NSW Premier Chris Minns vowed to evict "overseas visitors, tourists, backpackers" taking advantage of condemned properties left empty after being included in a state buyback scheme for Lismore homes after the 2022 floods.
"We bought those houses so that we could keep communities safe ... and to have squatters move in off the back of that is completely unacceptable," he told reporters on Tuesday.
"The housing problems are not going to be solved by moving people into flood-prone land.
"We have to draw a line in the sand here and that means demolishing those houses and ensuring that we can get on with life in the Northern Rivers."
About 40 people had been living in eight flood-ravaged homes near the Lismore city centre and the premier said previous eviction notices had been served to no avail.
The squatters had tried to jump the queue to access social housing during talks with government officials about leaving the properties, Mr Minns added.
The homes would be replaced by green space after the demolition, he said.
Lismore local Tina and her son Tyson previously told AAP they had been squatting in one of the properties after escaping a domestic violence situation.
Tina said the homes were occupied by people at the forefront of the local housing crisis, which had forced many residents to live in their cars.
Evacuation centres are due to shut as the latest emergency threat for the region winds down with floodwaters from ex-tropical cyclone Alfred receding.
Mr Minns previously said they couldn't serve as a long-term fix to entrenched housing problems in the region, which has the highest numbers of rough-sleepers in the state.
More than 50 emergency crews were out in the Tweed region finishing damage assessments, with four properties already deemed uninhabitable due to water damage.
About 7500 homes and businesses were still not connected to power as heavy rain continued to fall in many areas.
Major flood warnings had been lifted for most areas, except parts of the Richmond River.
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