Questions have been raised over the housing of asylum seekers in student accommodation following an alleged assault last week.

A 21-year-old asylum seeker has faced court charged with indecent assault after a student was allegedly sexually assaulted in her accommodation at Macquarie University in Sydney.

The man was not a resident of that housing but dozens of asylum seekers have been billeted in student accommodation by organisations contracted by the Federal Government.

One of those organisations, the Red Cross, has contracted private university accommodation company Campus Living Villages (CLV) as a housing provider.

At the time of the alleged incident last week there were 55 asylum seekers residing at CLV's Macquarie University Village.

Refugee Council chief executive Paul Power says organisations like the Red Cross are resorting to such options because of a lack of alternatives.

"The organisations that are working with the Department of Immigration are scouring the larger cities of Australia, looking for unused accommodation and it's a very difficult challenge," he said.

"There's a long term shortage of available accommodation in most of the larger cities in the country.

"One of the ironies is that while housing generally is in short supply, there are also particular places where empty accommodation happens to be available.

"I think the organisations that have been working on this program have built expertise in trying to find the places that are available and make maximum use of the accommodation that's around."

Opposition immigration spokesman Scott Morrsion says the Government should stop issuing bridging visas for asylum seekers awaiting their refugee claims to be assessed until it has reviewed the community release system.

Mr Morrison has also called for police to be notified when asylum seekers are released into the community.

But Mr O'Connor says it is a "knee-jerk" reaction, and has accused Mr Morrison of exploiting the allegation to cause fear.

Students concerned

Students are raising concerns about the appropriateness of housing large groups of non-students in student accommodation.

CLV also has around 12 asylum seekers at its Parramatta facility at the University of Western Sydney (UWS).

National Union of Students president Jade Tyrell says student accommodation should be primarily for students.

"Availability and safety is a concern because we find with accommodation you've got a lot of cultural differences anyway," she said.

"It's like a mini village, really, and you've got a lot of push-pull factors that can create cultural clashes. When you have a group of unfamiliar sort of people from the public it might change the dynamic.

"Safety is obviously a concern and students do have the university rules imposed upon them.

"It's really, really important that the students are together and that they are understanding each other. The public may just change the dynamic."

But a University of Western Sydney spokeswoman says no concerns have been raised by students.

CLV says it always gives students first priority and says at both its Macquarie and UWS sites, the number of asylum seekers will decrease as students arrive for the university year.

The Red Cross will not say whether it houses asylum seekers at other universities, citing concerns for their privacy and well-being.