Portsmouth will remain a hub for housing asylum seekers despite the council's attempt to remove it from the list of so-called "cluster areas".
Last year, the authority wrote to the Home Office after claiming a "disproportionate number" of asylum seekers were being housed there.
The move prompted protests in the city.
The council said it had now received a letter from the Immigration Minister stating its status would not be reviewed.
However, Councillor Luke Stubbs said the letter from James Brokenshire also said the Home Office would work with Clearsprings, the private company responsible for housing asylum seekers in Portsmouth, to keep numbers in the city below 200 and would look to open up more cluster areas in the South.
The Home Office said it would continue to work with local authorities to share the duty of housing asylum seekers, but would not comment directly on its correspondence with Portsmouth City Council.
Speaking on BBC Sunday Politics South, Councillor Donna Jones, leader of Portsmouth City Council, said although the authority would "absolutely do our bit" to help asylum seekers, other areas in the South East, which had offered to help, should be considered by the Home Office for cluster area status.
There is currently a seven-year waiting list for council housing and a 1,000-place shortage of primary school places in the city, she said.
She said the authority was working to tackle those issues but added: "Unfortunately having 160 asylum families in Portsmouth right now and 25 unaccompanied children adds to my problem".