...I see no reason that burden should be placed on other poor people in preference to the wealthy.

Yeah, thats why i pointed to the perceived risk that buying large buildings for one single pupose risks a slumlike situation developing. The concentration in one building.

The alternative in my mind, that i didn't mention, would be to spread the house purchases through-out the suburb. Which led me to the case some friends experienced, rendering me in two minds.

I'm all for social housing across all suburbs. In fact with a couple seconds thought, and putting on my oversized-poorly-educated development economics hat, i think they should be concentrated more heavily in better-off to well-off communities. Those are the communities most able, however unwilliingly, to support and lift up someone who needs social housing.

neighbours than housing them out in the middle of bum-f**k nowhere

I don't think you mean as far out as rural, pastoral regions, but as i read this, thats where my mind was drawn. And there are problems in regards this.

Not sure its got anything to do with social housing, but you take the community and infrastructure connections away and the effects are pretty clear from the troubles some country towns have.