Plymouth City Council has been ordered to pay £2,500 to a couple who claim their damp home has made their son ill.
The ombudsman says the council mishandled the case
The Local Government Ombudsman says the council must now also reassess a request to transfer the family to a different council house.
The complainants, who have not been named, say the damp conditions have contributed to their son's asthma.
Plymouth City Council acknowledges it has received the report and has three months to make its response.
Jerry White, the Local Government Ombudsman, has ruled that as a result of the council's mishandling of the case, the complainants have had to endure unacceptable living conditions for longer than necessary.
His report adds there has to be a reasonable assumption that the living conditions in the council house were prejudicial to the boy's health.
The couple also claim that clothing , carpets and wardrobes have been damaged as a result of damp.