This can be used as bed linen in a pinch. Many hostellers travel with sleeping bags and many hostels do not allow them for sanitary reasons. It is best not to have preconceptions about the site and the services at a hostel. Wait and be surprised. Most hostels will not accept local residents.
Many hostels limit their population to various groups.
One explanation is that the aim is to provide low-cost accommodation for international travellers. If the beds are filled with local travellers, then the aim is defeated. Some places require American hostellers to prove their international traveller status by showing travel documents, passport, etc. They are all different. So it's impossible to generalize about any one place.