do have a shortage in rental housing. ... I can't imagine doing nothing."

City staff will now go forward with setting up a regulatory framework for council's formal approval, with new guidelines expected by April 2018.

Split reaction

During a two-day public hearing, 32 people spoke in favour of the proposal, with 38 speaking against.

One of those in opposition was Alex Dagg, Airbnb's Canadian policy manager. She's critical of the complete ban on secondary suite rental, and didn't rule out the company taking legal action against the City in response.

"We think that's unnecessarily restrictive, because those kind of units that people are sharing on our platform are being used by their family and only shared on a very casual basis. And restricting people from doing that is problematic," she said.

However, Dagg was complimentary of the city's overall approach to establishing regulations.

"The city has done a pretty careful and thoughtful job of thinking about how to regulate home-sharing, and we're appreciative they're moving towards regulating it. They've recognized the value it provides for families and the local economy."

While some municipalities that have regulated short-term rentals allow for secondary suites, including New Orleans and Chicago, others, including New York City and Portland, do not.

In April, the city estimated there were around 6,000 online units currently in operation, mostly in the northern half of Vancouver.

The city estimated that 70 per cent of short-term listings in the city would still be allowed under the new rules, but about 1,000 listings would be taken off the market.

A slide by the City of Vancouver, presented in council, shows where short-term rental units are located throughout the municipality. (City of Vancouver)

With files from The Canadian Press