Ahmed Ebrahim was born into the family business, selling hot dogs, knishes and pretzels from a cart near Rockefeller Center. He and his brother and business partner, Mahmoud, inherited the work ethic of their mother, Magda, who started as a street vendor more than 30 years ago after immigrating from Egypt. They also inherited a burden: paying $20,000 every two years for a vending permit.

The city-issued permit usually costs $200, but because of a cap on permits set in the 1980s, many street vendors have no choice but to pay tens of thousands of dollars on the black market to obtain one. And their struggles have only worsened during the pandemic.

“Having the weight of $20,000 on my shoulders just to work is tough right now,” said Mr. Ebrahim, 27, who has seen his sales plummet by 75 percent since reopening over Christmas. “It’s a ghost town out there. I don’t know how much longer I can continue.”

On Thursday, the City Council passed legislation, by a vote of 34 to 13, to lift the cap. The bill enables the city to issue 400 new permits annually for the next 10 years, an attempt to eliminate the underground trade. It also establishes a new office of enforcement, which will coordinate enforcement done by various city agencies — including health and sanitation.

Last month, Mayor Bill de Blasio announced that the Police Department would no longer oversee enforcement of street vendors.

Mr. de Blasio expressed support for the Council bill before the vote and is expected to sign it into law.

Supporters of the bill said adding more permits will help vendors, who are mostly immigrants, get back into the formal economy after suffering economic and personal devastation during the pandemic.

“Street vendors are small businesses that are part of the New York economy, too,” said Councilwoman Margaret Chin, the bill’s lead sponsor. “They’re just trying to make a living to support themselves and their families.”

The timing, however, is one argument restaurants and landlords have made against the bill, saying that vendors hurt their businesses and that an influx of new street vendors would cause more harm to an already devastated restaurant industry.

“There’s room for everyone, but not at this time,” said Jeffrey Garcia, a retired Police Department detective who runs Mon Amore Coffee and Wine on West 238th Street in the Bronx, and is president of the New York State Latino Restaurant, Bar and Lounge Association. “This bill isn’t good. The city first needs to give us rent and utility relief. They should focus their attention on that and get businesses back flourishing.”

The debate over street vending in New York City is not new: Decades before the first food truck parked in Midtown, wooden pushcarts packed the narrow streets of immigrant neighborhoods. And just as common were efforts by officials and business owners to rein them in based on concerns over health, street congestion and competition. In 1937, Mayor Fiorello La Guardia tried to get pushcarts selling food off the streets and into indoor markets, like the one on Essex Street on the Lower East Side.

By the 1980s the city had placed a cap on mobile food vending permits: 2,800 citywide. They also started a waiting list, but hopeful vendors were not even able to put their names on the list, since it, too, was capped at 2,500 and closed in 2007.

Under the system proposed in the bill, priority is given to vendors on the waiting list who are already selling food. They would still need food handling permits, which they can easily obtain. But most importantly for vendors, the permit holder must be working at the cart, not leasing it to someone else on the black market.

“This represents, finally, fairness and inclusion for street vendors,” said Mohamed Attia, the executive director of the Street Vendor Project. “For decades they have been excluded from all support the city offers to small businesses.”

Mr. Attia, who started selling hot dogs soon after he arrived in New York in 2008, knows the risks he and other vendors face on the street when selling without permits: $1,000 summonses and confiscated goods. But, he said, they make up an economic ecosystem in their communities and beyond: According to data compiled by his group, street vendors in 2015 added nearly $300 million to the city’s economy, created some 18,000 jobs and paid $71 million in sales and income taxes.

Yet business associations, including the Real Estate Board of New York, and their lobbyists have raised concerns that a flood of vendors will lure away customers from brick-and-mortar stores, and they are skeptical about the city’s ability to establish a new enforcement office during a fiscal crisis.

REBNY declined an interview request, but James Whelan, the group’s president, said that while its members “recognize the need to expand opportunities for vendors and address the serious challenges they face,” they are worried about enforcement and adverse effects on already-weakened traditional businesses.

Supporters of the legislation said those concerns overlook that most the permits will go to people already vending, and only after the enforcement system is established. Restaurant and bar owners, Mr. Attia said, should be more concerned about commercial rent bankrupting their businesses.

The New York City Hospitality Alliance estimated that thousands of the city’s 25,000 bars and restaurants had been hard hit by the virus and shutdown, with some 140,000 people left unemployed. In the last month alone, the group noted, 11,000 more jobs were lost.

“We’ve seen reports that the vast majority of restaurants have been unable to pay their rents,” said Andrew Rigie, the executive director of the Hospitality Alliance. “We need to get through this crisis, then there can be a more comprehensive review of where vending could be done.”

City Council Speaker Corey Johnson said the legislation’s intent is to offer vendors entree into the formal economy, which could make them eligible for assistance from other city programs.

“One of the things I have been beating the drum on the over last three years as speaker,” he said, “is making sure we use our streets and sidewalks to benefit New Yorkers. No one has a monopoly on public space.”

Relief cannot come soon enough for M.D. Alam, who came to New York from Bangladesh in 1998 and in 2005 decided to to try his luck with a mobile cart he called Royal Grill Halal Food. “This is freedom,” he said.

Even though he was paying $18,000 to lease a permit, he expanded his business, eventually employing six people at his cart on 44th Street and Sixth Avenue. The lockdown forced him to let go of four workers and reduce the hours of those who remained. But he still had to put aside money for his black market permit. He said half of his revenue — already buffeted by the pandemic — went to paying for his permit.

“At the end of the week you have nothing,” said Mr. Alam, who lives with his wife and 14-year-old daughter. “If we had permits, you can make your own money and save it for your children’s future or your family. That’s how you survive.”

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