A historic army barracks will be opened to the public after the federal government backed down on contentious plans to sell it.

The Albanese government had planned to sell 67 military properties to raise $1.8 billion, including the historic Victoria Barracks complex established in Sydney in 1840.

The decision to offload the properties followed an independent defence estate audit in February that found they were not fit for purpose and were too expensive to maintain.

But Prime Minister Anthony Albanese said on Sunday his government had scrapped plans to sell the barracks to private interests, opting instead to keep the site in public hands.

“This will give an assurance to the public that the heritage at this site is vital; that it be not just maintained, but indeed enhanced,” he said at the barracks.

The inner-city grounds will nor remain a Defence facility but will be partially open to the public. The government will also explore commercial use of the property.

“Most Sydneysiders have not … avowed themselves of the opportunity to see the history that has been made here over such a long period of time,” Albanese said.

He did not rule out future housing development on the site.

The campaign to stop the sale drew high-profile opponents from across the political spectrum, including former conservative prime ministers John Howard and Tony Abbott, and current Greens leader David Shoebridge.

NSW Premier Chris Minns, who also opposed the planned sale by his federal Labor counterparts, welcomed the backflip.

“It needs to be in public hands; it’s an important piece of history for our city and our state and our country,” he said on Sunday.

Three other sites earmarked for sale – Melbourne’s Victoria Barracks, Fort Queenscliff and RAAF Williams base – will also stay in public hands.

The government will explore ways to maximise community access to the sites and look at commercial opportunities at each location.

To honour the locations’ historical significance, the Australian War Memorial will work to share and preserve their stories.

Defence personnel will continue to be moved off those and other sites earmarked for sale.

Defence Minister Richard Marles said those formerly based at the Sydney barracks would be relocated to other nearby sites, including office facilities in the city centre that were 60 per cent empty. He said Australia could not afford to waste any funds in the current strategic landscape.

“We need to have a defence force that is focused,” Marles said.

“Every person who wears our nation’s uniform matters. Every hour they spend in it counts, and every dollar which resources them is precious.”

RSL NSW president Vincent Williams, whose organisation opposed the Victoria Barracks sale, said the decision was a victory for common sense.

But he called on the government to “pause and properly examine” the implications of moving Defence personnel away from the site and into a “soulless commercial office tower”.

“Critically, any decision about the future of Victoria Barracks must also consider the significant impact that relocating Defence personnel could have on their morale, wellbeing and sense of identity and belonging,” Williams said.

Opposition defence spokesman James Patterson noted the backflip came after months of public pressure, adding the Coalition would keep fighting to save other sites still earmarked for sale.

Some defence sites are set to be partially divested. The section of HMAS Penguin in Mosman that houses part of the Angophora Forest will be handed over to the Sydney Harbour Federation Trust.

A part of the Northern Territory’s Stokes Hill Installation will be transferred back to its Traditional Owners, the Larrakia people.

Defence will have moved personnel off six sites by the end of the year.

-AAP