Two children aged seven and eight have won a High Court case to take MK Council to a judicial review for failing to house them.
The youngsters are Nigerian nationals and came to the UK with their mother when they were toddlers.
The mother, known only as BU, is still battling immigrations authorities to have a right to remain in the UK.
Early this year she approached MK Council for help, saying she and the children were destitute.
She said family and friends were not willing to accommodate them and she was scraping a living by braiding people’s hair for £10 or £20 a time.
The council carried out an assessment of the mum, who because of her immigration status is unable to claim benefits, work or hold a tenancy.
BU and the children were provided with temporary accommodation while the assessment was ongoing.
Officials concluded BU was not destitute and the children did not need support under the children’s act because they had other people, including a father in Nigeria who could help them. They did, however, offer to take the children into foster care.
When BU later presented evidence of change of circumstances claiming this help was no longer available, the council still refused to budge.
Lawyers for the children launched their High Court battle in September, claiming the council had failed in its duty under the Childrens Act to take all reasonable steps to assess children deemed to be in need. If this need is proved, the council has a legal duty to provide housing for the children.
Despite rigorous defence at the hearing from a council-hired barrister, the two youngsters last week won the right for their needs to be scrutinised at a judicial review. This could cost the council tens of thousands of pounds if it loses.
The council’s barrister claimed the mother had lied or failed to disclose important information that affected the council’s decision about whether or not the family was destitute.
An MK Council spokesman said this week: “The judge agreed that, having conducted a careful assessment, the council was entitled to find that the mother’s account lacked credibility and that she had access to undisclosed financial resources - which she could use to support and accommodate the children.
“Despite this, the judge rejected the council’s argument that the mother had other options for housing herself and the children because as someone with no leave to remain in the UK it would be unlawful for her to rent residential accommodation.
“Therefore, for the time being, the council will continue to provide temporary accommodation for this mother and her children.”
The spokesman added: “The full costs have yet to be decided, but the council’s own costs will be in the region of £12k.”