It has been revealed that landlords in Dublin are cramming up to 30 people into properties as they rake in thousands of euro a week.
A special investigation by the Irish Independent found that landlords are fooling council staff by hiding bunk beds before inspections.
Meanwhile, it has also been found that Ireland failed to provide adequate housing conditions on local authority estates.
The landmark ruling by the European Committee of Social Rights, part of the 47 nation Council of Europe, has been published today.
The complaint was brought by the International Federation for Human Rights against Ireland on behalf of the Tenants Collective Action.
It is estimated close to 355,000 people live in local authority housing across the country.
Cecilia Forrestal, who is with Community Action Network, said: "The State has to report to the Council of Europe by this time next year to say what measures they have taken to address the violation.
"We too will have the opportunity of reporting our experience.
"So our hope is that this is the beginning of engagement, the beginning of really meaningfully valuing the existing social housing stock and the existing housing tenants, and building a proper housing policy into the future."
European watchdogs backed a collective complaint and warned that some residents, including a high number of those in Dolphin House in Dublin, are living with sewage invasion years after the problems were first reported.
They said conditions are so poor in some council complexes that people live with contaminated water, dampness and persistent mould.
The report by the European Committee of Social Rights found a number of estates are inadequate and standards have deteriorated since the economic crisis.
"The committee finds that the Government has failed to take sufficient and timely measures to ensure the right to housing of an adequate standard for not an insignificant number of families living in local authority housing," it said.
The watchdogs also warned there is no national timetable for local authority housing to be refurbished and that the last state survey of standards was 15 years ago.
They said many regeneration schemes were shelved after 2008.
Dublin City Council had plans to revive 12 large disadvantaged inner city estates with 11,000 flats but all those were halted or delayed in the recession, except for Fatima Mansions which was virtually complete.
But the committee refused to uphold complaints that people living in many of the estates were being discriminated against or that their health, in particular those in Dolphin House, was affected specifically by poor housing.
The complaint was lodged in 2014 by the Paris-based International Federation for Human Rights on behalf of 130,000 residents in estates in inner city Dublin and Limerick over sewage problems, persistent leaks, damp and mould.
It highlighted conditions in estates like Dolphin House, St Theresa's Gardens, Charlemont Street and Bridgefoot Street in Dublin's south inner city and O'Devaney Gardens, Dominick St, Croke Villas in the north inner city, among others.
Surveys carried out on residents in Dolphin House in 2012 revealed a risk of lung disease and nine out of 10 children missing school days because of the impact of damp, mould and sewage.
Some people in the flats reported breathing difficulties, diarrhoea, skin rashes and depression due to the poor conditions.
The committee found some of the health issues were temporary and subjective and that the complaint did not sufficiently demonstrate that health issues were directly caused by poor living conditions.
The landmark case was taken under the European Social Charter, a Council of Europe treaty which guarantees social and economic human rights and that Ireland signed up to in 2000.
Debbie Mulhall, who has lived at Dolphin House all her life, said she had been vindicated.
"For years, tenants have put forward proof that we are living in unacceptable, unhealthy and uninhabitable conditions," she said.
"This has been constantly disputed.
"We have been consistently told that the dire conditions are of our own making, that persistent damp and mould is caused because of drying clothes or steaming pots, for example.
"This decision puts an end to this and finds that our right to housing of an adequate standard has been violated."
Ms Forrestal said the ruling demanded a serious response.
"Nobody wants to see Irish state housing being run down," she said.
"These Irish citizens have a right to a decent home, in particular the children living in state housing."