Environment Minister Alan Kelly has blamed the Central Bank for the "perfect storm" that has caused the current housing crisis.

In an exclusive interview with the Sunday Independent, Mr Kelly said the tough 20pc deposit rules introduced by the Central Bank have had a devastating impact on the housing sector.

Speaking in the wake of Philip Lane's appointment as the new governor of the Central Bank, Mr Kelly says something must be done to address the "number one" problem in the country.

"Given the Central Bank rules, it means pressure from the top and it means that people are being squeezed out, they can't afford it. Now, that's not acceptable," he said.

He said that while he welcomed intervention in order to prevent another bubble, the bank's new rules have "absolutely hammered" house building in the capital.

"It has absolutely hammered housing construction in Dublin, where they seem to have downed tools. Some of that is because builders paid heavy prices for land during the boom and are still being greedy and expecting boom-time profits," he said.

Mr Kelly was speaking as it was reported that the number of houses being built in Dublin is falling with just 2,057 being built last year. This is well short of the 8,000 a year needed in Dublin.

He said as a result there is a generation of people who are now being forced to rent and this is driving family homelessness.

"There is now a generation of people who have to rent while trying to save for a deposit and this is heaping pressure on the private rental sector which is causing family homelessness. There is a supply-line of social housing construction underway - but the private sector is not responding to demand," he said.

He said the Government is keen to ensure developers and builders are encouraged to build houses, primarily starter homes valued at under €300,000 in Dublin.

"What that means is we need to ensure that developers, builders, are going to build houses in Dublin that my generation and those younger than me can actually afford, in the €300,000 bracket, because the largest amount of development that's going on in Dublin is at a scale that's beyond that," he said.

He said the Central Bank rules are probably the right long-term policy, but short-term "we are paying a heavy price, with people falling out of the rental sector. This is what I was fearful of when the rules came in," he said.

But he warned that such is the perfect storm, the country runs the risk of over-building homes in counties surrounding Dublin rather than building in Dublin itself.

"The other thing is from a development side. We are now building more houses in Kildare than in Dublin. That means infrastructure has to be built. We're just basically going to end up repeating the same problems as we had before," he said.

Speaking yesterday, Mr Lane said he was not in a position to comment on the 20pc rule and would not be speaking publicly until he formally takes up his new role.

Mr Kelly has also lashed out at Government officials who he said "need to wake up" to the crisis, accusing many of them of being out of touch. "The level of seriousness of this issue is certainly at a political level, but I think some people at certain officialdoms need to wake up to this. They need to understand it because it doesn't affect them in their daily lives," he said.

Mr Kelly also criticised developers who are refusing to build because of what he sees as "bizarre" profit expectations. "There are big problems, legacy issues, expectations of developers are in some cases bizarre, the profit levels that they think they'll meet," he added.

Mr Kelly said he is still committed to plans for delivering rent certainty with Minister Michael Noonan and hopes to announce them before Christmas. He also denied reports of a major spat with Mr Noonan in the run-up to the Budget.

"I've never had a row with Michael Noonan in my life. He will verify the same thing. I've never had an angry word with the man in my life. So it's complete and utter rubbish," he said.

Mr Kelly was also deeply critical of his immediate predecessor and now EU Commissioner Phil Hogan.

"Being frank, I was given the biggest hospital pass in the history of modern politics," he said. "In terms of issues, I have said the man should have done more, I still stand by that, I think he should have done better," Mr Kelly said of Mr Hogan.

Sunday Independent