I suggest your leg is being pulled!
Housing NSW would not put a family of 8 into a two bedroom appartment.
I do not know where you live but I suggest you ask for proof from whoever told you about it. It should be easy to contact the agent to confirm if the story is true.
This sounds more like one of those racist stories that go around because some NIMBY people get upset about Dept of Housing residents or refugees moving into their area.
If there is a rogue landlord only concerned about getting rent from a large family, then that is another matter and I would report to the local council.
Sydney city council is supposed to be cracking down on landlords of high rise units who cram four overseas students into each bedroom of their unit.