UPDATE 1-Irish government secures deal on rent caps amid housing crunch

(Updates after opposition agrees to support government bill)

DUBLIN, Dec 15 (Reuters) - Ireland’s minority government secured opposition backing for residential rent controls on Thursday after accepting a demand to immediately consider expanding the scheme beyond the country’s two largest cities.

Though Ireland was left with a surplus of houses after a 2008 property crash, supply has since failed to come anywhere close to matching demand in a fast-recovering economy, catapulting rents back above their peak in the “Celtic Tiger” years.

The bill will impose temporary controls to limit annual increases to 4 percent for three years in Ireland’s two largest cities, with other areas to be considered immediately, Housing Minister Simon Coveney told parliament.

The opposition Fianna Fail party had initially refused to support the proposal by Coveney’s Fine Gael party in one of the most public disputes between the two parties since a deal to form a minority government in April.

As the Fine Gael minority government does not have enough seats in parliament to pass laws on its own, it needs Fianna Fail to abstain.

“I am pleased that for the first time in the history of the state, is now in a position to introduce rent certainty measures that will protect tenants,” Fianna Fail housing spokesman Barry Cowen said in a statement.

The bill is due to be passed in parliament on Friday, the last day the lower house is scheduled to sit before the Christmas recess. (Reporting by Padraic Halpin and Conor Humphries; Editing by Mark Heinrich)