Despite a waiting list for properties in the South, Housing New Zealand has sold 76 houses considered surplus to requirements in those provinces and acquired 23 alternative properties, figures supplied by the department show.
Dunedin-based Ms Turei has long lobbied for more state houses to be built or acquired.
Approached for comment on the department's figures on Friday, she said now was not the time to be selling state houses.
"There is a rental shortage in the city. There is a waiting list for state houses. Some people are sleeping rough or using emergency accommodation. There are children living in substandard houses in the private rental sector.
"While all that is going on, to have 53 state houses less than we did three years ago is a disgrace."
At the end of June, 120 Otago and Southland people were on Housing New Zealand's waiting list, 86 in Otago and 53 in Invercargill. Of the total, 53 - 46 in Otago and seven in Southland - were assessed as having a severe or significant need.
Housing New Zealand, which owns or leases 69,000 houses nationally and 2066 in Otago and Southland, has been selling properties since 2009. A spokeswoman said properties sold were too old or too expensive to maintain, no longer met customer needs, did not perform financially, or were not in the right location.
In the past three years, 54 houses had been sold in the Dunedin/Otago area and 22 in Invercargill/Southland. Over the same period, 23 properties were acquired, all in Dunedin or Otago. One property was purchased, four were built and 18 were leased.
No information was available on the exact locations of the properties sold or acquired, the spokeswoman said.
Housing New Zealand's portfolio was skewed towards three-bedroomed homes, but the demand nationally and in the South was for one- and two-bedroomed homes and larger homes of four bedrooms or more, she said.
Ms Turei said while it was reasonable for Housing New Zealand to reassess its stock to meet demand, it "should not be selling houses before it had replaced them".
Last year, an advisory group appointed by the Ministers of Finance and Housing to examine current and future social housing needs reported a growing shortage of affordable homes and an increasing number of people in need of state housing who were unable to get it. It estimated a shortage of 70,000 homes, with the greatest demand in Auckland, and 8500 to 20,000 households with extreme housing issues.
The group recommended the Government collaborate with councils and community organisations to provide more affordable social housing.
Despite that, the Government halved its budget for state-house acquisitions and improvements this year, from $18.1 million to $9 million, Ms Tueri said.
