Judge Roger Henderson QC rejected homeless Paula White's claims that the two-bedroom flat she had been offered was 'totally unacceptable' for herself and her daughter, Nicole, aged four.
The judge said she had complained about the Dunstable flat's disrepair, a potentially dangerous balcony and evidence of drug abuse and vandalism in the area.
'She was most unhappy about the area. Youths were smoking and taking drugs and there were drinkers. There was also glue-sniffing and other anti-social behaviour.'
The court heard the council accepted that the flat was in need of repair when the keys were offered to Ms White in July last year.
But the council had reassured her that the necessary work would be done and Ms White could have accepted the offer on that basis, said the judge.
He told the court that the council was entitled to take account of the pressure of demand on its scarce housing stock when deciding whether or not it was reasonable for Ms White and her daughter to occupy the flat.
Ms White turned down the flat in August last year, claiming that it was 'totally unacceptable'.
But the council insisted that the offer was a reasonable one and that it had discharged its duties towards Ms White under the Housing Act.
The have since declined to make her a further offer.
The court heard Ms White has been living in temporary council lodgings in Union Street, Dunstable, since late 1992.
The judge said council officials had fully considered all her complaints about the flat: 'nobody can say their approach was flawed in that regard'.