A “gentle giant” found dead in a canal in Manchester on Boxing Day was a known rough sleeper and had been in hospital on Christmas Day, it has been reported.

Tony Lawless, who lived on and off the streets following the death of his father, had been in North Manchester General hospital on Tuesday after a collapse, the Manchester Evening News said.

His sister, Diane Brennan, told the paper she had accompanied him in the ambulance on Christmas Day, leaving him in the hospital when she returned home. She said she had assumed he was still there until police contacted her to say he had been found dead on Wednesday.

A spokeswoman for the Pennine Acute Hospitals NHS trust, which runs North Manchester General, said: “The trust were sorry to hear of the death of Mr Anthony Lawless and will work closely with the police and coroner’s office to help ascertain the circumstances leading up to this tragic event. Our thoughts are with his family at this sad time.”

Police were called to an area of the canal near Redhill Road in Ancoats shortly after 9am after a report of a body in the water. Lawless usually slept rough in Harpurhey, north Manchester, and his sister said she was surprised to learn he was found 2.5 miles (4km) away in the city centre.

“That’s what we don’t understand; how did he make it from north Manchester to there, when he had no money?” said Brennan. “I said: why the heck did they let him out knowing he was falling down?”

She said he began drinking after the death of their father. “When the drink took hold of him he changed, but other than that he was all right. Everyone who knew him said he was very, very polite. He was lovely,” she said.

An estimated 50 homeless people died in Greater Manchester last year, up from 21 in 2013 and more than any other combined authority in England, figures from the Office for National Statistics showed just before Christmas. When population size is taken into account, the death rate for homeless people was higher in Greater Manchester than London, where there were 136 estimated deaths in 2017.

Lawless was “a popular guy”, according to the local councillor Pat Karney. “We must never get immune to these deaths. We must hear the struggle of these people and try to prevent other casualties,” he said.

In his 2017 election manifesto, Andy Burnham, the mayor of Greater Manchester, pledged to end rough sleeping in the region by 2020. Each month he donates 15% of his salary – £1,375 – to his Mayor’s Homeless Fund.

Tributes were paid on social media to Lawless, a well-known figure on Conran Street market in Harpurhey. “Poor Tony, I’m in shock, he was a nice man always helped me on the market,” wrote Barry Wayne. “RIP Tony, remember you always helping my mam out on the markets, rest easy mate,” wrote Anthony Spencer.

An appeal has been set up to raise money for his funeral. The fundraising appeal says: “Tony was sadly found on Boxing Day, our gentle giant is now with the angels. Let’s try and raise funds to give him the send off he deserves. We all speak highly of the gentleman he was, so can we raise as much as possible to give to his family to help towards funeral costs.”

Greater Manchester police (GMP) would not confirm the dead man’s identity but said an investigation was ongoing to establish if there were any suspicious circumstances surrounding his death.

Insp Mark Allinson of GMP’s city of Manchester district said on Wednesday: “This a very sad morning. We have recovered the body of a man from the canal, which is all the more difficult given the time of year.

“We will continue throughout the day to establish who the man is and the circumstances which led to him being in the canal. If anyone witnessed anything that could help with our enquiries, please contact police as soon as you can quoting log number 679 of 26 December 2018.

“My thoughts will be with the man today and we will ensure that his family are supported once his next of kin have been informed.”

Burnham said: “Any death that occurs on our streets is tragic and at this time of year it is even more heartbreaking, and the incident on Boxing Day is currently under investigation. Nobody should ever die on the streets of Britain for want of a roof over their head. In Greater Manchester we have rallied together and are running our Bed Every Night scheme which provides a place for people to go every night and has already helped more than 540 people indoors since the start of November.

“The effects of austerity, welfare changes and universal credit mean that there is increasing pressure and demand for all our homelessness services. We need the government to recognise the scale of homelessness and rough sleeping, particularly in big cities across the UK.”