The Taoiseach has told the Fine Gael parliamentary party that if the Government cannot get the support it requires to bring in its planned measures to tackle rising rents it will withdraw the legislation underpinning the measures.

Fianna Fáil has raised a number of concerns about the Government's strategy and wants the proposed 4% limit on rent increases in rent pressure zones to be reduced to 2%.

It also wants other areas designated as rent pressure zones – currently the cap will only apply to Dublin and Cork city.

Fianna Fáil also wants tax incentives for landlords.

However, Taoiseach Enda Kenny told the Fine Gael meeting tonight if the Government has to withdraw the legislation it would leave people in a perilous position heading into 2017.

The parliamentary party endorsed the position and measures put forward by Minister for Housing Simon Coveney.

Mr Coveney told the meeting that the 4% was a qualified figure and not plucked out of the sky like the 2% proposed by Fianna Fáil.

He said there was a risk of being too aggressive in the market and this could affect supply.

He also said the areas that are designated rent pressure zones have to meet certain criteria. In relation to incentives for landlords he said that tax measures were a budgetary matter and they could not be negotiated eight weeks after the budget.

Mr Coveney earlier wrote to Fianna Fáil responding to the party's criticism of the Government’s plan.

In his letter this afternoon, Mr Coveney outlined the Government's view on Fianna Fáil's concerns.

The minister also addressed the issue of extending the 4% annual rent rise cap to other cities and the commuter belt around the capital.

In the letter to Fianna Fáil spokesperson on housing Barry Cowen, Mr Coveney said he had instructed the Residential Tenancies Board to make it a priority to get information on rental pressures in Galway, Limerick and Waterford as well as the areas around Dublin by the end of February.

The aim is to examine whether these areas are experiencing such significant upward rental pressures that they would qualify to have the 4% rent cap imposed.

Mr Coveney also said the Government selected the figure following careful consideration and analysis with a wide variety of stakeholders.

He said there was a need for a reasonable rate of return on investment to ensure that rents were not spiked after areas are removed as pressure zones after three years.

He also said they did not want to drive existing rental supply out of the market and discourage prospective additional investment.

He added that a body representing landlords has already stated that the Government’s approach is tipped too far and will dry up supply.

Mr Coveney also argued that a lower figure would effectively be trying to introduce rent controls while encouraging supply and these are mutually exclusive.

At a meeting last night, Fianna Fáil proposed reducing the 4% limit to 2%.

Mr Coveney also pointed out that the Fianna Fáil call for tax measures for landlords will be examined by a working group charted by the Department of Finance and it is not possible or desirable to bring in measures that might be contained in budget 2018 in a piecemeal manner or to prejudge budget discussions that would take place in the Oireachtas.

Mr Coveney and Mr Cowen are understood to be meeting this evening to try to find a compromise.

Earlier, Mr Cowen said Fine Gael had "come a long way", but it was Fianna Fáil's duty and prerogative to try and improve the legislation to ensure tenants get a break.

He said there is ample opportunity for amendments to the strategy to be laid before the Dáil and some assistance must be offered to renters everywhere.

He said his party is currently putting down amendments and is prepared to engage in the passing of improved legislation but no deal had been done.

Fianna Fáil's education spokesperson described the rental strategy as inappropriate and a 'procedural nightmare'

Thomas Byrne said the issue is extremely market sensitive and that action must be taken this week, adding that there are a lot of small-time landlords who deserved a break in terms of tax incentives.

He also said that housing supplies must be increased and families removed from hotels. 

A Fianna Fáil parliamentary party meeting on the issue this evening has heard it is 50-50 as to whether a compromise can be found.

Some members told the meeting an agreement would have to be reached before Christmas as tenants who are due rent reviews shortly could face rent hikes before new measures are introduced.

It is understood the discussion on the matter was brief and party leader Micheál Martin addressed the meeting for a short period.

Meanwhile, Sinn Fein's housing spokesperson Eoin Ó Broin has appealed to Mr Coveney and the Government to rethink the additional costs he said the legislation will impose on renters.

He said it is not enough just to vote down the legislation and that a credible alternative needs to be in place.

Mr Ó Broin said that a 12% increase to a family in Dublin - 4% a year for three years - would amount to an extra €4,500.

The Dáil is set to debate the legislation tomorrow.

Fine Gael Chief Whip Regina Doherty told members the Dáil the debate "shall continue until the conclusion."

The Dáil had originally been due to sit on Friday to pass the bill.