The Portland City Council voted 7-2 Monday night to approve a tax break for a nonprofit housing developer that plans to build a four-story affordable housing complex in the prestigious West End neighborhood.

The 22-year tax break is worth more than $700,000, and diverts 65 percent of property tax back to the developer to be used for operation of the building.

The project would provide 37 units of new housing at 17 Carleton St. for people with limited incomes. While the developer, Avesta Housing, says it will add to the city’s supply of much-needed affordable housing, the project has drawn opposition from some neighbors over the loss of parking and whether affordable housing fits well in the historic neighborhood.

The two councilors who voted against the financing plan were Jon Hinck and Justin Costa.

Although the Planning Board is still considering project details, including the building’s final design, the council was asked to vote on the financing plan first in order to meet a state tax credit deadline.

“I do find it troubling that the first thing that comes to the council is the (financing),” Hinck said. “It’s a cart before a horse.”

The Planning Board has yet to weigh in on the project’s merits.

Avesta Housing President and CEO Dana Totman said the number of people who have contacted Avesta for housing in the past six months is up 27 percent over the same period last year, from 1,492 to 1,897. Meanwhile, rents in Portland have increased 17.4 percent over the past year – the second-highest rate in the U.S., according to the real estate data firm Zillow.

Without the financing assistance, however, Avesta said it would not be able to move forward with the project.

The half-acre site of the proposed development, which is still being reviewed by the Historic Preservation Board as well as the Planning Board, is currently a parking lot where several nearby residents lease spots.

Opponents – particularly those who rely on the Carleton Street lot for parking – are concerned about the loss of 58 spaces and lack of on-street parking to meet the increase in demand.

Avesta Housing bought the Carleton Street parking lot and two apartment buildings – the former Butler school at 77 Pine St. and the Payson building at 218 State St., which together provide 62 units of housing for seniors and the disabled – in 2011 for $6.2 million, according to the nonprofit.

Totman said Avesta is investing $4.9 million into the existing buildings and $6.5 million in the new building, which would also have 31 parking spots on the site. The four-story building would have 12 efficiencies, 23 one-bedrooms and two two-bedroom apartments.

The housing will be targeted to individuals and families who make at or below 40 percent to 60 percent of the Portland area’s median income, ranging from an individual earning about $20,000 a year to a three-person family earning $40,000 a year, he said. Rents would range from $540 a month for an efficiency to $1,044 for a two-bedroom.

The rents are made affordable by taking advantage of housing tax credits offered by Maine Housing, Totman said, and by the tax break – or Tax Increment Financing deal – with the city.

Avesta would keep 65 percent of the new tax revenue over that period, which is expected to be roughly $728,000 to be used for operation of the building. The city would see an additional $406,000, according to the agreement. After the 22nd year, the city would receive all of the taxes.

Staff Writer Randy Billings contributed to this report.