More than a year since a contentious, multimillion-dollar public housing sell-off at Millers Point was announced, the NSW government has provided the first evidence of how the proceeds will be spent.

Ten public housing units at Lurnea, in Sydney's south-west, are being built with takings from the sale of 293 historic homes at Millers Point and The Rocks.

Units in the $2.8 million complex are among about 1500 new public housing dwellings to be built from the proceeds of the controversial sale, which is expected to reap upwards of $500 million.

The divisive sell-off required relocating about 600 public housing tenants from the harbourside suburb – a move critics had decried as "social cleansing". About 158 residents are yet to move.

Many residents are elderly and some have family ties to the area stretching back more than a century.

New Social Housing Minister Brad Hazzard toured the Lurmea complex on Thursday, before inspecting two Millers Point properties to be sold.

Almost $27 million has been raised from the sale of 12 Millers Point properties – averaging about $2.2 million each – and three more hit the market this week.

Mr Hazzard said for every Millers Point property sold, five properties can be built elsewhere.

It includes homes at present being built across Sydney and the Illawarra, including at Padstow, Miranda, Gymea and Warilla.

The government had been criticised for selling the entire Millers Point public housing portfolio, rather than allowing some elderly and long-term residents to live out their lives in the area.

Mr Hazzard's predecessor, Gabrielle Upton, appeared to ignore calls for new public housing to be built at Millers Point; however, Mr Hazzard is taking a different view.

"I'm not ruling out trying to get more public housing in and around the Millers Point area and … the CBD because there are a lot of older residents who've been in that area for a long time," he said, adding that moving was a "tough ask" and officials were attempting to relocate residents to nearby suburbs.

The government said the Millers Point takings would be reinvested into the NSW social housing system. However, there were fears the funds would be used to fill a $300 million annual hole in the department's budget, rather than to build new homes.

Mr Hazzard said a separate bank account had been established for the proceeds, enabling full transparency on the sales and capital outlays.

Millers Point: a community under the hammer

He said the sale proceeds would help alleviate the public housing waiting list, which is expected to blow out to 86,000 by 2016.

"It [is] time to free up those dollars and make it available for those people who are sitting out there, often [homeless] under bridges in the most terrible circumstances, finding wet mattresses in warehouses to sleep on … I am committed to finding them accommodation," he said.

Independent Sydney MP Alex Greenwich welcomed Mr Hazzard's efforts to improve transparency and to consider building new public housing at Millers Point, describing it as "an improvement on the previous [term of] government".