Council tenants will be allowed earn up to €14,000 a year under the rent-a-room scheme.
The rent-a-room scheme was first introduced in the early-2000's allows homeowners who rent out a spare room to private tenants earn up to €14,000 a year, or €269.23 per week, tax-free.
Those living in council housing were exempt from the scheme but Cabinet has now agreed to extend it to council tenants in their latest bid to tackle the housing crisis.
Read more: Nearly 12,000 people in homeless emergency accommodation in March
There are currently around 140,000 housing units owned by local authorities across the country and up to 28,000 are "under occupied", in many cases by elderly people living alone.
A spokesman for the Department of Housing told Dublin Live: "On 21 March 2023, Government agreed to extend the Rent a Room scheme disregard for social welfare recipients and extend the disregard into medical card criteria from May 1st 2023 and allow local authority tenancies to access the scheme.
"Under the current Rent-a-Room scheme, property owners can rent out rooms in their houses and apartments for €14,000 tax-free per year.
"The Department of Housing is now working with the County and City Management Association (CCMA) to put in place the appropriate legal and administrative arrangements that will allow local authority tenants to rent out vacant rooms."
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