The Cambridge City Council passed a home-rule petition Monday night recommending that a 1 percent transfer tax be levied on all residential real estate valued above $300,000 at the time of sale.

The petition asks the state legislature to approve a referendum that would let city residents vote on whether to levy the tax to create affordable housing, in the wake of the abolition of rent control in November 1994.

Monday night's proposal amended an earlier recommendation passed March 16, which suggested placing a 1 percent tax on all residential real estate valued above $100,000.

"We amended it to a higher exemption to try to get more councillors to sign on," said Councillor Katherine Triantafillou.

But the proposal passed by a five-to-four margin at Monday night's council meeting-- the same margin by which the previous proposal passed.

The new proposal was something of a defeat for the council's liberal majority. The higher exemption means less money for affordable housing, but failed to get the approval of the Independent councillors, including Timothy J. Toomey, who is also a state representative.

Community activists at Monday night's meeting described their reaction to the amended proposal as "mixed."

"We're glad it passed even at five to four, [but] we were hoping for more support," said Bill Marcotte, a member of the Cambridge Eviction Free Zone steering committee.

Marcotte was among a handful of community residents who expressed their support of a transfer tax during the public comment session before the meeting.

Two Cambridge real-estate developers were on hand to voice their disapproval of the transfer tax, contending that it would be a "hurdle" preventing some middle-income families from buying adequate housing.

Vice Mayor Kathleen L. Born introduced the proposal, which had not been on the agenda.

Born said a transfer tax that exempted the first $300,000 of a residential property would have affected only 254 of the approximately 1,100 residential Cambridge properties that were sold in 1996.

Born told the council that a 1 percent tax with a $300,000 exemption would raise slightly more than $600,000 over the first year and would "likely reach $1 million of yield in two or three years."

"The money would be set aside by the city and would be used to support a bond...to invest in affordable housing," Triantafillou said.

Born said that in a few years revenue from the transfer tax would be able to fund a $10 million bond referendum.

The proposal will be heard in a committee meeting May 2 on Beacon Hill.

If the state legislature votes to enact the proposal, it will be voted on by Cambridge residents as a referendum.