The flat, which is situated on the Carpenter Gardens estate near Richmond, was sold last year by Sheffield Council and is now on the private rental market.
Residents on the estate - many of whom have expressed interest in buying their own properties themselves - say they were given assurances when they moved in that the flats would never be sold.
But Sheffield Council revealed last week that the flat had been sold in error, and promised to review their systems to stop it happening again.
Councillor Paul Wood, cabinet member for neighbourhoods and community safety at Sheffield Council, said: “Until this case we have always refused Right to Buy applications for properties in Carpenter Gardens, because they are part of our essential council housing stock for elderly or disabled people.
“We regret that an error led to this sale going through and we have reviewed all our systems and put additional steps in place to prevent this happening again.”
The Council said that when receiving a Right to Buy application, they check whether a property is suitable for an elderly person, and if it is, deny the application in the vast majority of cases.
However, although properties on Carpenter Gardens are usually declined, this property was sold to a tenant within the recommended age group and met all criteria under the Right to Buy legislation.
Once a property has been sold, the Right to Buy legislation cannot prevent the owner from letting the property to a private tenant, they added.
Sue Underhay, who lives on Carpenter Gardens and organises its twice-weekly coffee mornings, said residents were worried the sale could change the character of the area.
She said: “Luckily the man who has moved in we know but they ought to have put a clause in saying it was for the over 50s. It is lost for good now, isn’t it?”
“There is an article in the Star today saying we need more affordable housing and social housing so it just doesn’t make sense.”