The absence of both a policy and economic data prompted one housing academic to ask if the public housing sell-off was decided by reading "tea leaves". NSW Labor says the government risks flooding the market with homes, damaging returns to taxpayers.

The Department of Family and Community Services on Friday refused to answer questions on why potential economic outcomes were not modelled before former Community Services Minister Pru Goward announced the sale in March.

It has emerged that NSW Land and Housing Corporation Deputy Director-General Anne Skewes told a parliamentary inquiry in May that "I have done no economic modelling" on the Millers Point sale.

Millers Point: a community under the hammer

Ms Skewes said "sales advice" was required "to know precisely the investment that will be made" when proceeds are fed back into the social housing system.

The first Millers Point home sold at auction on Thursday for $1.911 million. The government has 18 months to sell the remaining 292 properties and relocate hundreds of tenants.

Labor MP Sophie Cotsis described the decision to "sell an entire suburb" without economic modelling as "sheer incompetence".

"They are just going to flood the market," she said.

"The government says they will build more [social housing] properties, but where? We just don't know."

University of Sydney urban planning professor Peter Phibbs described the absence of modelling as "staggering".

"It seems pretty cavalier. It's a substantial change in policy, it's a lot of properties, a lot of money," he said, asking if bureaucrats used "tea leaves" to arrive at the decision.

A report by the NSW Auditor-General in June last year said selling public housing to fill a budget shortfall was "not financially sustainable".

It called on the government to produce a new social housing policy, and strategies to manage housing estates and its asset portfolio, by December. The plans have not been delivered.

A departmental spokeswoman said the government was "developing its social housing priorities".

She said the Millers Point sale was "due to the high cost of maintenance … and high potential sales value".

"Selling properties at Millers Point is a financially sustainable way … to manage the portfolio," the spokeswoman said.

"The sales proceeds and savings in maintenance costs mean more money will be available to assist those who need help from the social housing system."

As reported, Lend Lease is wavering on a commitment to build affordable housing at Barangaroo, and has considered locating it at Millers Point.

City of Sydney Labor councillor Linda Scott is due to put a motion to the council on Monday, calling for affordable housing to be built at Barangaroo.

"There is an urgent need for more affordable housing in the inner-city which is close to jobs and transport," she said.