Regulations will be drawn up this month by the Minister for Social and Family Affairs on the maximum rent levels that will apply next year for the rent supplement scheme.
Ms Coughlan said the limits would be "realistic".
She has told the Dáil she is reforming the scheme for the first time since its introduction in 1971 and she would be "dealing wholeheartedly" with abuses in the system.
When the scheme started it was intended for single men, as an emergency measure for people who had lost a job. Addressing the controversy over the cuts in the scheme, she stressed that it was intended to deal with emergencies and short-term needs.
It "is not a housing programme", but since the 1970s it had expanded "into complete and wholehearted housing support".
Having unconnected housing programmes "is inappropriate, unfair and unsustainable", she said. "I am determined to make progress in tackling this, to achieve a better outcome for all concerned."
Fine Gael's spokesman, Mr Michael Ring, demanded to know, however, how the Minister could expect "someone on social welfare and in need of housing to have six months' rent along with a deposit for a landlord. Where does she expect people to get the money?"
Labour's spokesman, Mr Willie Penrose, asked "what kind of social policy requires that people have to get to the point of absolute desperation before they qualify for payment of rent supplement?"
Ms Coughlan replied that "it does not make sense to have two parallel but entirely separate programmes, one operated by the housing authorities and the other by the health boards".
Rent supplement will now be payable only where the person has been in rented accommodation for six months.
Ms Coughlan said, however, that the supplement would continue to be available to people with housing needs whose safety and well-being was at risk, such as people with disabilities, the elderly or those experiencing severe social problems.
She said the rent allowance had increased to €500 million this year and the Minister for the Environment was providing more than €1.9 billion to address housing needs.
It might be a fair point to say that was not enough but "it is wrong to approve of an expansion of a scheme which is not a housing scheme but a short-term emergency measure", she added.
