Senior judges quashed the PSNI's decision to refuse Rosaleen and Annette Cooley a Chief Constable's Certificates which is required for the Housing Executive's Scheme for the Purchase of Evacuated Dwellings (SPED).
They held that a proper analysis was not carried out into the risk created by an incident where a bullet was discovered in Annette Cooley's hallway.
Lord Chief Justice Sir Declan Morgan also said a senior officer who assessed their case was not in a position to decide the pair's psychological injuries as being at the lower end of the scale.
Rosaleen Cooley, 70, and her 51-year-old daughter endured years of criminal damage and abuse while living in houses on Mountpottinger Road, an area of east Belfast blighted by disorder and violence.
Reported incidents involved stone and firework attacks as sectarian trouble raged around them.
With both unable to live in the home they attempted to sell through the SPED scheme.
However, their applications were turned down, after the PSNI refused to issue a Chief Constable's Certificate to help them on the scheme.
Although it was accepted that they have been directly or specifically threatened or intimidated, police concluded in November 2011 they were not at risk of death or serious injury.
In a failed High Court challenge Rosaleen Cooley was described as an elderly lady with a serious mental health problem whose daughter now lives with and cares for her.
A letter sent to the Chief Constable on Annette Cooley's behalf by SDLP MP Alasdair McDonnell described how the windows on her home were covered by steel grids and triple glazed for extra reinforcement against missile attacks.
Heavy drops bars were installed on the front door, although they had not been used for years because it was too risky, he wrote.
Dr McDonnell also stated: "Annette, her family and any guests remain in the kitchen at the back instead of the living room at the front.
"Lights cannot be put on at this side of the house at all during the night, because this is an indication that there is someone inside, and very often a precursor to a barrage of missile attacks."
Her doctor also stated that she has suffered anxiety, stress and sleeplessness due to threats, abuse and other problems over 13 years living at the interface.
"She has retreated to her house and is afraid to go out especially in the evenings or at night," he added.
The Cooleys were provided with alternative accommodation after the Housing Executive accepted Annette was unintentionally homeless and entitled to intimidation points.
A High Court judge dismissed their judicial review, ruling that the Assistant Chief Constable who made the decision had taken account of all relevant considerations.
However, the Court of Appeal overturned that verdict based on the assessment of the bullet incident.
Referring to the Cooley's case, Sir Declan said: "That was a specific threat directed to the persons residing at that address, threatening to kill them and was of a different character from the threats arising from the location of the property on the interface.
"Nowhere in the ACC's submissions was there any analysis of the additional specific threat or risk posed by the discovery of the bullet, the judge held.
"Reasons should have been given explaining the assessment of the bullet incident and the risk to which it gave rise," he said.
Sir Declan, sitting with Lord Justice Girvan and Mr Justice Weatherup, also found that the police officer was not in a position to conclude that the mental health consequences for either of the Cooleys was at the lower end of the psychological injury scale.
He confirmed: "The appeal is allowed and the decision to refuse a Chief Constable's Certificate is quashed in each case."