University property services division director Dean Macaulay said the houses — built in the 1880s and 1910s in Union St — were bought in 2016 and 2018 and were already in a "compromised state" but they had strategic land value.
However, no decision had been made on developing the site.
The house at 111 Union St , previously a student flat given the name "The Emergency Room", had been vacant for several years because it was too uneconomic to repair and 113 Union St contained asbestos, non-consented basement conversions, mould and had a wall that was a potential earthquake risk.
In 2017, Heritage New Zealand agreed to the demolition of 113 Union St after the university commissioned an archaeological report on the property.
The university rejected a recent call from the trust to instead the sell the properties for someone else to repair.
Mr Macaulay said the university’s asset management committee had agreed to demolish the villas and the university was proceeding with planning the demolition.
The university would consider the sale of the land after the houses had been demolished along with a range of other potential asset sales but no decision had yet been made.
Trust chairwoman Jo Galer said the university needed to be more careful when buying property.
"If they can’t maintain the properties they bought, then one would argue they shouldn’t buy them.
"Buying a property and not maintaining it for six or seven years is irresponsible.
"They live in the Dunedin community and have a corporate responsibility towards our heritage."
The trust earlier criticised the university over the demolition of a 1900s-built villa in Union St West across the road from the School of Physical Education, Sport and Exercise Sciences building.
