Developers submitted plans to turn the Castle Howard Ox, thought to date back to the 1830s, into 16 flats.
Star Pubs and Bars bought the Townend Street pub in August 2017 and immediately closed it before putting it on the market in November 2018.
The freehold was advertised for £250,000 and more than 80 enquiries were received, though none of the final 12 bids were to run it as a pub or restaurant.
But councillor Jonny Crawshaw said the council’s own policy on ensuring community facilities are marketed for at least a year had not been met, with the evidence submitted to the council only showing it had been marketed for seven months.
He said: “I feel that this is unfortunately another example of pub operators seeing their buildings as assets that they can turnover for a quick profit and I think that that is what is happening here.”
The selling off of the Castle Howard Ox would leave The Groves area of the city with just one pub after losing three others in recent years. Questions have also been raised about the future of nearby Punch Bowl, which is not currently open.
Coun Crawshaw added: “If we are putting in policies then we ought to stick to those policies and I think that if we had received financial information submitting that the profitability of the pub was not viable in 2017 then it might be a slightly different situation.
“I think that the fact that the area will have lost potentially all of its pubs in six months or a years’ time is of concern.”
He also noted that The Carlton Tavern in Acomb Road had gone on to “thrive” after councillors rejected plans to turn it into a care home.
Councillor Tony Fisher, a CAMRA member, did not support Coun Crawshaw’s argument, adding: “The Castle Howard Ox has never particularly thrived. Some areas of York have a thriving pub culture, this part never has.”
The council’s development manager Gareth Arnold told the meeting: “We know that the premises has suffered from high turnover of tenants and it was felt that it was unlikely to be a viable tenanted pub.
“We didn’t feel that on balance there would be anything gained from requiring an additional period of marketing, added to the fact that there are other pubs in the area.”
Concerns were also raised about the size of some of the flats, with councillor Denise Craghill saying students would be “crammed in” in the smaller rooms.
Councillors Fisher and Daubney noted that they appeared to be larger than accommodation they stayed in during their own student days. The proposal to refuse permission was won by a vote of six to four.
The name of the pub is said to have come from an ox called White Willy, which was owned by a syndicate who lived near Castle Howard and which was exhibited in York in 1833.