Residents of a B&B that provides emergency accommodation have said they would rather sleep on the streets as it would be "cleaner and safer".
People living in Dorchester House in Gloucester have complained of collapsed ceilings, rotten floors and bed bugs.
The 28-bed guest house in Denmark Road takes in council and agency emergency referrals from across Gloucestershire.
The Dorchester said it was working to "improve facilities" and providing safe accommodation was a priority.
Former resident Dave Collins, who stayed there after coming out of jail in September, said it was "a really bad place" and "a dump" and he would "rather be back in prison".
"It's untidy, it's substandard. There was an army of bed bugs on my pillow. I got blisters and bites under my eyes."
Another former resident, Dan Johnson, said his stay there was "the worst experience ever".
"The floors are rotten, the carpets are stained to hell, the ceilings are caving in and there's bed bugs. The streets are probably cleaner," he said.
"It needs to be shut down and everyone moved out and the place gutted... and knocked down and rebuilt."
Another former resident, Phil, said he was now choosing to sleep in a tent rather than in the "slum".
'Blood in bathrooms'
The Dorchester houses people who are often vulnerable, with complex needs and struggling with addiction.
Dave Kinghorn, manager of Gloucester City Mission, which works with homeless people, said it "had never had a great reputation".
He said he had seen "blood in the bathrooms", "mould on the walls" and "paint peeling".
"It's not a nice environment to be in. It's not good for people's mental health or their wellbeing.
"We've had a large cohort of people say they would rather sleep rough."
One of the authorities that has referred homeless people to the Dorchester, Gloucester City Council, said it had stopped doing so last month "due to them carrying out improvements".
Another authority, Cheltenham Borough Council, said it was still sending people there.
A Dorchester spokesperson said funding had been "under considerable pressure".
"Regulations on accommodation for houses of multiple occupancy have changed and the Dorchester is currently undergoing a programme of works to further improve facilities.
"We continue to make it our priority to do what we can to provide somewhere safe and managed for our tenants to live."