Steve Bruce’s side finished 12th last season after pulling away from relegation trouble in the final weeks of the campaign.
Supporters, however, feel that the club, which has qualified for a European competition once under Mike Ashley’s ownership, should be competing higher up the Premier League table.
That expectation has been questioned by some pundits, but Townsend – who spent six months at St James’s Park earlier in his career – believes that supporters are right to demand more from their team.
"The fans and their expectation ... I wouldn’t say they expect more than what they have, because that’s the job of the fans,” said the Crystal Palace winger on talkSPORT. “You want your team to do better.
“It’s the right of the fans to expect (that), and us players are the same. Those Newcastle players will be thinking ‘we’re better than 13th, we should be aiming 10th, nine, eight, seventh’.”
Asked by co-presenter and former Palace owner Simon Jordan if he had met Ashley during his time at United, Townsend said: “No. I never met him – (managing director) Lee Charnley does most of his stuff on a day-to-day basis, but Newcastle is a massive, massive club, and I loved my time at Newcastle.
"Hopefully, they do get back to where they belong, which I think is definitely in the top half of the Premier League.”
Townsend is out of contract at Palace this summer.