Department of Finance officials were warned that a five-year capital gains tax exemption for certain property funds would incentivise the funds to hoard property instead of selling it.
The warning emerged in emails obtained under Freedom of Information by Sinn Féin’s finance spokesman Pearse Doherty.
Last year the Government legislated for Irish Real Estate Funds in the Finance Bill.
If the funds purchase and hold property for a five-year period they are exempt from capital gains tax.
In one email, the Department of Finance was warned by the Revenue Commissioners that the exemption would create a "lock on the residential market".
Revenue also said that in instances where funds bought apartment blocks from the State the funds would retain the block for a "long time".
"The individual sale of these was always the intention....now...they won’t be released until 2019 -2021," the Revenue official said.
"The effect of this policy was to clog up housing supply for buyers at a time of a drought in supply and this is pushing up house prices," Mr Doherty commented.
"It is unacceptable that the change was brought in without this analysis being presented," he added.
Mr Doherty told RTÉ's News at One that the Finance Committee and Oireachtas was "kept in the dark about these unforeseen consequences" when the legislation was being debated.
He said that it is not clear whether or not the apartment blocks in question are housing residents.
A spokesman for the Department of Finance said that in the longer term the policy would "lead to a more sustainable secure property market for investors and property tenants".
"Although a gain may be exempt...tax will still be payable on the rental income," he added.