The San Jose City Council on Tuesday approved a housing impact fee of $17 per square foot on new rental housing starting in 2016.
Opponents said the fee is a "rental housing killer" by discouraging contractors from building rentals.
Mayor Chuck Reed said only voters can approve what this fee really is -- a tax.
"It looks like a tax, talks like a tax and it's quacking like a tax," Reed said. "We need to face the music and let the people decide."
Councilman Xavier Campos said the council has not done enough for low-income housing, adding the city should consider a rent-control policy.
Builders are expected to challenge the fee in court and the first low-income housing units would not be built until 2019.
Meanwhile, supporters took Tuesday's vote in as a win.
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"This is just a huge day for people who can't afford to live here," said Jolene Jones, Sacred Heart Action Committee. "We're just ecstatic."
