Proceeds from the NSW government's multimillion-dollar Millers Point public housing sell-off is being used to build dwellings for pensioners in Sydney's southwest.

Last July the state government made the controversial decision to sell almost 300 state-owned properties in Sydney’s prime real estate locations near The Rocks to raise up to $500 million.

The first of those properties went under the hammer in August.

Since then 12 Millers Point properties have been sold, generating $26.8 million, Community Services Minister Brad Hazzard said in a statement.

Another three properties are also up for sale.

In Lurnea in Sydney’s southwest, 10 two-bedroom seniors living dwellings have been built.

While another 99 new dwellings are under construction in 11 suburbs in Sydney’s western and southern suburbs.

Across The Rocks and Millers Point, a total of 293 properties will be sold off, including 214 that are heritage listed.

The government claims the average annual maintenance bill for a Millers Point house is $14,500 compared with $3000 to $5000 for other social housing properties.

It claims that for every house sold in Millers Point, three houses can be built in many other suburbs in Sydney.

The government says it will build additional social housing where it’s needed most, including in Sydney’s southeast and southwest, the Illawarra-Shoalhaven area and Nepean-Blue Mountains areas.