Vancouver homeowners will now be able to legally convert their garages to rental units. (CBC)

Homeowners in Vancouver can start converting their laneway garages into rental housing under a new bylaw passed unanimously by the city council on Tuesday.

About 70,000 single-family lots across the city are eligible to add the new homes, which can only be built in the area usually reserved for a garage, and only used as rental units.

On a standard lot, the laneway houses can have up to 500 square feet of floor space and be up to one and a half stories high. The idea was promoted by former mayor Sam Sullivan as part of his eco-density initiative.

Current Mayor Gregor Robertson said the new homes will help the environment by offering affordable housing for those who work in the city, allowing them to avoid long commutes.

"Hopefully, we do see some positive green impact from laneway in terms of the density and the use of our infrastructure here in the city, rather than being pushed out from jobs and family," said Robertson.

City staff said two-thirds of the people who spoke out at several lengthy public meetings in recent days supported the idea, but those opposed were most concerned about parking and congestion.

Councillor Raymond Louie said he believes the units will help raise the city's low vacancy rate for rental units and allow neighbourhoods to evolve as residents seek different home sizes during the different stages of their lives

"It will allow people to age in place, as they purchase a home, they become part of that community and have the opportunity to stay in that community for the entire duration of their life," said Louie

The city will start accepting applications Wednesday, and a permit will cost $899. Estimates for the cost of building the units range anywhere from $125,000 to $200,000.

The city council is also considering a similar proposal to allow downtown condominium owners to put 205-square-foot mini-suites inside their units.