No longer an HI affiliate, the 20-bed Residencial Temuco (Manuel Rodríguez 1341, 2nd floor, tel./fax 045/233721, hostemuco [at] hotmail [dot] com, US$8 pp) is small, so reservations are advisable; note also that it lacks a street sign. Breakfast costs US$1 more; there is a kitchen and laundry service.
Hostal Aldunate (Aldunate 864, tel. 045/642438, hostalaldunate864 [at] hotmail [dot] com, US$11 pp shared bath, US$15/25 s/d private bath, breakfast included) occupies a quiet but still central neighborhood. At gracefully aging Hostal Casa Blanca (Manuel Montt 1306, tel./fax 045/278600, www.hostalcasablanca.cl [1], US$9 pp shared bath, US$16/25 s/d private bath), all rates include breakfast, but only rooms with private bath have cable TV.
Links:
[1] http://www.hostalcasablanca.cl