Prime public housing land in inner Melbourne was sold to developers too cheaply, a parliamentary committee has revealed.

The developers behind the partial privatisation of the Kensington housing estate gained "significant advantage" by building more private units than was justified – while the amount of public housing on the estate was simultaneously reduced.

The state government is selling nine inner Melbourne public housing estates to developers. On Tuesday, a highly critical Upper House inquiry into the Public Housing Renewal Program tabled its progress report in Parliament.

Under the planned privatisations, developers will set aside land on each sold estate to rebuild dilapidated public units – plus 10 per cent more apartments for the poor than were there before.