The Cambridge City Council moved closer Monday night to increasing the amount of affordable housing in the city.

Councillors debated whether to impose a transfer tax to assist citizens who may lose their homes because of the end of rent controls this winter.

Different versions of the tax are being considered, including a 1 percent tax on all property sales, or a 1.5 percent tax on sales over $300,000, Councillor Henrietta A. Davis said in an interview. The transfer tax will be used to fund a bond issue to assist displaced tenants.

The council's housing committee will meet on Friday to try to agree on a single version of the tax to present to the council.

Most area real-estate agencies oppose the measure, saying that it would discourage people from moving into Cambridge.

"We see a tremendous number of families that just can't afford to live here," said William F. Luther, an agent at Channing Real Estate. "The tax is another burden that is going to have to be borne by someone." He said Cambridge has a large number of properties worth more than $300,000.

Councillor Timothy J. Toomey, who proposed a version of the transfer tax at the meeting, said he did not think that it would hurt Cambridge's residential market.

"If someone can afford a $500,000 home, then they can afford the extra percentage added by the tax," he said.

"People move into Cambridge for a lot of reasons," Toomey added. "I don't see the tax turning someone to another community."

Councillors are aware of the real-estate companies' opposition but feel the city will benefit in other ways from the measure, according to Vice Mayor Kathleen L. Born.

"The reason to increase the stock of affordable housing is to keep diversity in the city," she said. "There is literally no corner of Cambridge that doesn't have upscale housing, including former blue-collar neighborhoods."

The Campaign to Save 2,000 Homes, a tenants group, supports the tax as a means to provide for low-income households displaced by the demise of rent control, which was abolished by voters in a 1994 Massachusetts referendum.

Holding signs with slogans such as "We Are a Community and We Do Not Abandon People," members of the group picketed in front of City Hall before the meeting.

"We have already experienced the greatest dislocation of people in the history of the city," said Bill Marcotte, a protester. "We draw the line for justice."

The Campaign began Sept. 7 at a parade celebrating Cambridge's 150th anniversary, and is endorsed by 16 community groups.

Campaign members said they are frustrated by the council's inaction on the tax.

"We are disappointed the council has not acted," said Louise Dunlap, another participant in the protest, who criticized the council's "grid-lock."

Toomey said that the council has been slow to act because of the conflicting opinions of the proposal.

"It's just trying to reach a consensus among a very different group of people," he said.

Alternate proposals exist.

Councillor Michael A. Sullivan suggested tapping into the city's savings to pay for housing aid rather than introducing a new tax.

"We could take the excesses from the free cash account and provide a one time major kick-in to housing," he said at the meeting. "We can lump-load it."

This idea was supported by Councillor Anthony D. Galluccio, who said that the transfer tax followed "the wrong rationale."

"I can't see taxing the citizens more when we have the money in our accounts," he said.

Councillor Kenneth E. Reeves '72 said there were other problems with dipping into the free cash.

"The free cash is like our savings account and if we take money out of our savings account, then it becomes harder for us to borrow money," he said.

Reeves was referring to the city's bond rating, which is based on the size of its free cash fund.

Born raised another objection to this method of funding.

"Depleting the free cash reserve will eventually be passed on to an increase in property taxes," she said