The Taoiseach has set the Government on a collision course with Fianna Fail by defending the proposed caps for rental increases.

Housing Minister Simon Coveney unveiled new measures yesterday, which he wants to turn into law before Christmas.

Both Dublin and Cork will be designated as rent ‘pressure zones’ - with landlords only permitted to increase payments by up to 4% a year over the next three years.

Fianna Fáil says the 4% limit for rent increases in the two cities is too high and needs to be lowered.

In a statement yesterday, the party's housing spokesperson Barry Cowen said: "We are not satisfied that the proposed 4% increase is appropriate and we also believe that tax incentives for landlords should be part of the package."

He also suggested that Galway, Limerick, Waterford and other large population centres are added to the scheme from 'day one'.

Speaking on Newstalk Breakfast this morning, Deputy Cowen argued: "Let's see the proposals, let's amend them, let's debate them, let's analyse them, and let's reach a consensus. That's what the democratic process presents us with the opportunity to do and I hope that won't be lost."

However Enda Kenny is standing by the 4% level, saying it needs to strike a balance.

In the Dáil he has appealed to Fianna Fáil to allow the measures be passed into law before the Christmas break on Friday.

"This is a really important matter for thousands of people now, and I do hope that this legislation will nto be delayed," he told deputies.