The Crown agency now manages only nine state houses in the resort.
It sold the 10th at auction last month for $665,500, angering local charity and trust leaders.
An internal Housing NZ memo justifying the sale, released under the Official Information Act, shows it is part of a plan to remove all state housing from the resort.
"[The house] is one of just 10 residual HNZ properties in Queenstown, where an exit strategy is in place.''
The strategy, it says, is based on low demand as there is a "negligible'' waiting list of people identified by the Ministry of Social Development (MSD) as needing social housing in Queenstown.
Housing NZ chiefs also believe the area is "inappropriate'' for social housing.
"Queenstown is also a high-profile resort/lifestyle environment and has reasonable work opportunities, both of which could be seen as incompatible with a social housing presence.''
It says the need for "affordable'' ownership of housing is the dominant requirement.
The exit strategy, in place in recent years, is "via natural vacancy attrition of tenancies'' - so when someone moves out, the state house will probably go on the market.
The house auctioned last month, a two-bedroom house on Frankton Rd, could not be tenanted, Housing NZ said.
Regional portfolio manager Monique Fouwler confirmed the last tenants agreed to be transferred to another Housing NZ property in April 2015.
She did not say where.
"Because of ongoing low demand for social housing in the area, no other social housing applicants, who were assessed by MSD, were identified as needing a property of this size and location,'' she said.
Karen Stuart, manager of social services agency Happiness House, unsuccessfully tried to stop the auction.
"How far away from reality can these people be?'' Mrs Stuart asked.
"They're turning their back on a growing problem. There is a need right now.
"We've got a family eligible for social housing but there's nothing available, so they're looking to leave town like everyone else.''
Families had been discouraged from joining the social housing waiting list, she said.
"But since all this has happened, we're actively encouraging all our clients who are in a housing situation, or possible future housing situation, to apply.''
MSD assesses on five main criteria including lack of security of tenure in current accommodation and "the ability to access and afford suitable and adequate housing as a result of discrimination, lack of financial means to move and availability of alternative, affordable suitable housing in the private market''.
Queenstown Lakes Community Housing Trust executive officer Julie Scott said the rental market had changed dramatically in 12 months, and some rents had increased from $400 to $700.
"What we're seeing on the ground, which perhaps they can't see in Wellington, is low-income families struggling to pay rent in such a crazy rental market.''
The Housing NZ memo says occasional demand does arise but says it "has the appearance of being `aspirational', based on Queenstown lifestyle appeal, when other locations should satisfy''.
Ms Scott said people had established lives in the town.
"It is unfair to take the black and white approach of `if they can't afford to live here, they should move'.
"A community is made up of all sorts of people, from very low-income workers to high-income families.''
