Whenever the department determines a public emergency or distress no longer exists in a particular city or town, a rehabilitation project, or a part of any such project with the land appurtenant thereto, rehabilitated or reconstructed under this section, may, at the direction of the department, be sold for the fair market value thereof, as determined by the department, but not for less than the total of the outstanding obligations of the applicable operating agency with respect to such project if the whole is sold, or not for less than that percentage of the total cost which the cost of the part sold bears to the total cost of the entire project if a part is sold. So long as any notes and bonds issued by the operating agency to finance the cost of such project and guaranteed by the commonwealth are outstanding, the proceeds of any sale of such project shall be paid by the operating agency into the Housing Authority Bonds Sinking Fund and shall be expended from time to time by the state treasurer to pay interest and principal of any notes and bonds issued by such operating agency to finance such project.