Sparking vigorous opposition from owners and tenants alike, the City Council agreed Monday night to work towards the establishment of a so-called "tenant tax."

Following hours of impassioned speeches from council members and observers packed into Sullivan Chamber at City Hall, the council voted 8 to 1 to begin work on an administrative plan to raise money for an Affordable Housing Preservation Fund.

The plan would require eligible tenants to contribute between 2 and 5 percent of their incomes to a fund for the upkeep of rent-controlled housing. Low-income tenants, the disabled and the elderly would be able to apply for exemptions from the surcharge.

Michael H. Turk, co-chair of the Cambridge Tenants' Union (CTU), said that the main problem with the tenant surcharge is that it will be a move in the direction of government subsidies for owners. Currently, owners of rent-controlled properties charge rent based on upkeep costs.

"If the tenant tax goes through, it represents a serious weakening to rent control, and it hurts tenants," Turk said at the meeting. Members of the tenants' union, which supports rent control, lined the council chamber with signs stating "No Tenant Tax" and "Stop Unjustified Rent Hikes."

Members of the Small Property Owners Association (SPOA), which opposes rent control, also spoke out against the surcharge. They argued that it would not raise a significant amount of money and questioned councillors about how it would be enforced and collected.

For the fourth time in as many sessions, councillors stayed at City Hall past midnight Monday to debate a package of proposals designed to remedy the maladies plaguing Cambridge's 20-year-old rent control system.

The council's subcommittee on rent control unveiled the 16 proposals at the beginning of last month as part of its 320-page final report, the result of more than nine months of meetings and hearings.

After a series of amendments, the council passed five, rejected one and tabled one of the final seven orders before it. Apart from agreeing to the development of the Affordable Housing Trust Fund, the council passed the following measures:

* To take inventory of the over-all condition and maintenance of rent-controlled properties in Cambridge.

* To create an umbrella housing department in the interest of ensuring consistent housing inspections.

* To speed resolution of owner-tenant disputes involving owner-occupied, four- to six-unit buildings.

* To stabilize the timing and amount of across-the-board "general adjustment" rent increases.

But tenants and owners alike questioned whether the package of proposals will actually result in positive changes for the city's embattled housing program.

"To refer to this bundle of proposals as reform is to deprive the word of all of its ordinary meanings," SPOA member John Natale said in an interview yesterday. "These proposals haven't done a goddamn thing to help us."

And at the meeting, Turk questioned whether the proposals had done anything "other than open up a storm around rent control."

"I don't think that helps owners or tenants," he said.

But Councillor Kenneth E. Reeves '72, chair of the rent control subcommittee, said that many of the objections raised against the proposals by owners and tenants have been specious and misinformed.

"The longer I am in this council chamber, the more learned I become in the following technique, and that technique is to take something that hasn't been said, to say it and to disagree with it," Reeves told on-lookers in Sullivan Chamber.

Reeves also spoke in support of the Affordable Housing Preservation Fund initiative, calling it "a change that would ensure the future housing of many tenants.