How is this making her unable to work?
Not really sure how these things work, so correct me if i'm wrong, but to qualify for a housing association flat, does she have to be on reduced income/benefits? I would suggest that she rents privately instead though, and then she can choose her surroundings herself. As far as the housing association are probably concerned, why should they move her to somewhere better? and they'll still have to put someone else in your niece's flat - they get nothing from this?