New Jersey's largest city will tax Airbnb rentals at the same rate as hotels.

The Airbnb app is displayed on a smartphone on April 21, 2014 in San Anselmo, California. (Photo Illustration by Justin Sullivan/Getty Images)

Newark Mayor Ras Baraka announced Tuesday the city had reached an agreement to have the company collect a 6 percent hotel tax on rentals that previously were not regulated. The city estimates the deal will add $750,000 in revenue in the first year.

Under the agreement, residents would be allowed to rent their homes for less than 30 days and would limit the number of properties that one user could rent to five to prevent the creation of informal Airbnb hotels.

According to a statement released by the city, Airbnb praised the agreement with Newark as a "smart, fair approach" to online home rentals.

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