The only temporary accommodation for homeless people in Lewes is on the list of 49 sites the council is making available for housing.
Lewes Stop the Cuts said the sale of Saxonbury in Juggs Lane would contribute towards the ‘social cleansing’ of the town.
But Lewes District Council said the layout and design of the flats meant it was difficult for residents to keep warm, the noise insulation was poor and that there were no self contained bathrooms.
Stop the Cuts spokesperson Chris Smith said: “We need to be building more emergency housing to cope with the crisis, not selling off what we have.
“In the long run this will cost the council money in sub-standard bed and breakfast bills.”
Lewes Stop the Cuts said land at Jubilee Gardens, the old Turkish Baths, the Tourist Information Centre, the council offices in Fisher Street, Western Road toilets, and St Mary’s Social Centre were all on the list.
When pensioners, people with children or other vulnerable people become homeless through no fault of their own, the council must find them somewhere to live.
The number of people needing to be housed in this way in Lewes district has doubled in recent years, said the group.
It was common for people to be placed in bed and breakfast accommodation in places like Eastbourne.
A spokesperson for the district council said: “Lewes District Council takes its responsibility to find accommodation for homeless people extremely seriously.
“We are committed to providing a high standard of housing for all our tenants in the district, including homeless families who deserve better.
“Our plan is to replace with affordable, energy efficient, self-contained properties within the district so that we are able to meet the individual needs of homeless people and their families.
“The council would like to see Saxonbury House refurbished and restored to provide homes of a much better standard.”
The council said it invested more than a million pounds to buy the Crest in Newhaven to provide value for money and keep families out of B&Bs.