Wolverhampton Council said the increase – of seven per cent from April 1 – was in line with the rent cap imposed by the Government and a necessity.
Chiefs said it would help them to fund a string of maintenance in the social homes to "help residents in the long run" and continue investment in projects.
But it was criticised by the opposition Conservatives who accused the Labour-run authority of hitting people in the pocket amid the cost of living crisis.
The move – which would have required the use of £1.1 million from reserves – was rejected by chiefs who accused the Tories of "political point-scoring".
Conservative councillor Adam Collinge, who represents Oxley and tabled the amendment, told a council meeting last week: "We're at groundhog day yet again – a Labour proposal for rising rents by the highest level permitted. I'm thankful the Government did impose a rent cap because I'm concerned we would've had 10, 11 per cent rent rises.
"I wish our amendment could have gone further. However we recognise capital investment in social housing is indeed needed."
Reports to councillors show the Housing Revenue Account's capital expenditure will increase, alongside borrowing levels, with Councillor Collinge calling for the business account to be fully scrutinised.
He added: "We talk about the biggest squeeze on income and living standards in living memory, that's what Labour says, but they have decided to implement a huge increase in spending, debt and borrowing and of course it's the tenants and taxpayers paying for this – that's why rents are up."
However the motion was dismissed by Labour councillors who were critical of the Tories' amendment – and potential use of reserves for it – with the original proposal, the seven per cent rise, being backed.
Councillor Stephen Simkins, deputy leader of the authority, said to the Conservatives: "[The amendment] would pose a risk to the future of Wolverhampton and a risk to the future housing of our children who will want a home in the future.
"It's typical of the Conservative Party across the chamber that they use smoke and mirrors by [putting forward] a one per cent rise in the rent. If that's not rank electioneering, I don't know what else is.
"It's a disgrace that you come here and you try to bend your political points into making political point-scoring, while we on this side are trying to resolve these issues."
The increase will affect around more than 20,000 homes in the city. It would be an increase of £5.07 a week for one-bed homes, £5.67 for two-bed and £6.45 for three-bed homes for Wolverhampton Homes properties.