The construction industry is telling TDs it is not viable to build houses, Fianna Fáil finance spokesman Michael McGrath told the Dáil.

The Government, he said, must take a number of steps, including examining State- controlled costs such as development levies. The Irish Water connection was adding an estimated €3,000 to €4,000 to the cost of building a new home, he added.

“It must make finance available so that residential construction can get under way,” said Mr McGrath.

He told Minister for Social Protection Joan Burton she needed to lift rent caps immediately and introduce "some sense of reality" to the rent supplement scheme.

The reality, said Mr McGrath, was that 1,500 children would sleep in emergency accommodation last night, while there were 130,000 families on the social-housing list.

“It is a scandal, it is not acceptable and it is not going to get any better without major intervention,” he said. “There is no building and there is no supply and the problem is only going to get worse.”

Ms Burton said she accepted there was “a legacy issue” relating to housing arising from the collapse in the building industry. She said that through the rent supplement housing and homes were provided for 65,000 individuals and families.

The Government, she added, was concerned about what would happen if it followed “the demands of some landlords who, I have to say, are excessively greedy”.