Sedgefield Borough Council has been criticised in a report which gave its housing maintenance service a zero rating.
The independent Audit Commission report says the service is "poor and has uncertain prospects for improvement".
It says the no stars rating has been made because the service fails to have a customer focus, access to all aspects is limited, and information about the level of service customers can expect is lacking.
The report adds that poor working practices and inadequate information systems reduce the service's ability to provide a good quality, value- for-money service.
Roy Irwin, Chief Inspector of Housing, said: "The council has now begun work on a new improvement plan which recognises the weaknesses of the current service and is realistic in its short and medium-term goals.
"If all the actions in the improvement plan are achieved this will deliver significant improvements to customers.
"However, the plan still needs to gain the approval and support of councillors, staff, tenants and all partners and stakeholders.
"In addition, we found the service to be very poor, and so the level of change required to move the service to a 'fair' rating is substantial."
Inspectors found many weaknesses in the service, including a high level of emergency repairs, a sub-standard gas servicing policy and poor cleanliness of empty properties.
Inspectors said there were positive aspects, including a useful tenants' guide to housing repairs, polite and courteous staff and the speed at which high priority adaptations were completed.
A Sedgefield Borough Council spokesman said: "Although we feel our properties are in a relatively good condition, it is clear that our responsive maintenance service is not providing the standard that is expected.
"We have worked closely with the Best Value Housing Inspectors throughout this inspection and we have accepted their findings. However, we have responded positively to the report findings and this has been acknowledged by the Best Value Inspectors.
"We have reviewed and updated our service improvement plan to provide a more comprehensive and robust set of actions, in which we can take the service forward, to make steady progress and ensure we are continually improving over the five years of the plan."
He added: "We are confident the service improvement plan will be delivered, will ensure continuous improvement in the service, and upon next inspection will positively move up in the ratings."
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