The response, from the Department of Communities and Justice, has angered the welfare agency representatives and opposition Labor state MPs who gathered at the Stockton Centre at the start of the month to call for the former disability centres to be reopened as a short-term way of providing crisis accommodation to what they said was the Hunter Region's growing number of homeless people.

"This is a crisis and we need solutions now," Newcastle MP Tim Crakanthorp said yesterday.

"No one is saying this solution is perfect but it's much better than sleeping in your car or on the street.

"If the government thinks this solution is not viable then I challenge them to be constructive and offer an alternative idea."

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Advocates of using the two centres say they could accommodate hundreds of people, with dormitory rooms available for individuals and cottages for families or groups.

When this was put to the department, a spokesperson said the state already funded "300 dwellings" in Newcastle and Port Stephens local government areas under the Community Housing Leasing Program and the Social and Affordable Housing Fund and was talking with City of Newcastle about solutions.

The spokesperson said the government was spending $4.1 million on homelessness in Newcastle and Port Stephens.

But using Tomaree Lodge and the Stockton Centre was ruled out.

Tomaree's sewage system was "not operational" and "significant parts" of Stockton's "sewage, electricity and water" were "not operational or fit for purpose".

Port Stephens MP Kate Washington said people were still living at Tomaree Lodge last year and the sewage system was working then.

"Either the government thinks we're all stupid, or they just don't care about local families who are becoming homeless," Ms Washington said.

"I have serious doubts about the government's claim, and I'll be seeking further information. But even if it were true, after 12 years, is this Liberal Government so incompetent that it can't fix a plumbing issue to provide shelter to families facing homelessness?

"Are local families seriously expected to live in their cars or on the street because the Minister for Families and Communities can't be bothered to hire a plumber?"

Wendy Cuneo, a member of the Stockton Centre Welfare Association, said the sewage system at Stockton had also been operational when there were still people living there.

"There might have been occasional problems if people put things they shouldn't have down the toilet, but that was about all," Ms Cuneo said.

Port Stephens Family and Neighbourhood Services assistant manager Ann Fletcher said from a homelessness conference in Canberra yesterday that Australia was experiencing a homelessness crisis.

Ms Fletcher said the organisation had provided housing support services to more than 800 people a year in the past two years, more than double the numbers before COVID.

She said the pandemic had triggered some substantial changes in the Port Stephens housing market, with properties that were previously on the rental market being bought by people moving from Sydney who were working remotely.

Rents had also risen substantially, and even in more inland Hunter towns where rents were traditionally cheaper, houses were scarcer and more expensive - so much so that virtually all rentals were out of reach of people on government benefits.

Marcia Chapman, manager of Newcastle refuge Jenny's Place, said the government's response was disappointing, but that Jenny's Place would "continue to explore any and all options for affordable housing to accommodate our clients in safety".

"The Stockton Centre might not be as accessible as we would ideally like for our clients, but the need for housing remains urgent," Ms Chapman said.

"Any avenue for short to medium-term solutions should be fully explored, alongside planning for longer-term initiatives."

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