Fr Peter Groves, from St Mary Magdalen Church in central Oxford told the Oxford Times that some people have been taking shelter beneath scaffolding which was erected while a £400,000 renovation of the roof was being completed.
He said: "A few people have turned up in recent weeks and set up makeshift shelters in the churchyard but we tell them it is not safe for them to stay.
"We offer them a cup of coffee and then refer them to the city council's homelessness team and other agencies including the Gatehouse charity.
"It's a great shame there has been a reduction in local authority funding to tackle homelessness in Oxford in recent years."
Lucy Faithfull House, a 61-bed homeless hostel on city council-owned land, closed in January last year after Oxfordshire County Council withdrew its annual £500,000 funding.
Fr Groves said staff at Lucy Faithfull House "did some fantastic work" and urged the city council to consider reopening it.
He added: "There is a certain amount of migration and often people are trying to get somewhere else, to return to a place where they have family contacts."
A city council count of rough sleepers in Oxford last November said on one night there were 39.
Mike Rowley, city council board member for housing, told the Oxford Times: "Rough sleeping is a growing challenge nationally, and the Government simply doesn't provide enough funding.
"But here in Oxford we're not prepared to just let the situation worsen, which is why the city council has chosen to pick up an additional, non-statutory burden in tackling rough sleeping to try to plug the gap after the county council was unable to carry on funding some support due to this tightening of the purse strings by the Government.
"We have kept our budget allocation at £1.4m to keep our support at the same level for the majority of currently funded organisations."
