In response to Water, Property and Housing budget estimate questions, the government revealed Land and Housing Corporation-owned properties in the Newcastle allocation zone declined from 4397 in 2009/10 to 4247 in 2019/20.

Social housing properties managed by the government in the local government area also decreased from 3921 in 2011/12 to 3777 in 2019/20, while the number of properties managed by community providers rose from 481 to 553 in the same period.

To counteract this declining housing availability, Hunter Labor MPs have called on the government to make social housing a priority in Tuesday's state budget.

Newcastle MP Tim Crakanthorp said the decrease was "disappointing, but it's not surprising".

"This government is flogging off these properties in Newcastle and raking in the cash, but completely failing to build appropriate properties to keep up with demand," he said.

A NSW Land and Housing Corporation spokesperson said most properties it sold were "run down and the ongoing cost to maintain them is simply not sustainable".

"The demographic of people who require social housing has changed significantly and as such our properties need to reflect that," the spokesperson said. "Three to four-bedroom homes that don't accommodate for mobility issues of our largely ageing tenant base, many of whom live alone, are simply not fit for purpose."

They said sale proceeds from old homes were re-invested into building new homes that are "modern, well-designed and built specifically for the people that will live in them".

"New homes are built in areas of demand across NSW," the spokesperson said. "In the last nine years, social housing stock has increased by 10 per cent.

"We have the biggest social housing building program of any state or territory across Australia, and this financial year we increased the budget for social housing investment by over 80 per cent."

The spokesperson said the corporation had five Hunter projects under construction to deliver 35 new social homes, including in Adamstown, Shortland and Waratah West, and a further 83 new dwellings were planned in the region.

But the wait time for all types of social housing in Newcastle is five to 10 years, with 1200 people on the waiting list as of June 30, 2020.

Matthew Talbot Homelessness Service manager Karen Soper said the government needed to do more.

"The government hasn't committed to building enough social houses," she said. "The commitment they've made doesn't even meet the need we currently have let alone what it's going to be in six months time."

Community housing provider Hume said it received 1000 inquiries a month on average from people seeking temporary accommodation.

"On average there are 20 households per night provided with temporary accommodation through Hume," Hume CEO Nicola Lemon said. "We recently published Hunter data which showed a 24 per cent increase in the need for temporary accommodation for those deemed homeless."

Ahead of next week's budget, Charlestown MP Jodie Harrison listed social housing as one of three of her wishlist items, while Mr Crakanthorp said the budget was "the perfect opportunity" for the government to make a serious commitment to reducing homelessness.

"There must be a real increase in the number of beds, not just properties, available for people who need social housing," Ms Harrison said.

"More social housing will relieve the immense pressure homelessness services are experiencing - as they simply have nowhere to house people who are homeless or leaving domestic violence."

"Our social housing stock needs a significant boost," Mr Crakanthorp said. "Last year the Victorian Labor Government committed $5 billion to new and upgraded social housing stock. This is the kind of investment NSW needs.

"We're in a horrid situation at the moment where demand for both rentals and property to purchase is through the roof. This is not sustainable and without more social and affordable housing we will be facing a homelessness situation we've never before seen."

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