An inquiry into Birmingham has found it "not guilty" of failing to provide low-cost housing, according to Ministers.
An investigation gave the local authority a clean bill of health, said Local Government Minister Yvette Cooper.
But city council leaders accused her of playing political games with people's homes.
Councillor John Lines, cabinet member for housing, said: "Nobody has even come to speak to us."
The inquiry was announced by Ms Cooper in the House of Commons three weeks ago, after Labour MPs criticised the local authority.
It followed the publication of a report by the Independent Housing Commission, chaired by Professor Anne Power of the London School of Economics, which warned Birmingham faced "critical gaps" in its housing policy.
Ms Cooper said she was concerned the council, led by a Conservative and Liberal Democrat partnership, was making it difficult for housing associations to build low-cost homes by pushing up the cost of land.
The council should be working closely with housing associations but, instead, it was working against them, she said.
However yesterday she announced that the problem has been solved.
In response to questioning from MP John Hemming (Lib Dem Yardley), she said: "The aim of the inquiry about provision of affordable housing in Birmingham was to establish how the city council could achieve optimal affordable housing outputs from the Government subsidy provided.
"The Housing Corporation has reported to me that it has discussed with Birmingham City Council the effect of land costs for housing associations . . . I understand that the Housing Corporation and Birmingham City Council have made significant progress with regards to land costs and improving value for money which has resulted in an increase in the new homes that can be provided."
Coun Lines said: "I don't know of any investigation, but I have had a number of housing associations that have come to me giving their support and saying how well Birmingham is working with them.
"We are working very hard and spending money on bringing our homes up to a decent standard rather than wasting millions trying to hive them off to private corporations, but the Labour MPs and Ministers don't seem to like that."
Ms Cooper said officials were still looking into the council's "longer term approach".