The Federal Government is set to waive Tasmania's $150 million housing debt.

Key points: The debt was accumulated to pay for the construction of public housing between 1956 and 1989

The debt was accumulated to pay for the construction of public housing between 1956 and 1989 The welfare sector says the waiving of the debt will allow the state to build 30 new houses a year

The welfare sector says the waiving of the debt will allow the state to build 30 new houses a year Other states owe the Federal Government $2 billion in public housing debt

Sources have confirmed the debt is to be waived in full as part of a deal struck with Senator Jacqui Lambie, to secure her vote in favour of the Government's $158 billion tax cut.

The Tasmanian Government spends $15 million each year repaying the debt, about half of the amount the Commonwealth gives to Tasmania for housing.

The debt was accumulated to pay for the construction of public housing between 1956 and 1989, with repayments beginning in 2006.

Kym Goodes, chief executive of Tasmanian's Council of Social Services, said public housing in Tasmania had effectively been underfunded because of the debt burden.

"The impacts of an underfunded housing system are real," she told the ABC.

"We hear stories of people going without food for multiple days in a row just to keep a roof over their heads through extreme levels of rent.

"We have heard stories of women who are potentially being forced to exchange sex for somewhere to sleep of a night and on and on these stories go and they are not stories, they are people."

More than 3,000 people are on the waiting list for public housing.

Professor Richard Eccleston from the University of Tasmania believes it makes economic sense to waive housing debts.

"The long-term return on secure and affordable housing is really high and that's one reason why we need to re-frame the debate, rather than thinking about it being one particular dimension about the welfare system," he said.

Kym Goodes says an extra 30 new houses could be built with the money each year. ( ABC News: Lucy MacDonald )

"So, that broader conversation that affordable and suitable housing is really important infrastructure for the future prosperity and well-being of the country."

Ms Goodes said $15 million could be used to build 30 affordable housing properties "each year".

"What we know is there are many people now telling us they haven't even applied for social housing because they can't see the point of going to the bottom of that list," she said.

"Realistically, if we are able to spend $15 million a year more than what we currently spend on social housing, while it may not sound like a lot, it will be 20 or 30 properties per annum that we can start to build on top of the current build."

Other states owe the Commonwealth $2 billion in public housing debt.

Shadow Treasurer Jim Chalmers said states will have to make their cases individually.

"Clearly, states will make their case to the federal government whether it be at COAG or via the other opportunities they have to put their bids in for funding from the federal government," he said.

"Homelessness and housing are big issues right across the country, especially in Tasmania.

"It's really for the Prime Minister, the Treasurer and the Morrison Cabinet to determine why, or to explain why this deal is different to the other states."

Earlier this year, during the midst of the Federal Government's tax negotiations, Senator Lambie said she would "go in hard" for Tasmania to get the debt waived.

"I want that debt removed," she said at the time.

A spokesperson for Housing Minister Michael Sukkar declined to comment.