The City of Perth has warned residents they could be prosecuted if they are caught renting or selling their private parking bays.
Dismissing claims of expensive and scarce parking, the council's chief executive Gary Stevenson said planning and parking policies made it unlawful to lease private residential parking for commercial use.
"Leasing surplus commercial, or office, tenant bays to workers of other buildings is also contrary to planning and licensing approvals and subject to legal enforcement," Mr Stevenson said.
"Where misuse is found to be occurring, the city will advise the owners that they are in contravention of their approvals and any ongoing non-compliance can be prosecuted by both the City of Perth and the Department of Transport."
He said residential parking permits could only be used by a property's owner or their visitors, and could not be used by someone undertaking commercial activity in the city.
The warning comes after it emerged CBD residents and business owners have been making thousands of dollars a year renting their parking spaces to drivers keen to avoid high parking fees and crowded carparks.
Melbourne company Parkhound allows residents to list their parking spaces and permits for hourly, daily or weekly rental on a website or smartphone app.
Mr Stevenson said council officers would contact Parkhound to ensure it had checks to ensure people offering their bays were not breaching city policies.
He dismissed claims there was a scarcity of parking in the city and that prices charged by private operators were significantly cheaper than those imposed by the council.
"The City of Perth operates more than 16,000 bays and offers a big range of parking options for commuters, including early-bird rates and lower rates on the city's fringe," he said.
"In relation to congestion, the city has to pay a levy to the State Government for every parking bay it operates and this goes towards providing free public transport in the city.
"That is a specific strategy to reduce congestion."
Parkhound co-founder Rob Crocitti said he welcomed the council's response.
"We are more than happy to sit down with them to help resolve the current parking situation in Perth," he said, adding that he was yet to receive formal communication from the council.