Taxi drivers welcome the measures, while ride-hailing firms warn the cap will lead to reduced service in City

NEW YORK CITY(TIP): New York moved to become the first city in the U.S. to cap ride-hailing services including Uber Technologies Inc. and Lyft Inc., freezing new vehicle licenses for one year while it studies the fallout from the booming industry.

The vote Wednesday, August 8 by the New York City Council could cripple the growth of Uber and Lyft in their biggest U.S. market as both companies are heading toward eventual initial public offerings. The Silicon Valley companies’ businesses depend on recruiting as many drivers as they can to drive down fares and cut pickup times.

Council members approved a package of bills after months of campaigning from taxi drivers and others in favor of the legislation and a challenge by the ride-hailing companies urging customers to oppose the bills.

Mayor Bill de Blasio, who has championed the measures and unsuccessfully tried to rein in the services in 2015, said he would sign the legislation. “Our city is directly confronting a crisis that is driving working New Yorkers into poverty and our streets into gridlock,” he said.

The ride-hailing firms warned that the cap, which the council approved in a 39-6 vote, would lead to reduced service in the outer boroughs and to higher fares at a time when the city’s subway and bus systems are frequently delayed and overcrowded.

“The city’s 12-month pause on new vehicle licenses will threaten one of the few reliable transportation options while doing nothing to fix the subways or ease congestion,” a spokeswoman for Uber, Danielle Filson, said.

Ms. Filson added: “Uber will do whatever it takes to keep up with growing demand.”

Joseph Okpaku, vice president of public policy for Lyft, said: “These sweeping cuts to transportation will bring New Yorkers back to an era of struggling to get a ride, particularly for communities of color and in the outer boroughs.”

The vote marks the first big lobbying setback for Uber CEO Dara Khosrowshahi.

Since joining the company in September from Expedia Group Inc., Mr. Khosrowshahi has scored several wins, including a short reprieve in London after regulators there threatened to effectively shutter Uber. He also helped to soften legislation affecting ride-hail drivers in Brazil.

Uber’s fate in New York carries added weight as the company eyes an IPO in the second half of next year. If other cities follow New York’s example, it could cast doubt on Uber’s ability to maintain its growth, as well as the effectiveness of its lobbying operation. The nine-year-old company, last valued by investors at about $70 billion, recorded more than $7 billion in revenue last year but lost $4.5 billion.